Skechers U.S.A.

2012 AnnuAl RepoRt

3

2012 ANNUAL REPORTNow 21 years old, Skechers has grown into a leading 
global footwear brand with a reputation for capturing 
trends, delivering product quickly to market, and 
supporting that product with creative and consistent 
marketing. And it’s our ability to be flexible and 
diverse in both our product and distribution that has 
resulted in our long success, and continued growth 
around the world.

This flexibility, as well as our ability to reinvent ourselves with 
fresh looks, enabled us to transition from a challenging 2011 
to a successful and profitable 2012 with growth in all of our 
revenue channels in the fourth quarter. Our key indicators 
lead us to believe that this positive trend will continue in 
2013. During the year, we were highly focused on growing 
our existing product divisions and broadening our offering 
to consumers with several new product lines. We established 
an award-winning performance division and further grew 
our heritage business, all while adding new features and 
technologies that consumers desire, and supporting these 
efforts with comprehensive marketing, including our third 
Super Bowl commercial (with 2013’s Skechers “GOrun 2” 
commercial being our fourth).

At our foundation is product. In the beginning, we were a 
men’s brand with a single sport utility look. As the demand 
grew, we expanded our offering. Today, we still react to 
increased demand for our product, but we also focus on new 
opportunities to create demand with fresh lines. 

In 2012, we launched three new lines for adults: SKCH+3, 
fashionable hidden wedge sneakers and boots; Daddy’s 
Money, stylized hidden wedge sneakers for juniors; and Mark 
Nason by Skechers, casual lifestyle looks with a fashion 
attitude. We also launched Air-Mazing by Skechers, a new 
brightly colored line for older boys. While still new, these lines 
are performing well in our own Skechers retail stores, and 
we believe will also prove to be solid performers with our 
wholesale partners.

With a focus on comfort, we also integrated two new key 
features in many of our men’s and women’s sport and casual 
shoes. Launched in the Fall of 2012 for men, Relaxed Fit from 
Skechers shoes fall under both our Skechers Sport and 
Skechers USA lines. They feature a roomier fit, memory foam 
insoles and breathable materials, and are a natural extension 

of relaxed fit jeans. The memory foam footbed has also been 
added to many of our women’s shoes, adding extra comfort.

The most growth in the year came from our Skechers 
Performance Division, which saw its first full year of sales with 
triple-digit growth in the fourth quarter. In November 2011, 
we launched Skechers GOrun with elite runner Meb racing 
in the NYC Marathon, where he achieved a new personal 
best. Then in January 2012, Meb came in first at the Houston 
Trials wearing Skechers GOrun, again achieving a personal 
best. At age 36, Meb returned to race on the world’s biggest 
sports stage after already earning a silver medal in Athens. 
He finished fourth in London, making him the top American 
marathon runner. Meb has brought a great deal of acclaim to 
the Skechers Performance Division, as have the numerous 
favorable blog reviews and the eight awards we have received 
from top running publications in the United States and several 
countries around the world. A year later, with numerous lines 
under our Performance Division – including Skechers GOrun 
ride, Skechers GOrun 2, Skechers GObionic, Skechers GOwalk 
and Skechers 
on-the-GO – the GO platform has become a key growth 
category for our company.   

To support our rich product range, we also focused on building 
our Lifestyle, Kids and Performance divisions with marketing 
that crosses multiple platforms, covering nearly every one of our 
lines. 

Along with product-focused commercials, we used the power of 
celebrities to build several of our lifestyle lines. We developed 
three humorous commercials starring sports icons Mark Cuban, 
Joe Montana and Tommy Lasorda to illustrate the comfort 
features of Relaxed Fit from Skechers footwear. To further build 
brand awareness for our charitable footwear line, we utilized 
Dancing with the Stars host Brooke Brooke in our BOBS from 
Skechers commercial. Through the success of the BOBS program, 
we reached the three-million-pair donation milestone in 2012. 

With our donation partners, we have delivered these shoes to 
children in need around the world, as well as across the United 
States. We have also worked with several of our accounts 
to donate shoes in the communities where they are based, 
bringing local awareness and making a stronger connection with 
consumers. 

For Skechers Kids, our cast of characters who represent our 
Kids lines are now recognizable to children, thanks to our animated 
commercials that appear regularly in key markets. We have 
added computer-generated imagery to our new commercials, 
creating even more dynamic, attention-grabbing spots for 
children, and in 2012 we also delivered our first full-length 
feature, Twinkle Toes: The Movie through Universal Pictures.  

To build the Skechers Performance Division, we started the 
year off with a much-talked-about Super Bowl commercial for 
Skechers GOrun. The spot attained a lot of media attention as 
the press splashed headlines that Kim Kardashian, our 2011 
Super Bowl star, had been replaced by a dog, the adorable 
French bulldog Mr. Quiggly. The commercial, which also 
had a cameo from Mark Cuban, ended up ranking high in 
numerous advertising polls. We also launched two Performance 
commercials around the London Games to support Meb and the 
Skechers GOrun product. The 
first starred Meb and highlighted his accomplishments and 
the second brought Mr. Quiggly back, this time to promote 
Skechers GOrun ride.

Key to building the Performance brand has been our 
participation at marathons around the world – from Boston and 
New York, to London and Paris – interfacing with the running 
community, and then seeing runners buying our shoes on-site 
and actually racing in them at these events.

As always, our goal with marketing Skechers is to efficiently 
and effectively reach consumers – be it while they are shopping, 
working, driving or in the comfort of their own homes by 
marketing on TV, outdoors, in-store, online, in magazines, and 
even at airport security screening locations.

As diverse as our product and marketing is, our distribution 
network is also vast. New product categories resulted in new 
retail partners as well as increased shelf space in many stores. 
This was true 
in both our domestic and international wholesale businesses, 
which grew by 72 percent and 30 percent in the fourth quarter 
of 2012, respectively. 

Economic problems across Europe and other parts of the world 
impacted our international sales for the year, but the growth we 
experienced in the fourth quarter, including the improvements 
in many of the regions that had experienced economic stress 
earlier in the year, as well as the backlogs in these regions, 
leads us to believe that we are on a positive track across the 
Americas, Asia, the Middle East and Europe.

subsidiary during the year, and saw first product deliveries 
there through our subsidiary in the second half of the year. We 
also established a joint venture in India during the year, and 
believe both of these countries will have a positive impact on our 
business in the next three to five years.

In the fourth quarter, we also experienced 16 percent gains in 
our company-owned Skechers stores. As of February 15, 2013, 
there were 733 Skechers stores around the world, of which 349 
stores were company-owned and -operated. New stores were 
opened 
on six continents in 2012, and we are planning to continue this 
trend, with at least another 30 to 35 company-owned stores 
planned for 2013. 

Additionally, our e-commerce business experienced 39 percent 
growth during the fourth quarter of 2012.

The strong domestic wholesale growth and positive comp store 
sales in our company-owned SKECHERS domestic stores are 
evidence of the broad acceptance of our new product offerings 
in the United States.  Our product and marketing also translated 
to countries around the world as we saw growth come from 
numerous regions. Consumers can already shop for Skechers-
branded eyewear, apparel, backpacks and socks, among 
other items.

With a focused effort on growing our existing product divisions, 
broadening our offering to consumers with several new product 
lines and efficiently growing our business, we have returned to 
profitability and generated positive momentum.

A walk through our product theaters at our corporate offices 
in Manhattan Beach, or a visit to one of our company-owned 
retail stores, or a trip to the Sports and Fitness floor at Harrods in 
England, Karstadt department store in Germany, Sportsmaster 
in Russia or Town Shoes in Canada, and you will see the 
strength of Skechers. Watch TV on a Saturday morning, flip 
through a running or weekly magazine, or visit marathons 
around the world, and you will see the strength of Skechers. 
Talk to bloggers, interact with our fans on Facebook, or stop the 
next person you see in our shoes, and you will hear about the 
strength of Skechers.

We capitalized on our strength in 2012 and saw a reinvention 
of Skechers as we transitioned from a challenging 2011 to a 
profitable 2012 with growth across our many lines. It was a 
remarkable year for Skechers: at 21, we have never looked better, 
and we are excited to build on our strength in 2013 and continue 
to profitably grow our business.

Sincerely,

With an eye on growing our international business, we 
transitioned Japan from a distributor to a wholly owned 

Robert Greenberg
Chairman & CEO

Michael  Greenberg
President

 
footweAR

Forward-thinking product visionaries developing 
three divisions: Lifestyle, Performance and Kids.

Entering new markets with juniors (Daddy’s Money), 
fashion sneakers (SKCH+3), walking (Skechers GOwalk) 
and running (Skechers GOrun) footwear.

Building on its heritage in sport utility footwear with 
boots and casuals for men, women and kids.

Leading the market in children’s footwear thanks to its 
color, creativity and cast of globally recognizable characters 
(including the new addition for older boys, Air-Mazing).

Giving back with its charitable line BOBS, which has resulted 
in three million pairs of new shoes donated to kids in need.

Going like never before with award-winning, innovative 
performance footwear, including eight awards in 2012.

7

2012 ANNUAL REPORTBuilding brand awareness globally through 
targeted marketing campaigns. 

Reaching consumers while they shop online 
and in the mall, relax in front of the TV, and 
read magazines.

Capturing attention with the star power of 
Brooke Burke, and sports icons Joe Montana, 
Mark Cuban and Tommy Lasorda.

Influencing with elite runner Meb, who 
became the fastest American marathon runner 
with his fourth place finish at the London 
Games.

Captivating little ones with a cast of 
characters that now includes Air-Mazing.

MARketing

9

2012 ANNUAL REPORTDistRibution

Growing network of department, specialty, 
athletic and independent stores around 
the world. 

Expanding retail presence with 733 Skechers 
retail stores around the world, of which 349 
are Skechers-owned.

Transitioned our largest distributor in Japan 
to a subsidiary and entered into a joint venture 
partnership in India. 

Growing e-commerce presence with new 
Skechers.com web sites in Germany and 
the U.K.

Cornering the globe and increasing shelf 
space with the advent of new product lines.

1 1

2012 ANNUAL REPORTImproving distribution 
efficiency with a 1.82 million 
square-foot, fully-automated, 
LEED-Gold certified facility 
in California serving North 
America.

Shipping product to Europe 
from our 490,000 square-foot 
distribution facility in Belgium.

Directly reaching our 
international distributors 
through our third-party 
manufacturers.

Dynamic corporate 
headquarters in Manhattan 
Beach, California enables us 
to expand our product lines.

EXPLANATORY NOTE

THIS ANNUAL REPORT TO STOCKHOLDERS INCLUDES UNAUDITED
FINANCIAL STATEMENTS IN LIEU OF AUDITED FINANCIAL STATEMENTS
BECAUSE OUR FORMER INDEPENDENT AUDITORS WITHDREW THEIR AUDIT
OPINION FOR FISCAL YEARS 2011 AND 2012.

YOU SHOULD BE AWARE THAT NO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(“INDEPENDENT AUDITOR”) HAS OPINED THAT THE UNAUDITED FINANCIAL STATEMENTS
PRESENT FAIRLY, IN ALL MATERIAL RESPECTS, THE FINANCIAL POSITION, THE RESULTS OF
OPERATIONS, CASH FLOWS AND THE CHANGES IN STOCKHOLDERS’ EQUITY OF THE COMPANY
FOR FISCAL YEARS 2011 AND 2012 IN ACCORDANCE WITH GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES.

ON APRIL 8, 2013, OUR FORMER INDEPENDENT AUDITOR, KPMG LLP, NOTIFIED US THAT KPMG
WAS RESIGNING, EFFECTIVE IMMEDIATELY, AS THE COMPANY’S INDEPENDENT AUDITOR.
KPMG STATED IT HAD CONCLUDED IT WAS NOT INDEPENDENT BECAUSE OF ALLEGED INSIDER
TRADING IN THE COMPANY’S SECURITIES BY ONE OF KPMG’S FORMER PARTNERS WHO WAS
THE KPMG ENGAGEMENT PARTNER ON THE COMPANY’S AUDIT FOR THE 2011 AND 2012 FISCAL
YEARS. KPMG ADVISED THE COMPANY IT RESIGNED AS THE COMPANY’S INDEPENDENT
ACCOUNTANT SOLELY DUE TO THE IMPAIRMENT OF KPMG’S INDEPENDENCE RESULTING
FROM ITS NOW FORMER PARTNER’S ALLEGED UNLAWFUL ACTIVITIES AND NOT FOR ANY
REASON RELATED TO THE COMPANY’S FINANCIAL STATEMENTS, ITS ACCOUNTING
PRACTICES, THE INTEGRITY OF THE COMPANY’S MANAGEMENT OR FOR ANY OTHER REASON.

NONE OF KPMG’S AUDIT REPORTS ON THE COMPANY’S FINANCIAL STATEMENTS FOR THE
FISCAL YEARS ENDED DECEMBER 31, 2011 AND 2012 OR KPMG’S AUDIT REPORTS ON THE
EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING AS OF DECEMBER 31,
2011 AND 2012 CONTAINED AN ADVERSE OPINION OR A DISCLAIMER OF OPINION, NOR WAS
ANY SUCH REPORT QUALIFIED OR MODIFIED AS TO UNCERTAINTY, AUDIT SCOPE OR
ACCOUNTING PRINCIPLES. IN ADDITION, AT NO POINT DURING THE TWO FISCAL YEARS ENDED
DECEMBER 31, 2012 AND THE SUBSEQUENT INTERIM PERIOD THROUGH APRIL 8, 2013 WERE
THERE ANY (1) DISAGREEMENTS WITH KPMG ON ANY MATTER OF ACCOUNTING PRINCIPLES
OR PRACTICES, FINANCIAL STATEMENT DISCLOSURE OR AUDITING SCOPE OR PROCEDURES,
WHICH DISAGREEMENT(S), IF NOT RESOLVED TO THE SATISFACTION OF KPMG, WOULD HAVE
CAUSED IT TO MAKE REFERENCE TO THE SUBJECT MATTER OF THE DISAGREEMENT(S) IN
CONNECTION WITH ITS REPORTS, OR (2) “REPORTABLE EVENTS” AS SUCH TERM IS DEFINED IN
ITEM 304(A)(1)(V) OF REGULATION S-K.

FOR ADDITIONAL INFORMATION REGARDING KPMG’S RESIGNATION AND WITHDRAWAL OF
ITS AUDIT OPINIONS, AND THE STATUS OF THE APPOINTMENT OF A NEW CERTIFYING
ACCOUNTANT, PLEASE SEE THE COMPANY’S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION AT WWW.SEC.GOV, INCLUDING THE COMPANY’S FORM 8-K FILED ON APRIL 9,
2013.

1 3

2012 ANNUAL REPORTUNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, D.C. 20549 
FORM 10-K 

(Mark One) 

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

For the fiscal year ended December 31, 2012 

OR 

  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) 

Delaware 
(State or Other Jurisdiction of Incorporation or Organization) 

95-4376145 
(I.R.S. Employer Identification No.) 

228 Manhattan Beach Blvd., Manhattan Beach, California 
(Address of Principal Executive Offices) 

90266 
(Zip Code) 

Registrant’s telephone number, including area code: (310) 318-3100  

Securities registered pursuant to Section 12(b) of the Act: 

Title of Each Class 
Class A Common Stock, $0.001 par value 

  Name of Each Exchange on 
Which Registered 
New York Stock Exchange 

Securities registered pursuant to Section 12(g) of the Act: 

   None   
(Title of Class) 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes 

 No 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes

 No 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), 
and (2) has been subject to such filing requirements for the past 90 days.  Yes 

 No 

Indicate  by  check  mark  whether  the  registrant  has  submitted  electronically  and  posted  on  its  corporate  Website,  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 

 No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K(§229.405) is not contained herein, 
and  will  not  be  contained,  to  the  best  of  registrant’s  knowledge,  in  definitive  proxy  or  information  statements  incorporated  by 
reference in Part III of this Form 10-K or any amendment to this Form 10-K.  

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.  

Large accelerated filer 

    Accelerated filer 

  Non-accelerated filer 

      Smaller reporting company 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes 

 No 

As  of  June  30,  2012,  the  aggregate  market  value  of  the  voting  and  non-voting  Class  A  and  Class  B  Common  Stock  held  by  non-
affiliates of the Registrant was approximately $777.0 million based upon the closing price of $20.37 of the Class A Common Stock on 
the New York Stock Exchange on such date. 
The number of shares of Class A Common Stock outstanding as of February 15, 2013:  39,320,598. 
The number of shares of Class B Common Stock outstanding as of February 15, 2013:  11,274,090. 

DOCUMENTS INCORPORATED BY REFERENCE 
Portions of the Registrant’s Definitive Proxy Statement issued in connection with the 2013 Annual Meeting of the Stockholders of the 
Registrant are incorporated by reference into Part III. 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SKECHERS U.S.A., INC. AND SUBSIDIARIES 
TABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-K 
FOR THE YEAR ENDED DECEMBER 31, 2012 

PART I 

ITEM 1. 

ITEM 1A.   
ITEM 1B. 
ITEM 2. 
ITEM 3. 
ITEM 4. 

ITEM 5. 

ITEM 6. 

ITEM 7. 

ITEM 7A. 
ITEM 8. 

ITEM 9. 

ITEM 9A. 
ITEM 9B.  

ITEM 10. 
ITEM 11. 

ITEM 12. 

ITEM 13. 

ITEM 14. 

BUSINESS .............................................................................................................................................................. 2 
RISK FACTORS.................................................................................................................................................... 16 
UNRESOLVED STAFF COMMENTS ................................................................................................................ 23 
PROPERTIES ........................................................................................................................................................ 24 
LEGAL PROCEEDINGS ...................................................................................................................................... 24 

MINE SAFETY DISCLOSURES ......................................................................................................................... 30 

PART II 

MARKET  FOR  REGISTRANT’S  COMMON  EQUITY,  RELATED  STOCKHOLDER 
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ............................................................... 31 
SELECTED FINANCIAL DATA ......................................................................................................................... 33 

MANAGEMENT’S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND 
RESULTS OF OPERATIONS .............................................................................................................................. 34 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...................................... 45 
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...................................................................... 46 

CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND 
FINANCIAL DISCLOSURE ................................................................................................................................. 69 
CONTROLS AND PROCEDURES ...................................................................................................................... 69 

OTHER INFORMATION ..................................................................................................................................... 72 

PART III 

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ............................................... 72 
EXECUTIVE COMPENSATION ......................................................................................................................... 72 

SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT 
AND RELATED STOCKHOLDER MATTERS .................................................................................................. 72 

CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS,  AND  DIRECTOR 
INDEPENDENCE ................................................................................................................................................. 72 

PRINCIPAL ACCOUNTING FEES AND SERVICES ........................................................................................ 72 

ITEM 15. 

EXHIBITS, FINANCIAL STATEMENT SCHEDULES ..................................................................................... 72 

PART IV 

____________ 

This  annual  report  includes  our  trademarks,  including  Skechers®,  the  S  in  Shield  Design,  the  Performance-S  Shifted 
Design,  Shape-ups®,  Twinkle  Toes®,  Bella  Ballerina™,  Skechers  GOrun®,  Skechers  GOwalk™,  Resalyte®,  Resagrip™, 
Resamax®, each of which is our property.  This report contains additional trademarks of other companies. We do not intend 
our  use  or  display  of  other  companies’  trade  names  or  trademarks  to  imply  an  endorsement  or  sponsorship  of  us  by  such 
companies, or any relationship with any of these companies. 

SPECIAL NOTE ON FORWARD LOOKING STATEMENTS 

This annual report on Form 10-K contains forward-looking statements that are made pursuant to the safe harbor provisions of the 
Private  Securities  Litigation  Reform  Act  of  1995,  including  statements  with  regards  to  future  revenue,  projected  2013  results, 
earnings, spending, margins, cash flow, orders, expected timing of shipment of products, inventory levels, future growth or success in 
specific countries, categories or market sectors, continued or expected distribution to specific retailers, liquidity, capital resources and 
market  risk,  strategies  and  objectives.  Forward-looking  statements  include,  without  limitation,  any  statement  that  may  predict, 
forecast,  indicate  or  simply  state  future  results,  performance  or  achievements,  and  can  be  identified  by  the  use  of  forward  looking 
language  such  as  “believe,”  “anticipate,”  “expect,”  “estimate,”  “intend,”  “plan,”  “project,”  “will  be,”  “will  continue,”  “will  result,” 
“could,” “may,” “might,” or any variations of such words with similar meanings. These forward-looking statements involve risks and 
uncertainties  that  could  cause  actual  results  to  differ  materially  from  those  projected  in  forward-looking  statements,  and  reported 
results  shall  not  be  considered  an  indication  of  our  company’s  future  performance.  Factors  that  might  cause  or  contribute  to  such 
differences include: 

•

•

• 

• 
• 
• 

• 

• 

international, national and local general economic, political and market conditions including the slow pace of economic 
recovery in the United States and the uncertainty of market conditions in Europe; 
our  ability  to  maintain  our  brand  image  and  to  anticipate,  forecast,  identify,  and  respond  to  changes  in  fashion  trends, 
consumer demand for the products and other market factors; 
our  ability  to  remain  competitive  among  sellers  of  footwear  for  consumers,  including  in  the  highly  competitive 
performance footwear market; 
our ability to sustain, manage and forecast our costs and proper inventory levels; 
the loss of any significant customers, decreased demand by industry retailers and the cancellation of order commitments; 
our ability to continue to manufacture and ship our products that are sourced in China, which could be adversely affected 
by various economic, political or trade conditions, or a natural disaster in China; 
our  ability  to  predict  our  revenues,  which  have  varied  significantly  in  the  past  and  can  be  expected  to  fluctuate  in  the 
future due to a number of reasons, many of which are beyond our control; and 
sales levels during the spring, back-to-school and holiday selling seasons. 

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, which reflect our opinions only as of the date of this annual report, as a prediction of 
actual results. We  undertake  no obligation to publicly release any revisions to the  forward-looking  statements after the date of this 
document, except as otherwise required by reporting requirements of applicable federal and states securities laws. 

i 

1 

 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
PART I 

SKECHERS LINES 

ITEM 1. 

BUSINESS 

We were incorporated in California in 1992 and reincorporated in Delaware in 1999. Throughout this annual report, we refer to 
Skechers U.S.A., Inc., a Delaware corporation, its consolidated subsidiaries and certain variable interest entities (“VIEs”) of which it 
is the primary beneficiary, as “we,” “us,” “our,” “our company” and “Skechers” unless otherwise indicated.  Our Internet address is 
www.skechers.com.  Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Form 3’s, 4’s 
and 5’s filed on behalf of directors, officers and 10% stockholders, and any amendments to those reports filed or furnished pursuant to 
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on our corporate website, www.skx.com, as 
soon  as  reasonably  practicable  after  we  electronically  file  such  material  with,  or  furnish  it  to,  the  U.S.  Securities  and  Exchange 
Commission  (“SEC”).  You  can  learn  more  about  us  by  reviewing  such  filings  at  www.skx.com  or  at  the  SEC’s  website  at 
www.sec.gov. 

GENERAL 

We design and market Skechers-branded lifestyle footwear for men, women and children, and performance footwear for men and 
women  under several unique  lines. Our footwear reflects a combination of style, quality and value that appeals to a broad range of 
consumers.  In  addition  to  Skechers-branded  lines,  we  also  offer  a  uniquely  branded  junior  line.  Our  brands  are  sold  through 
department and specialty stores, athletic and independent retailers, and boutiques as well as catalog and internet retailers.  Along with 
wholesale distribution, our footwear is available at our e-commerce website and our own retail stores. As of February 15, 2013, we 
operated 116 concept stores, 118 factory outlet stores and 61 warehouse outlet stores in the United States, and 36 concept stores and 
18  factory  outlets  internationally.   Our  objective  is  to  profitably  grow  our  operations  worldwide  while  leveraging  our  recognizable 
Skechers brand through our strong product lines, innovative advertising and diversified distribution channels. 

We  seek  to  offer  consumers  a  vast  array  of  fashionable  footwear  that  satisfies  their  active,  casual,  dress  casual  and  athletic 
footwear needs. Our core consumers are style-conscious men and women attracted to our youthful brand image and fashion-forward 
designs, and  with our new performance  footwear, athletes  and fitness enthusiasts. Many of our best-selling and core styles are also 
developed for children with colors and materials that reflect a playful image appropriate for this demographic.   

We believe that brand recognition is an important element for success in the footwear business.  We have aggressively promoted 
our  brands  through  comprehensive  marketing  campaigns  for  men,  women  and  children.   During  2012,  our  Skechers  brand  was 
supported  by  print,  television  and  outdoor  campaigns  for  men  and  women;  animated  kids'  television  campaigns  featuring  our  own 
action heroes and characters; marathons and other events for our performance division, and print, television and outdoor campaigns 
featuring our Skechers Performance and Skechers lifestyle endorsees. These endorsees included television personality Brooke Burke, 
Hall  of  Fame  quarterback  Joe  Montana,  Dallas  Mavericks  owner  Mark  Cuban,  Dodgers  baseball  legend  Tommy  Lasorda,  New 
England Patriots running back Danny Woodhead and Olympic medalist Meb. 

Since  we  introduced  our  first  line,  Skechers  USA  Sport  Utility  Footwear,  in  December  1992,  we  have  expanded  our  product 
offering and grown our net sales while substantially increasing the breadth and penetration of our account base.  Our men’s, women’s 
and children’s Skechers-branded product lines benefit from the Skechers reputation for contemporary and progressive styling, quality, 
comfort  and  affordability.   Our  lines  that  are  not  branded  with  the  Skechers  name  benefit  from  our  marketing  support,  quality 
management and expertise. To promote innovation and brand relevance, we manage our product lines separately by utilizing dedicated 
sales  and  design  teams.  Our  product  lines  share  back  office  services  in  order  to  limit  our  operating  expenses  and  fully  utilize  our 
management’s vast experience in the footwear industry. 

We offer a  wide array of  Skechers-branded product lines for men,  women, juniors and  children. Within these product lines,  we 
also have  numerous categories, some of  which  have developed into  well-known  names. Most of these categories are  marketed and 
packaged with unique shoe boxes, hangtags and in-store support. Management evaluates segment performance based primarily on net 
sales and gross margins; however, sales and costs are not allocated to specific product lines. 

Lifestyle Brands 

Skechers USA. Our Skechers USA category  for  men and women includes: (i) Casuals,  (ii) Dress Casuals, (iii) Relaxed  Fit (for 
men  only),  (iv)  seasonal  sandals  and  boots  and  (v)  Casual  Fusion.  This  category  is  generally  sold  through  mid-tier  retailers, 
department stores and some footwear specialty shops.  

•      The  Casuals  line  for  men  and  women  is  defined  by  lugged  outsoles  and  utilizes  value-oriented  and  leather  materials  in  the 
uppers.   For  men,  the  Casuals  category  includes  “black  and  brown”  boots,  shoes  and  sandals  that  generally  have  a  rugged 
urban design — some  with industrial-inspired fashion  features. For  women, the Casuals category includes basic  “black and 
brown”  oxfords  and  slip-ons,  lug  outsole  and  fashion  boots,  and  casual  sandals.   We  design  and  price  both  the  men’s  and 
women’s categories to appeal primarily to younger consumers with broad acceptance across age groups.   

•     The Dress Casuals category for men is comprised of basic “black and brown” men’s shoes that feature shiny leathers and dress 
details, but may utilize traditional or lugged outsoles as well as value-oriented materials.  The Dress Casual line for women is 
comprised of trend-influenced stylized boots and shoes, which may include leather uppers, shearling or faux fur lining or trim, 
and water-resistant materials. 

•      Skechers  Relaxed  Fit  is  a  line  of  trend-right  casuals  for  men  who  want  all-day  comfort  without  compromising  style. 
Characteristics  of  the  line  include  comfortable  outsoles,  memory  foam  insoles  and  quality  leather  uppers.  A  category  with 
unique features, we market and package Skechers Relaxed Fit styles in a shoe box that is distinct from that of other categories 
in the Skechers USA line of footwear.  

•     Our seasonal sandals and boots collection for men and women is designed with many of our existing and proven outsoles for 
our Casuals, Dress Casuals and Casual Fusion lines, stylized with basic or core uppers as well as fresh looks. These styles are 
generally made with quality leather uppers, but may also be in canvas or fabric for sandals, and water-resistant materials and 
fur and faux fur linings for boots. 

•     Our Casual Fusion line is comprised of low-profile, sport-influenced Euro casuals targeted to trend-conscious young men and 
women.   The  outsoles  are  primarily  rubber  and  adopted  from  our  men’s  Sport  and  women’s  Active  lines.  This  collection 
features leather or nubuck uppers, but may also include mesh.  

Skechers  Sport.  Our  Skechers  Sport  footwear  for  men  and  women  includes:  (i)  Lightweight  Joggers,  (ii)  Trail-inspired,  (iii) 
Athletic-inspired, (iv) Performance-inspired athletics and (v) Sport sandals and boots. Our Skechers Sport category is distinguished by 
its  technical  performance-inspired  looks;  however,  we  generally  do  not  promote  the  technical  performance  features  of  these 
shoes.  Skechers Sport is typically sold through specialty shoe stores, department stores and athletic footwear retailers. 

•       Our  Lightweight  Joggers  are  designed  with  comfort  and  flexibility  in  mind.  Careful  attention  is  devoted  to  the  cushioning, 
weight, materials, design and construction of the outsoles, which vary greatly depending on the intended use. This category 
features bright colors, earth tones and traditional athletic white.  

•  Trail-inspired athletics are designed for city and off-road wear, some with aggressive all terrain traction lugs, external torsion 
stabilizer, abrasion-resistant toe and tuned dual-density molded EVA midsole with pronation control.  Many of the uppers are 
in breathable materials, mesh, leather and nubuck.  

•     Athletic inspired casuals are designed with the comfort of sneakers and the styling of casuals. With all-day comfort and durable 
rubber  treads,  the  shoes  are  intended  to  go  from  weekend  to  work.  Many  of  the  designs  are  in  natural  shades  with  athletic 
accents.  The uppers are designed in leather, suede, nubuck and canvas.  

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•      Performance-inspired  athletics  take  their  styling  and  design  cues  from  our  footwear  in  the  Skechers  Performance  Division, 
allowing consumers to  wear similar looks  without the technology and associated costs.  The styles are primarily lightweight 
and flexible, and feature cushioned outsoles and ventilated uppers. Designed as a versatile, trend-right athletic shoe suitable 
for all-day wear, the line features leather and trubuck uppers in both bright and classic athletic colors. 

•     Our Sport sandals and boots are primarily designed from existing Skechers Sport outsoles and may include many of the same 
sport features as our sneakers with the addition of new technologies geared toward making a comfortable sport sandal. Sport 
sandals and boots are designed as seasonal footwear for the consumer who already wears our Skechers Sport sneakers.  

Skechers Active. A natural companion to Skechers Sport, Skechers Active has grown from a casual everyday line into a complete 
line  of  sneakers  for  active  females  of  all  ages.  The  line,  with  lace-up,  Mary  Janes,  sandals  and  open  back  styles,  is  available  in  a 
multitude of colors as well as solid white or black, in fabrics, leathers and meshes, and with various closures – traditional laces, zig-
zag and cross straps, among others.  The Active line now includes low-profile, lightweight, flexible and sporty styles under the names 
Sport Active and Sport Flex. Active sneakers are typically available through specialty casual shoe stores and department stores.  

BOBS from Skechers. Our BOBS from Skechers footwear for men, women and kids is an alpagarta-inspired footwear line created 
to help millions of children worldwide. For every pair of BOBS shoes sold, Skechers donates a pair of new shoes to a child in need 
around the world through reputable charity organizations. By the end of 2012, we had donated three million pairs to SolesforSouls and 
Fashion  Delivers,  which  are  our  charity  partners.  Primarily  designed  with  canvas  and  linen  uppers,  BOBS  are  also  made  with 
corduroy, boiled wool and Tyvek (a paper fabric) uppers. BOBS’ versatile, classic designs are available at department, specialty shoe 
stores and online retailers. 

SKCH+3 from Skechers. Introduced in Fall 2012, our SKCH+3 line  features  a 3" hidden  wedge in low-top sneakers and boots  
that are primarily designed for fashion savvy 20 to 34 year old women. The marketing used for our SKX+3 line is more stylish than 
that used for our other Skechers lines, and SKCH+3 is available at department stores as well as specialty independents.  

Daddy’s Money. Introduced during the Holiday Season in 2012, Daddy's Money is a uniquely branded juniors line that features a 
2” hidden wedge. The collection of primarily low-top sneakers is marked by patterned and bright canvas uppers. Daddy’s Money is 
available at department stores as well as specialty independent stores.  

Skechers Kids. The Skechers Kids line includes: (i) Skechers Kids, which is a range of infants’, toddlers’, boys’ and girls’ boots, 
shoes and sneakers, (ii) S-Lights, Hot Lights by Skechers and Luminators by Skechers, (iii) Skechers Cali for Girls, (iv) Airators by 
Skechers, (v) Skechers Super Z-Strap, (vi) Elastika by Skechers, (vii) Bella Ballerina by Skechers, (viii) Twinkle Toes by Skechers, 
(ix) Sporty Shorty by Skechers, and (x) Air-Mazing by Skechers.   

•  The Skechers Kids line includes embellishments or adornments such as fresh colors and fabrics from our Skechers adult shoes. 
Some of these styles are also adapted for toddlers with softer, more pliable outsoles and for infants with soft, leather-sole crib 
shoes.  

• 

• 

S-Lights, Hot Lights and Luminators by Skechers are lighted sneakers and sandals for boys and girls. The S-Lights combine 
patterns  of  lights  on  the  outsoles  and  sides  of  the  shoes  while  Hot  Lights  feature  lights  on  the  front  of  the  toe  to  simulate 
headlights  as  well  as  on  other  areas  of  the  shoes.  Luminators  by  Skechers  feature  glowing  green  lights  and  a  marketing 
campaign with the Luminators characters. 

Skechers Cali for Girls is a line of sneakers, skimmers and sandals for young girls designed to typify the California lifestyle. 
The sneakers are designed primarily with canvas uppers in unique prints, some with patch details, on vulcanized outsoles. The 
skimmers and flats are designed with many of the same upper materials and outsoles as the sneakers. 

•  Airators by Skechers is a line of boys sneakers with a foot-cooling system designed to pump air from the heel through to the 

toes. The line is marketed with the character, Kewl Breeze. 

• 

Skechers Super Z-Strap is a line of athletic styled sneakers with a unique “z” shaped closure system for easy closure. The line 
is marketed with the character, Z-Strap. 

•  Elastika by Skechers is a line of girls’ sneakers with bungee closures. The line is marketed with the character, Elastika. 

•  Bella Ballerina by Skechers is a line of shoes with a disc that spins on the outsole, allowing girls to twirl like a ballerina.  

•  Twinkle Toes by Skechers is a line of girls’ sneakers and boots that feature bejeweled toe caps and brightly designed uppers. 

Some also include lights. The line is marketed with the character, Twinkle Toes. 

• 

Sporty Shorty by Skechers is a line of athletic-inspired sneakers for girls who like to wear sport-style footwear off the field. 
Many of the styles are lightweight and come in bright colors. Some also include lights. The line is marketed with the character, 
Sporty Shorty. 

•  Air-Mazing  by  Skechers  is  a  lightweight  line  of  colorful  sneakers  designed  for  older  boys.  The  line  is  marketed  with  the 

character, Air-Mazing Kid, who performs air tricks in his sneakers. 

Skechers  Kids  and  Skechers  Cali  for  Girls  are  comprised  primarily  of  shoes  that  are  designed  as  “takedowns”  of  their  adult 
counterparts, allowing the younger consumers the opportunity to wear the same popular styles as their older siblings and schoolmates. 
This “takedown” strategy maintains the product’s integrity by offering premium leathers, hardware and outsoles without the attendant 
costs involved in designing and developing new products. In addition, we adapt current fashions from our men’s and women’s lines by 
modifying  designs  and  choosing  colors  and  materials  that  are  more  suitable  for  the  playful  image  that  we  have  established  in  the 
children’s  footwear  market. Each Skechers Kids line is  marketed and packaged separately  with a distinct  shoe box.  Skechers Kids 
shoes are available at department stores and specialty and athletic retailers. 

Skechers Work. Expanding on our heritage of cutting-edge utility footwear, Skechers Work offers a complete line of men’s and 
women’s casuals, field boots, hikers and athletic shoes. The Skechers Work line includes athletic-inspired, casual safety toe and non-
slip safety toe categories that may feature lightweight aluminum safety toe, electrical hazard and slip-resistant technologies, as well as 
breathable,  seam-sealed  waterproof  membranes.   Designed  for  men  and  women  with  jobs  that  require  certain  safety  requirements, 
these  durable  styles  are  constructed  on  high-abrasion,  long  wearing  soles,  and  feature  breathable  lining,  oil  and  abrasion  resistant 
outsoles  offering  all-day  comfort  and  prolonged  durability.   The  Skechers  Work  line  incorporates  design  elements  from  the  other 
Skechers men’s and women’s line.  The uppers are comprised of high-quality leather, nubuck, trubuck and durabuck.  Our safety toe 
athletic sneakers, boots, hikers and casuals are ideal for environments requiring safety footwear and offer comfort and safety in dry or 
wet conditions.  Our slip-resistant boots, hikers, athletics, casuals and clogs are ideal for the service industry.  Our safety toe products 
have been independently tested and certified to meet ASTM standards, and our slip-resistant soles have been tested pursuant to the 
Mark II testing method for slip resistance.  Skechers Work is typically sold through department stores, athletic footwear retailers and 
specialty shoe stores, as well as marketed directly to consumers through business-to-business channels.   

Performance and Fitness Brands 

Shape-ups  Liv  by  Skechers.  Shape-ups  Liv  by  Skechers  is  a  lightweight  sneaker  collection  for  men  and  women  with  Natural 
Stride technology. The curved bottom is designed to promote the body’s natural stride, the Resalyte® cushioning provides a cushioned 
base,  and  the  flex  groove  bottom  offers  more  flexibility.  Uppers  are  in  leather,  breathable  mesh  and  lightweight  fabrics  in  classic 
athletic colors, whites and brights. Shape-ups Liv by Skechers are marketed in their own box as a stylish walking and light running 
shoe for men and women. The line is available at athletic footwear retailers, department stores and specialty shoe stores.  

Skechers Performance. Skechers Performance is a collection of technical footwear designed with a focus on a specific activity to 
maximize performance and promote natural motion. Developed by the Skechers Performance Design Team, the footwear utilizes the 
latest  advancements  in  materials  and  innovative  design,  including  an  ultra-lightweight  Resalyte®  compound  for  the  midsole  and 
GOimpulse sensors for responsive feedback. The footwear is available at athletic footwear retailers, department stores and specialty 
running stores. 

• 

• 

Skechers GOrun.  Skechers GOrun is an extremely flexible, minimalistic collection of running shoes that feature a midfoot 
strike design for efficient running and a low 4mm heel drop for a natural running feel. Skechers GOrun ride features a similar 
design  with  enhanced  cushioning  for  elevated  comfort  and  support.  Skechers  GOrun  2  updates  the  original  GOrun  with  a 
lighter-weight design and new features including a breathable stretch mesh upper, a progressive flex outsole, and a custom fit 
removable insole. These lines are marketed to serious runners and recreational runners alike. 

Skechers  GOwalk.    Skechers  GOwalk  is  designed  for  walking  and  casual  wear  and  offers  performance  features  in  a 
comfortable  casual  slip-on.  The  line  is  also  lightweight  and  extremely  flexible  to  promote  natural  foot  movement  when 
walking.  Skechers  GOwalk  2  incorporates  more  performance  technologies  with  a  unique  V-Stride  outsole  designed 

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specifically  to  promote  a  natural  walking  stride.  Skechers  On-the-go  footwear  fuses  iconic  designs  and  premium  materials 
with Skechers Performance technologies for comfort and style. 

Skechers  GObionic.  Skechers  GObionic  is  designed  for  ultra-minimal  running  and  was  engineered  with  inspiration  from 
nature’s ultimate design—the human body—to create a shoe that moves like the foot. Eighteen fully articulated bio-responsive 
zones offer flexibility, feel and ground conformity. It also features a zero heel drop design, which places the heel and forefoot 
at the same distance from the ground, and Resalyte® cushioning. A version of the shoe with enhanced cushioning and a 4mm 
heel drop is called GObionic ride. 

Skechers GOtrail. Skechers GOtrail is designed for trail running with rugged, uneven running surfaces in mind. A proprietary 
Resagrip™  outsole  increases  the  durability  to  handle  wear  and  tear  from  tougher  terrain  and  hydrophobic  Skechers  GOdri 
technology shields feet from harsh elements. 

Skechers GOtrain. Skechers GOtrain is designed for the gym and features a wider minimal forefoot and linked high-abrasion 
rubber  pillars  for  added  stability  and  control  at  lateral  and  medial  strike  points.  This  shoe  offers  a  responsive  workout 
experience. 

Skechers  GOgolf.  Skechers  GOgolf  is  designed  for  the  golf  course  and  offers  the  zero  heel  drop  design,  which  keeps  feet 
close  to  the  ground  for  a  solid  foundation  on  every  swing.  A  Resagrip™  outsole  helps  with  traction  control  and  a  soft 
Resamax® cushioned insole delivers comfort.  

• 

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• 

• 

PRODUCT DESIGN AND DEVELOPMENT 

Our principal goal in product design is to generate new and exciting footwear in all of our product lines with contemporary and 
progressive  styles  and  comfort-enhancing  performance  features.  Targeted  to  the  active,  youthful  and  style-savvy,  we  design  our 
lifestyle line to be fashionable and marketable to the 12- to 24-year old consumer,  while substantially all of our lines appeal to the 
broader  range  of  5-  to  40-year  old  consumers,  with  an  exclusive  selection  for  infants  and  toddlers.  Designed  by  the  Skechers 
Performance Division, our performance products are for professional and recreational athletes who want a technical fitness shoe.  

We believe that our products’ success is related to our ability to recognize trends in the footwear markets and to design products 
that anticipate and accommodate consumers’ ever-evolving preferences. We are able to quickly translate the latest fashion trends into 
stylish,  quality  footwear  at  a  reasonable  price  by  analyzing  and  interpreting  current  and  emerging  lifestyle  trends.  Lifestyle  trend 
information  is  compiled  and  analyzed  by  our  designers  from  various  sources,  including  the  review  and  analysis  of  modern  music, 
television, cinema, clothing, alternative sports and other trend-setting media; traveling to domestic and international fashion markets 
to identify and confirm current trends; consulting with our retail and e-commerce customers for information on current retail selling 
trends; participating in major footwear trade shows to stay abreast of popular brands, fashions and styles; and subscribing to various 
fashion  and  color  information  services.  In  addition,  a  key  component  of  our  design  philosophy  is  to  continually  reinterpret  and 
develop our successful styles in our brands’ image. 

The  footwear  design  process  typically  begins  about  nine  months  before  the  start  of  a  season.  Our  products  are  designed  and 
developed primarily by our in-house design staff. To promote innovation and brand relevance, we utilize dedicated design teams, who 
report  to  our  senior  design  executives  and  focus  on  each  of  the  men’s,  women’s  and  children’s  categories.  In  addition,  we  utilize 
outside design firms on an item-specific basis to supplement our internal design efforts. The design process is extremely collaborative, 
as members of the design staff frequently meet with the heads of retail, merchandising, sales, production and sourcing to further refine 
our products to meet the particular needs of the target market. 

After a design team arrives at a consensus regarding the fashion themes for the coming season, the designers then translate these 
themes into our products. These interpretations include variations in product color, material structure and embellishments, which are 
arrived at after close consultation with our production department. Prototype blueprints and specifications are created and forwarded 
to our manufacturers for a design prototype. The design prototypes are then sent back to our design teams. Our major retail customers 
may also review these new design concepts. Customer input not only allows us to measure consumer reaction to the latest designs, but 
also affords us an opportunity to foster deeper and more collaborative relationships with our customers. We also occasionally order 
limited production runs that may initially be tested in our concept stores. By working closely with store personnel, we obtain customer 
feedback that often influences product design and development. Our design teams can easily and quickly modify and refine a design 
based  on  customer  input.  Generally,  the  production  process  can  take  six  months  to  nine  months  from  design  concept  to 
commercialization. 

For disclosure of product design and development costs during the last three fiscal years, see note 1 to the financial statements of 

this annual report. 

SOURCING 

Factories. Our products are produced by independent contract manufacturers located primarily in China and, to a lesser extent, in 
Vietnam,  Brazil  and  various  other  countries.  We  do  not  own  or  operate  any  manufacturing  facilities.    We  believe  that  the  use  of 
independent  manufacturers  substantially  increases  our  production  flexibility  and  capacity  while  reducing  capital  expenditures  and 
avoiding  the  costs  of  managing  a  large  production  work  force.    For  disclosure  of  information  regarding  the  risks  associated  with 
having our  manufacturing operations abroad and relying on independent contract  manufacturers, see the relevant risk factors under 
Item 1A of this annual report. 

When possible, we seek to use manufacturers that have previously produced our footwear, which we believe enhances continuity 
and  quality  while  controlling  production  costs.  We  attempt  to  monitor  our  selection  of  independent  factories  to  ensure  that  no  one 
manufacturer  is  responsible  for  a  disproportionate  amount  of  our  merchandise.  We  source  product  for  styles  that  account  for  a 
significant  percentage  of  our  net  sales  from  at  least  five  different  manufacturers.    During  2012,  five  of  our  contract  manufacturers 
accounted for approximately 61.6% of total purchases.  One manufacturer accounted for 33.5%, and another accounted for 9.2% of 
our total purchases. To date, we have not experienced difficulty in obtaining  manufacturing  services or  with the availability of raw 
materials. 

We finance our production activities in part through the  use of interest-bearing open purchase arrangements  with certain of our 
Asian manufacturers. These facilities currently bear interest at a rate between 0% and 1.0% for 30- to 60-day financing, depending on 
the factory. We believe that the use of these arrangements affords us additional liquidity and flexibility.  We do not have any long-
term  contracts  with  any  of  our  manufacturers;  however,  we  have  long-standing  relationships  with  many  of  our  manufacturers  and 
believe our relationships to be good. 

We  closely  monitor  sales  activity  after  initial  introduction  of  a  product  in  our  concept  stores  to  determine  whether  there  is 
substantial  demand  for  a  style,  thereby  aiding  us  in  our  sourcing  decisions.  Styles  that  have  substantial  consumer  appeal  are 
highlighted in  upcoming collections or offered as part of our periodic style offerings,  while less popular styles can  be discontinued 
after a limited production run. We believe that sales in our concept stores can also help forecast sales in national retail stores, and we 
share  this  sales  information  with  our  wholesale  customers.  Sales,  merchandising,  production  and  allocations  management  analyze 
historical and current sales and market data from our wholesale account base and our own retail stores to develop an internal product 
quantity forecast that allows us to better manage our future production and inventory levels. For those styles with high sell-through 
percentages,  we  maintain  an  in-stock  position  to  minimize  the  time  necessary  to  fill  customer  orders  by  placing  orders  with  our 
manufacturers prior to the time we receive customers’ orders for such footwear.  

Production  Oversight.  To  safeguard  product  quality  and  consistency,  we  oversee  the  key  aspects  of  production  from  initial 
prototype manufacture through initial production runs to final manufacture. Monitoring of all production is performed in the United 
States  by  our  in-house  production  department  and  in  Asia  through  an  approximately  200-person  staff  working  from  our  offices  in 
China. We believe that our Asian presence allows us to negotiate supplier and manufacturer arrangements more effectively, decrease 
product  turnaround  time  and  ensure  timely  delivery  of  finished  footwear.  In  addition,  we  require  our  manufacturers  to  certify  that 
neither convicted, forced nor indentured labor (as defined under U.S. law) nor child labor (as defined by law in the manufacturer’s 
country)  is  used  in  the  production  process,  and  that  compensation  will  be  paid  according  to  local  law  and  that  the  factory  is  in 
compliance with local safety regulations. 

Quality Control. We believe that quality control is an important and effective means of maintaining the quality and reputation of 
our  products.  Our  quality  control  program  is  designed  to  ensure  that  not  only  finished  goods  meet  our  established  design 
specifications, but also that all goods bearing our trademarks meet our standards for quality. Our quality control personnel located in 
China  perform  an  array  of  inspection  procedures  at  various  stages  of  the  production  process,  including  examination  and  testing  of 
prototypes of key raw materials prior to manufacture, samples and materials at various stages of production and final products prior to 
shipment.  Our  employees  are  on  site  at  each  of  our  major  manufacturers  to  oversee  production.  For  some  of  our  lower  volume 
manufacturers, our  staff  is on site during  significant production runs or  we  will perform unannounced  visits to their  manufacturing 
sites to further monitor compliance with our manufacturing specifications. 

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ADVERTISING AND MARKETING 

With a marketing philosophy of “Unseen, Untold, Unsold,” we take a targeted approach to marketing to drive traffic, build brand 
recognition  and  properly  position  our  diverse  lines  within  the  marketplace.  Senior  management  is  directly  involved  in  shaping  our 
image and the conception, development and implementation of our advertising and marketing activities. The focus of our marketing 
plan is print and television advertising, which is supported by outdoor, trend-influenced marketing, public relations, promotions, grass 
roots and in-store support.  In addition, we utilize celebrity endorsers in our advertisements. We also believe our websites and trade 
shows  are  effective  marketing  tools  to  both  consumers  and  wholesale  accounts.  We  have  historically  budgeted  advertising  as  a 
percentage of projected net sales.  

The majority of our advertising is conceptualized by our in-house design team. We believe that our advertising strategies, methods 
and creative campaigns are directly related to our success. Through our lifestyle, performance-inspired and image-driven advertising, 
we generally seek to build and increase brand awareness by linking the Skechers brand to youthful attitudes for our lifestyle lines, and 
technology with authentic runners and athletes for our performance lines. Our ads are designed to provide merchandise flexibility and 
to facilitate the Skechers brand’s direction.  

To  further  build  brand  awareness  and  influence  consumer  spending,  we  have  selectively  signed  endorsement  agreements  with 
celebrities  whom  we  believed  would  reach  new  markets.  Our  endorsees  Brooke  Burke,  Mark  Cuban,  Joe  Montana  and  Tommy 
Lasorda all appeared in print and television campaigns in 2012.  The Skechers Performance Division launched in 2011, with a global 
marketing campaign starring elite distance runner and Olympic medalist Meb.  Competing in Skechers GOrun footwear, he recently 
achieved two back-to-back personal best marathon times during the 2011 New York City marathon and a first place finish in the 2012 
Olympic Trials.  Meb was the fastest American at the London Games, finishing fourth overall.  From time to time, we may sign other 
celebrities to endorse our brand name and image in order to strategically market our products among specific consumer groups in the 
future. 

With a targeted approach, our print ads appear regularly in popular fashion and lifestyle consumer publications, including Runner's 
World,  Cosmopolitan,  Shape,  Lucky,  In  Style,  Seventeen,  Maxim,  Men's  Fitness,  and  Women’s  Health,  as  well  as  in  weekly 
publications such as People, Us Weekly, OK!, and Sports Illustrated, among others. Our advertisements also appear in international 
magazines around the world. 

Our television commercials are produced both in-house and through producers that we have utilized in the past who are familiar 
with our brands. In 2012, we developed commercials for men, women and children for our Skechers brands, including our animated 
spots for kids featuring our own action heroes and our performance collections.  We have found these to be a cost-effective way to 
advertise  on  key  national  and  cable  programming  during  high  selling  seasons.  In  2012,  many  of  our  television  commercials  were 
translated into  multiple languages and aired in Brazil, Canada, the United Kingdom, France, the Benelux  Region, Germany, Spain, 
Italy, Chile, Japan, Austria and Switzerland.   

Outdoor. In an effort to reach consumers where they shop and in high-traffic areas as they travel to and from work, we continued 
our  multi-level outdoor campaign that included kiosks in key  malls across the  United States plus billboards, transportation systems 
and  telephone  kiosks  in  North  America,  Brazil,  Chile,  Asia  and  Europe.    In  addition,  we  advertised  on  perimeter  boards  at  soccer 
matches  in several European  countries. We believe these are effective and efficient  ways to reach a broad range of consumers and 
leave a lasting impression for our brands. 

Trend-Influenced  Marketing/Public  Relations.  Our  public  relations  objectives  are  to  secure  product  placement  in  key  fashion 
magazines, place our footwear on the feet of trend-setting celebrities and their children, and gain positive and accurate press about us 
and our products. Through our commitment to aggressively promote our upcoming styles, our products are often featured in leading 
fashion and pop culture magazines, as well as in select films and popular television shows. Our footwear and our company have been 
prominently displayed and referenced on news and magazine shows. We have also amassed an array of prominent product placements 
in  magazines  including  Seventeen,  OK!, US  Weekly, Runner’s  World  and  Competitor.  In  addition,  our  brands  have  been  associated 
with cutting edge events and various celebrities.  

Promotions and Grass Roots. By applying creative sales techniques via a broad spectrum of media, our marketing team seeks to 
build brand recognition and drive traffic to Skechers’ retail stores, websites and our retail partners’ locations. Skechers’ promotional 
strategies have encompassed in-store specials, charity events, product tie-ins and giveaways, and collaborations with national retailers 
and radio stations.  In 2012, we appeared at walks and at numerous marathons in Boston, London, Paris, Santiago and other cities with 
Skechers  Performance  branded  booths  to  allow  runners  the  ability  to  try  on  and  often  buy  our  products.    Our  products  were  made 

available to consumers directly or through key accounts at many of these events. In addition, we partnered with several key accounts 
for BOBS donation events in cities in the United States.   

Visual Merchandising. Our in-house visual  merchandising department supports  wholesale customers, distributors and our retail 
stores by developing displays that effectively leverage our products at the point of sale. Our point-of-purchase display items include 
signage, graphics, displays, counter cards, banners and other merchandising items for each of our brands. These materials mirror the 
look and feel of each brand and reinforce the image as well as draw consumers into stores. 

Our visual merchandising coordinators (“VMC’s”) work with our sales force and directly with our customers to ensure better sell-
through at the retail level by generating greater consumer awareness through Skechers brand displays. Our VMC’s communicate with 
and visit our wholesale customers on a regular basis to aid in proper display of our merchandise. They also run in-store promotions to 
enhance  the  sale  of  Skechers  footwear  and  create  excitement  surrounding  the  Skechers  brand.  We  believe  that  these  efforts  help 
stimulate impulse sales and repeat purchases. 

Trade  Shows.  To  better  showcase  our  diverse  products  to  footwear  buyers  in  the  United  States  and  Europe  and  to  distributors 
around  the  world,  we  regularly  exhibit  at  leading  trade  shows.  Along  with  specialty  trade  shows,  we  exhibit  at  WSA’s  The  Shoe 
Show, FFANY,  ASR, MAGIC and  Outdoor Retailer  in the United  States; GDS, MICAM, ISPO, Mess  Around and  Who’s  Next in 
Europe;  and  Couromoda  and  Francal  in  Brazil.  Our  dynamic,  state-of-the-art  trade  show  exhibits  are  developed  by  our  in-house 
architect  to  showcase  our  latest  product  offerings  in  a  lifestyle  setting  reflective  of  each  of  our  brands.  By  investing  in  innovative 
displays and individual rooms showcasing each line, our sales force can present a sales plan for each line and buyers are able to truly 
understand the breadth and depth of our offerings, thereby optimizing commitments and sales at the retail level.  

Internet. We promote and sell our brands through our e-commerce website www.skechers.com,which enables fans and customers 
to shop, browse, find store locations, socially interact, post a shoe review, photo, video, or question and immerse themselves in our 
brands.    Our  website  is  a  venue  for  dialog  and  feedback  from  customers  about  our  products  which  enhances  the  Skechers  brand 
experience while driving sales through all our retail channels. In addition, we established e-commerce websites in the United Kingdom 
and Germany in 2012.  

PRODUCT DISTRIBUTION CHANNELS  

We have four reportable segments – domestic wholesale sales, international wholesale sales, retail sales and e-commerce sales.  In 
the  United  States,  our  products  are  available  through  a  network  of  wholesale  customers  comprised  of  department,  athletic  and 
specialty stores.  Internationally, our products are available through wholesale customers in more than 100 countries and territories via 
our global network of distributors in addition to our subsidiaries in  Asia, Europe, Canada and South  America.  Skechers owns and 
operates  retail  stores  both  domestically  and  internationally  through  three  integrated  retail  formats—concept,  factory  outlet  and 
warehouse  outlet  stores.  Each  of  these  channels  serves  an  integral  function  in  the  global  distribution  of  our  products.    Nineteen 
distributors  and  five  licensees  have  opened  278  distributor-owned  and  licensee-owned  Skechers  retail  stores  in  42  countries  as  of 
December 31, 2012.   

Domestic  Wholesale.  We  distribute  our  footwear  through  the  following  domestic  wholesale  distribution  channels:  department 
stores,  specialty  stores,  athletic  specialty  shoe  stores  and  independent  retailers,  as  well  as  catalog  and  internet  retailers.  While 
department  stores  and  specialty  retailers  are  the  largest  distribution  channels,  we  believe  that  we  appeal  to  a  variety  of  wholesale 
customers, many of whom may operate stores within the same retail location due to our distinct product lines, variety of styles and the 
price criteria of their specific customers. Management has a clearly defined growth strategy for each of our channels of distribution. 
An integral component of our strategy is to offer our accounts the highest level of customer service so that our products will be fully 
represented in existing retail locations and new locations of each customer. 

In  an  effort  to  provide  knowledgeable  and  personalized  service  to  our  wholesale  customers,  the  sales  force  is  segregated  by 
product  line,  each  of  which  is  headed  by  a  vice  president  or  national  sales  manager.  Reporting  to  each  sales  manager  are 
knowledgeable account executives and territory managers. The vice presidents and national sales managers report to our senior vice 
president  of  sales.  All  of  our  vice  presidents  and  national  sales  managers  are  compensated  on  a  salary  basis,  while  our  account 
executives  and  territory  managers  are  compensated  on  a  commission  basis.  None  of  our  domestic  sales  personnel  sells  competing 
products. 

We  believe  that  we  have  developed  a  loyal  customer  base  through  exceptional  customer  service.  We  believe  that  our  close 
relationships with these accounts help us to maximize their retail sell-throughs. Our visual merchandise coordinators work with our 

8 

9 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
wholesale  customers  to  ensure  that  our  merchandise  and  point-of-purchase  marketing  materials  are  properly  presented.  Sales 
executives and merchandise personnel work closely with accounts to ensure that appropriate styles are purchased for specific accounts 
and  for  specific  stores  within  those  accounts  as  well  as  to  ensure  that  appropriate  inventory  levels  are  carried  at  each  store.  Such 
information is then utilized to help develop sales projections and determine the product needs of our wholesale customers. The value-
added services we provide our wholesale customers help us maintain strong relationships with our existing wholesale customers and 
attract potential new wholesale customers. 

Retail Stores. We pursue our retail store strategy through our three integrated retail formats: the concept store, the factory outlet 
store and the warehouse outlet store. Our three store formats enable us to promote the full Skechers product offering in an attractive 
environment that appeals to a broad group of consumers.  In addition, most of our retail stores are profitable and have a positive effect 
on our operating results.  We periodically review all of our stores for impairment.  We prepare a summary of cash flows for each of 
our  retail  stores  to  assess  potential  impairment  of  the  fixed  assets  and  leasehold  improvements.      If the  assets  are  considered  to  be 
impaired, the impairment we recognize is the amount by which the carrying value of the assets exceeds the fair value of the assets.   In 
addition, we base the useful lives and related amortization or depreciation expense on our estimate of the period that the assets will 
generate revenues or otherwise be used by us. As of February 15, 2013, we owned and operated 116 concept stores, 118 factory outlet 
stores and 61 warehouse outlet stores in the United States, and 36 concept stores and 18 factory outlet stores internationally.  During 
2012,  we  opened  25  domestic  stores  and  four  international  stores,  and  closed  five  domestic  stores  and  two  international  stores.  In 
addition, we also took over the operations of one concept store and two outlet stores from our distributor in Japan.   During 2013, we 
plan to open 30 to 35 new stores. 

• 

Concept Stores  

Our concept stores are located at marquee street locations, major tourist areas or in key shopping malls in metropolitan 
cities. Our concept stores have a threefold purpose in our operating strategy. First, concept stores serve as a showcase for a 
wide range of our product offering for the current season, as we estimate that our average wholesale customer carries no more 
than 5% of the complete Skechers line in any one location.  Our concept stores showcase our products in an attractive, easy-
to-shop open-floor setting, providing the customer with the complete Skechers story.  Second, retail locations are generally 
chosen  to  generate  maximum  marketing  value  for  the  Skechers  brand  name  through  signage,  store  front  presentation  and 
interior  design.  Domestic  locations  include  concept  stores  at  Times  Square,  Union  Square  and  34th  Street  in  New  York, 
Powell Street in San Francisco, Hollywood and Highland in Hollywood, Santa Monica’s Third Street Promenade, and Las 
Vegas’ Fashion Show Mall.  International locations include Covent Garden in London, Toronto’s Eaton Centre, Vancouver’s 
Pacific Centre, and Kalverstraat Street in Amsterdam.  The stores are typically designed to create a distinctive Skechers look 
and  feel,  and  enhance  customer  association  of  the  Skechers  brand  name  with  current  youthful  lifestyle  trends  and  styles. 
Third,  the  concept  stores  serve  as  marketing  and  product  testing  venues.  We  believe  that  product  sell-through  information 
and rapid customer feedback derived from our concept stores enables our design, sales, merchandising and production staff to 
respond  to  market  changes  and  new  product  introductions.  Such  responses  serve  to  augment  sales  and  limit  our  inventory 
markdowns and customer returns and allowances.  In 2012, we opened five domestic concept stores and four international 
concept stores and took over one concept store from our distributor in Japan. 

The  typical  Skechers  concept  store  is  approximately  2,500  square  feet,  although  in  certain  markets  we  have  opened 
concept stores as large as 7,800 square feet or as small as 900 square feet. When deciding where to open concept stores, we 
identify top geographic markets in the larger metropolitan cities in North America, Europe, South America and Asia. When 
selecting  a  specific  site,  we  evaluate  the  proposed  sites’  traffic  pattern,  co-tenancies,  sales  volume  of  neighboring  concept 
stores, lease economics and other factors considered important within the specific location. If we are considering opening a 
concept store in a shopping mall, our strategy is to obtain space as centrally located as possible in the mall where we expect 
foot  traffic  to  be  most  concentrated.  We  believe  that  the  strength  of  the  Skechers  brand  name  has  enabled  us  to  negotiate 
more favorable terms with shopping malls that want us to open up concept stores to attract customer traffic to their venues. 

• 

Factory Outlet Stores  

Our factory outlet stores are generally located in manufacturers’ direct outlet centers throughout the United States.  In 
addition, we have 18 international outlet stores – four in England, two each in Canada, Germany, Italy and Japan, and one 
each in Austria, Chile, the Netherlands, Portugal, Wales and Scotland. Our factory outlet stores provide opportunities for us 
to sell discontinued and excess merchandise, thereby reducing the need to sell such merchandise to discounters at excessively 
low  prices  and  potentially  compromise  the  Skechers  brand  image.  Skechers’  factory  outlet  stores  range  in  size  from 
approximately 1,400 to 9,000 square feet. Unlike our warehouse outlet stores, inventory in these stores is supplemented by 

certain first-line styles sold at full retail price points. We opened 12 domestic factory outlet stores in 2012 and took over two 
outlet stores from our distributor in Japan. 

•  Warehouse Outlet Stores  

Our  free-standing  warehouse  outlet  stores,  which  are  primarily  located  throughout  the  United  States,  enable  us  to 
liquidate  excess  merchandise,  discontinued  lines  and  odd-size  inventory  in  a  cost-efficient  manner.  Skechers’  warehouse 
outlet stores are typically larger than our factory outlet stores and typically range in size from approximately 5,200 to 15,000 
square feet. Our warehouse outlet stores enable us to sell discontinued and excess merchandise that would otherwise typically 
be sold to discounters at excessively low prices, which could otherwise compromise the Skechers brand image. We seek to 
open our warehouse outlet stores in areas that are in close proximity to our concept stores to facilitate the timely transfer of 
inventory that we want to liquidate as soon as practicable. We opened eight domestic warehouse outlet stores in 2012. 

International  Wholesale.  Our  products  are  sold  in  more  than  100  countries  and  territories  throughout  the  world.  We  generate 
revenues from outside the United States from three principal sources: (i) direct sales to department stores and specialty retail stores 
through  our  subsidiaries  and  joint  ventures  in  Canada,  France,  Germany,  Spain,  Portugal,  Italy,  Switzerland,  Austria,  Malaysia, 
Thailand, Singapore, Hong Kong, China, Japan, India, the Benelux Region, the United Kingdom, Brazil and Chile; (ii) sales to foreign 
distributors  who  distribute  our  footwear  to  department  stores  and  specialty  retail  stores  in  countries  and  territories  across  Eastern 
Europe,  Asia,  Central  America,  South  America,  Africa,  the  Middle  East  and  Australia,  among  other  regions;  and  (iii)  to  a  lesser 
extent, royalties from licensees who manufacture and distribute our non-footwear products outside the United States. 

We  believe  that  international  distribution  of  our  products  represents  a  significant  opportunity  to  increase  sales  and  profits.  We 
intend to further increase our share of the international footwear market by heightening our marketing in those countries in which we 
currently have a presence through our international advertising campaigns, which are designed to establish Skechers as a global brand 
synonymous with trend-right casual shoes. 

• 

International Subsidiaries 

 Europe 

We currently distribute product in most of Western Europe through the following subsidiaries: Skechers USA Ltd., with 
its offices and showrooms in  London, England; Skechers S.a.r.l., with its offices in Lausanne, Switzerland; Skechers  USA 
France  S.A.S.,  with  its  offices  and  showrooms  in  Paris,  France;  Skechers  USA  Deutschland  GmbH,  with  its  offices  and 
showrooms in Dietzenbach, Germany; Skechers USA Iberia, S.L., with its offices and showrooms in Madrid, Spain; Skechers 
USA Benelux B.V.,  with its  offices and showrooms in Waalwijk, the Netherlands; and Skechers USA Italia S.r.l.,  with its 
offices and showrooms in Milan, Italy.  

Skechers-owned  retail  stores  in  Europe  include  nine  concept  stores  and  thirteen  factory  outlet  stores  located  in  nine 

countries, including the key locations of Covent Garden in London and Kalverstraat Street in Amsterdam.  

To accommodate our European subsidiaries’ operations,  we operate an approximately 490,000 square foot distribution 
center in Liege, Belgium.  This distribution center is currently used to store and deliver product to our subsidiaries and retail 
stores throughout Europe. 

Canada 

Merchandising  and  marketing  of  our  product  in  Canada  is  managed  by  our  wholly-owned  subsidiary,  Skechers  USA 
Canada, Inc. with its offices and showrooms outside Toronto in Mississauga, Ontario.  Product sold in Canada is primarily 
sourced from our U.S. distribution center in Rancho Belago, California.  We have five concept stores; Toronto Eaton Centre, 
West Edmonton Mall, Chinook Centre, Richmond Centre, and Pacific Centre; and two factory outlet stores in Toronto and 
Alberta.  

Malaysia, Singapore and Thailand 

We have a 50% interest in a joint venture in Malaysia and Singapore, and a 51% interest in a joint venture in Thailand 
that generate net sales in those countries.  The joint ventures operate 18 retail stores and eight shops-in-shops in Malaysia, 12 
concept  stores  and  three  shop-in-shops  in  Singapore,  and  seven  concept  stores  and  11  shops-in  shops  in  Thailand.    These 

10 

11 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
joint ventures are included in our consolidated financial statements.   

• 

Distributors and Licensees 

China and Hong Kong 

We have a 50% interest in a joint venture in China and a minority interest in a joint venture in Hong Kong that generate 
net sales in those countries.  Under the joint venture agreements, the joint venture partners contribute capital in proportion to 
their respective ownership interests.  The joint ventures operate 54 direct-owned stores and in excess of 127 shops-in-shop in 
China  and  17  direct-owned  stores  and  10  shops-in-shop  in  Hong  Kong.  These  stores  are  in  key  locations  in  Shanghai, 
Beijing,  Guangzhou,  Xiamen,  Hong,  Kong,  Macau,  and  other  cities.    The  joint  ventures  are  included  in  our  consolidated 
financial statements. 

Japan 

Merchandising and marketing of our product in Japan is managed by our wholly-owned subsidiary, Skechers Japan GK, 
with its offices located in Tokyo, Japan.  Product sold in Japan is primarily shipped directly from our contract manufacturers’ 
factories in China. We have one concept store in Osaka and two factory outlet stores one each in Osaka and Toki.  

India 

We have a 51% interest in a joint venture in India that generates net sales in that country. The joint venture operates one 
retail  store  in  Mumbai  and  supports  wholesale  accounts  in  India.    Under  the  joint  venture  agreement,  the  joint  venture 
partners  contribute  capital  in  proportion  to  their  respective  ownership  interests.  The  joint  venture  is  included  in  our 
consolidated financial statements. 

Brazil 

Merchandising and marketing of our product in Brazil is managed by our wholly-owned subsidiary, Skechers Do Brasil 
Calcados LTDA., with its offices located in Sao Paulo, Brazil.  Product sold in Brazil is primarily shipped directly from our 
contract manufacturers’ factories in China and occasionally from our U.S. distribution center in Rancho Belago, California. 

Chile 

Our  wholly-owned  subsidiary,  Comercializadora  Skechers  Chile  Limitada,  supports  our  21  retail  stores  and  wholesale 
accounts in Chile.  Product sold in Chile is primarily shipped directly from our contract manufacturers’ factories in China and 
occasionally from our U.S. distribution center in Rancho Belago, California. 

12 

Where  we  do  not  sell  directly  through  our  international  subsidiaries  and  joint  ventures,  our  footwear  is  distributed 
through an extensive network of more than 30 distributors who sell our products to department, athletic and specialty stores 
in more than 100 countries around the world. As of December 31, 2012, we also had agreements with 19 of these distributors 
and five licensees regarding 257 distributor-owned  Skechers retail stores and 21 licensee-owned Skechers retail stores that 
are open in 42 countries, including 74 stores that were opened in 2012, while 16 distributor-owned stores were closed during 
the year.  In addition, we now own three stores in Japan that were previously distributor-owned, and one store in India is now 
operated by our joint venture in that country.  Our distributors and licensees own and operate the following retail stores: 

REGION 
North America 

Central America 

South America 

Africa 

Asia 

Australia 

STORE FORMAT 

Concept 
Warehouse 

Concept 
Warehouse 

Concept 
Warehouse 

Concept 

Concept 
Warehouse 

Concept 
Warehouse 

Europe 

Concept 

Warehouse 

Middle East 

Concept 

Warehouse 

NUMBER OF 
STORES 
25 
8 

Canada (8), Mexico (17)  
Canada (2), Mexico (6) 

LOCATION 

(1)

9 
1 

32 
1 

12 

106 
4 

8 
11 

34 

3 

23 

1 

Costa Rica (2), El Salvador, Guatemala (2), Honduras, Panama (3)  
Panama 

Aruba (2), Colombia (8), Ecuador (2),  Peru (4), Venezuela (16) 
Colombia 

Egypt (2), Morocco (2), South Africa (8) 

Indonesia (11), Korea (72), Mongolia, Philippines (14), Taiwan (8) 
Korea, Taiwan (3) 

Castle Hill, Chadstone, Sydney (3), Melbourne (2), Brisbane 
Brisbane,  Bundoora,  Cairns,  Canberra,  Melbourne  (4),  Jindalee, 
Sydney, Biggera Waters 

Croatia  (3),  Estonia  (3),  Greece  (2),  Ireland  (5),  Israel,  Malta  (3), 
Netherlands, Portugal (4), Russia (8), Serbia, Spain, Ukraine (4)  
Serbia 

Bahrain,  Kuwait,  Qatar,  Saudi  Arabia  (10),  UAE  (7),  Mauritius, 
Jordan, Oman 
UAE 

(1)  One store per location except as otherwise noted. 

The distributors are responsible for their respective stores’ operations, have ownership of their respective stores’ assets, 
and select the broad collection of our products to sell to consumers in their regions. In order to maintain a globally consistent 
image, we provide architectural, graphic and visual guidance and materials for the design of the stores, and we train the local 
staff  on  our  products  and  corporate  culture.  We  intend  to  expand  our  international  presence  and  global  recognition  of  the 
Skechers  brand  name  by  continuing  to  sell  our  footwear  to  foreign  distributors  and  by  opening  flagship  retail  stores  with 
distributors that have local market expertise. 

Electronic Commerce.  Our website, www.skechers.com, is a virtual storefront that promotes the Skechers brands. Our website is 
designed  to  provide  a  positive  shopping  and  brand  experience,  showcasing  our  products  in  an  easy-to-navigate  format,  allowing 
consumers  to  browse  our  selections  and  purchase  our  footwear.  This  virtual  store  has  provided  a  convenient  alternative-shopping 
environment and brand experience.  The website is an efficient and effective additional retail distribution channel, and it has improved 
our customer service. We also established Skechers e-commerce websites in Germany and the United Kingdom in 2012. 

For  disclosure  of  financial  information  about  geographic  areas  and  segment  information  for  our  four  reportable  segments  – 
domestic wholesale sales, international wholesale sales, retail sales and e-commerce sales—see note 12 to the financial statements of 
this annual report. 

13 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LICENSING 

We  believe  that  selective  licensing  of  the  Skechers  brand  name  and  our  product  line  names  to  manufacturers  may  broaden  and 
enhance  the  individual  brands  without  requiring  significant  capital  investments  or  additional  incremental  operating  expenses.  Our 
multiple  product  lines  plus  additional  subcategories  present  many  potential  licensing  opportunities  on  terms  with  licensees  that  we 
believe  will  provide  more  effective  manufacturing,  distribution  or  marketing  of  non-footwear  products.  We  also  believe  that  the 
reputation of Skechers and its history in launching brands has also enabled us to partner with reputable non-footwear brands to design 
and market their footwear. 

As  of  January  31,  2013,  we  had  38  active  domestic  and  international  licensing  agreements  in  which  we  are  the  licensor.  These 
include  Skechers  branded  leather  goods  and  backpacks,  Skechers  Performance  and  sport  apparel,  Skechers  Scrubs  for  health  care 
professionals  and  Skechers  Eyewear.  We  have  international  licensing  agreements  for  the  design  and  distribution  of  men’s  and 
women’s apparel in India, Israel, Mexico, and Korea; bags in Panama; and watches in the Philippines.   

DISTRIBUTION FACILITIES AND OPERATIONS 

We believe that strong distribution support is a critical factor in our operations. Once manufactured, our products are packaged in 
shoe  boxes  bearing  bar  codes  that  are  shipped  either:  (i)  to  our  approximate  1.8  million  square-foot  distribution  center  located  in 
Rancho Belago, California,  (ii) to our approximately 490,000 square-foot distribution center located in Liege, Belgium or (iii) directly 
from  third-party  manufacturers  to  our  other  international  customers  and  other  international  third-party  distribution  centers.  Upon 
receipt  at  either  of  the  distribution  centers,  merchandise  is  inspected  and  recorded  in  our  management  information  system  and 
packaged  according  to  customers’  orders  for  delivery.  Merchandise  is  shipped  to  customers  by  whatever  means  each  customer 
requests,  which  is  usually  by  common  carrier.  The  distribution  centers  have  multi-access  docks,  enabling  us  to  receive  and  ship 
simultaneously,  and  to  pack  separate  trailers  for  shipments  to  different  customers  at  the  same  time.  We  have  an  electronic  data 
interchange  system,  or  EDI  system,  to  which  some  of  our  larger  customers  are  linked.  This  system  allows  these  customers  to 
automatically place orders with us, thereby eliminating the time involved in transmitting and inputting orders, and it includes direct 
billing and shipping information. 

BACKLOG 

As of December 31, 2012, our backlog was $468.9 million, compared to $390.2 million as of December 31, 2011.  Backlog orders 
are subject to cancellation by customers, as evidenced by order cancellations that we have experienced in the past due to the weakened 
U.S. economy and shifting footwear trends.  For a variety of reasons, including changes in the economy, customer demand  for our 
products, the timing of shipments, product mix of customer orders, the amount of in-season orders and a shift towards tighter shipment 
lead times, backlog may not be a reliable measure of future sales for any succeeding period. 

INTELLECTUAL PROPERTY RIGHTS 

We own and utilize a variety of trademarks, including the Skechers trademark. We have a significant number of both registrations 
and  pending  applications  for  our  trademarks  in  the  United  States.  In  addition,  we  have  trademark  registrations  and  trademark 
applications in approximately 105 foreign countries. We also have design patents and pending design and utility patent applications in 
both  the  United  States  and  approximately  27  foreign  countries.  We  continuously  look  to  increase  the  number  of  our  patents  and 
trademarks both domestically and internationally where necessary to protect valuable intellectual property. We regard our trademarks 
and other intellectual property as  valuable assets and believe that they  have significant  value in the  marketing of our products. We 
vigorously  protect  our  trademarks  against  infringement,  including  through  the  use  of  cease  and  desist  letters,  administrative 
proceedings and lawsuits. 

We  rely  on  trademark,  patent,  copyright  and  trade  secret  protection,  non-disclosure  agreements  and  licensing  arrangements  to 
establish, protect and enforce intellectual property rights in our logos, trade names and in the design of our products. In particular, we 
believe  that  our  future  success  will  largely  depend  on  our  ability  to  maintain  and  protect  the  Skechers  trademark  and  other  key 
trademarks.  Despite  our  efforts  to  safeguard  and  maintain  our  intellectual  property  rights,  we  cannot  be  certain  that  we  will  be 
successful  in  this  regard.  Furthermore,  we  cannot  be  certain  that  our  trademarks,  products  and  promotional  materials  or  other 
intellectual property rights do not or will not violate the intellectual property rights of others, that our intellectual property would be 
upheld if challenged, or that we  would, in such an event, not be prevented from using our trademarks or other intellectual property 
rights.  Such  claims,  if  proven,  could  materially  and  adversely  affect  our  business,  financial  condition  and  results  of  operations.  In 
addition, although any such claims may ultimately prove to be without merit, the necessary management attention to and legal costs 

associated  with  litigation  or  other  resolution  of  future  claims  concerning  trademarks  and  other  intellectual  property  rights  could 
materially and adversely affect our business, financial condition and results of operations. We have sued and have been sued by third 
parties for infringement of intellectual property. It is our opinion that none of these claims has materially impaired our ability to utilize 
our intellectual property rights. 

The laws of certain foreign countries do not protect intellectual property rights to the same extent or in the same manner as do the 
laws  of  the  United  States.  Although  we  continue  to  implement  protective  measures  and  intend  to  defend  our  intellectual  property 
rights vigorously, these efforts may not be successful or the costs associated with protecting our rights in certain jurisdictions may be 
prohibitive.  From  time  to  time  we  discover  products  in  the  marketplace  that  are  counterfeit  reproductions  of  our  products  or  that 
otherwise infringe upon intellectual property rights held by us. Actions taken by us to establish and protect our trademarks and other 
intellectual property rights may not be adequate to prevent imitation of our products by others or to prevent others from seeking to 
block  sales  of  our  products  as  violating  trademarks  and  intellectual  property  rights.  If  we  are  unsuccessful  in  challenging  a  third 
party’s products on the basis of infringement of our intellectual property rights, continued sales of such products by that or any other 
third  party  could  adversely  impact  the  Skechers  brand,  result  in  the  shift  of  consumer  preferences  away  from  our  products  and 
generally have a material adverse effect on our business, financial condition and results of operations. 

COMPETITION 

Competition in the footwear industry is intense. Although we believe that we do not compete directly with any single company 
with respect to its entire range of products, our products compete with other branded products within their product category as well as 
with  private  label  products  sold  by  retailers,  including  some  of  our  customers.  Our  casual  shoes  and  utility  footwear  compete  with 
footwear  offered  by  companies  such  as  Columbia  Sportswear  Company,  Converse  by  Nike,  Inc.,  Crocs,  Inc.,  Deckers  Outdoor 
Corporation, Kenneth Cole Productions Inc., Steven Madden, Ltd., The Timberland Company, V.F. Corporation and Wolverine World 
Wide, Inc.  Our athletic lifestyle and performance shoes compete with footwear offered by companies such as Nike, Inc., adidas AG, 
Reebok International Ltd., Puma AG, ASICS America Corporation, New Balance Athletic Shoe, Inc. and Under Armour, Inc.  The 
intense  competition  among  these  companies  and  the  rapid  changes  in  technology  and  consumer  preferences  in  the  markets  for 
performance  footwear,  including  the  walking  fitness  category,  constitute  significant  risk  factors  in  our  operations.    Our  children’s 
shoes compete with footwear offered by these companies and others including Payless Holdings, and with other brands such as Stride 
Rite by Wolverine World Wide, Inc.  In varying degrees, depending on the product category involved,  we compete  on the basis of 
style, price, quality, comfort and brand name prestige and recognition, among other considerations. These and other competitors pose 
challenges to our market share in our major domestic markets and may make it more difficult to establish our products in Europe, Asia 
and other international regions. We also compete with numerous manufacturers, importers and distributors of footwear for the limited 
shelf space available for the display of such products to the consumer. Moreover, the general availability of contract manufacturing 
capacity allows ease of access by new market entrants. Many of our competitors are larger, have been in existence for a longer period 
of time, have achieved greater recognition for their brand names, have captured greater market share and/or have substantially greater 
financial, distribution, marketing and other resources than we do. We cannot be certain that we will be able to compete successfully 
against present or future competitors, or that competitive pressures will not have a material adverse effect on our business, financial 
condition and results of operations. 

EMPLOYEES 

As of January 31, 2013, we employed 5,666 persons, 2,468 of whom were employed on a full-time basis and 3,198 of whom were 
employed on a part-time basis, primarily in our retail stores. None of our employees are subject to a collective bargaining agreement. 
We believe that our relations with our employees are satisfactory. 

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ITEM 1A.  RISK FACTORS 

In  addition  to  the  other  information  in  this  annual  report,  the  following  factors  should  be  considered  in  evaluating  us  and  our 

business. 

The  Effects Of The Slow Pace Of Economic Recovery In The United States And  The Uncertainty Of Market Conditions  In 
Europe May Continue To Have A Negative Impact On Our Business, Results Of Operations Or Financial Condition. 

The slow pace of economic recovery in the United States and the uncertainty of market conditions in Europe have led to declining 
consumer and business confidence, which has resulted in decreased levels of consumer spending, particularly on discretionary items 
such as footwear.  These macroeconomic developments have and could continue to negatively impact our business, which depends on 
the general economic environment and levels of consumers’ discretionary spending in the United States and other parts of the world 
that affect not only the ultimate consumer, but also retailers, who are our primary direct customers.  As a result, we may not be able to 
maintain or increase our sales to existing customers, make sales to new customers, open and operate new retail stores, maintain sales 
levels  at  our  existing  stores,  maintain  or  increase  our  international  operations  on  a  profitable  basis,  or  maintain  or  improve  our 
earnings  from  operations  as  a  percentage  of  net  sales.    If  the  economic  recovery  in  the  United  States  continues  to  be  slow  or 
experiences  a  prolonged  period  of  decelerating  or  negative  growth,  or  if  the  uncertain  market  conditions  in  Europe  continue  for  a 
significant  period  of  time  or  worsen,  our  results  of  operations,  financial  condition,  and  cash  flows  could  be  materially  adversely 
affected.  

Our Business And The Success Of Our Products Could Be Harmed If We Are Unable To Maintain Our Brand Image. 

Our success to date has been due in large part to the strength of the Skechers brand. If we are unable to timely and appropriately 
respond to changing consumer demand, our brand name and brand image may be impaired. Even if we react appropriately to changes 
in consumer preferences, consumers may consider our brand image to be outdated or associate our brand with styles of footwear that 
are no longer popular. In the past, several footwear companies including ours have experienced periods of rapid growth in revenues 
and earnings followed by periods of declining sales and losses. Our business has been and may be similarly affected in the future. 

We Face Many New Challenges After Entering The Highly Competitive Performance Footwear Market In 2008. 

Although the design and aesthetics of our products have traditionally been the most important factors in consumer acceptance of 
our footwear, we began incorporating technical innovations into certain of our product offerings in late 2008 and have continued to 
develop and introduce new performance footwear since then.  The performance footwear market is keenly competitive in the United 
States  and  worldwide,  and  the  newer  entrants  in  that  market  including  our  company  face  many  challenges.    Negative  consumer 
perceptions of our performance features due to our historical reputation as a fashion and lifestyle footwear company, product offerings 
and technologies from our competitors, and failure to keep up with rapid changes in footwear technology and consumer preferences 
may constitute significant risk factors in our strategy and may negatively impact our business. 

Our Operating Results Could Be Negatively Impacted If Our Sales Are Concentrated In Any One Style Or Group Of Styles. 

If any single style or group of similar styles of our footwear were to represent a substantial portion of our net sales, we could be 
exposed to risk should consumer demand for such style or group of styles decrease in subsequent periods. We attempt to mitigate this 
risk  by  offering  a  broad  range  of  products,  and  no  style  comprised  over  5%  of  our  gross  wholesale  sales  during  2012  or  2011. 
However, this may change in the future and fluctuations in sales of any given style that represents a significant portion of our future 
net sales could have a negative impact on our operating results. 

We  Face  Intense  Competition,  Including  Competition  From  Companies  With  Significantly  Greater  Resources  Than  Ours, 
And If We Are Unable To  Compete Effectively With These Companies, Our Market Share May Decline And Our Business 
Could Be Harmed. 

We  face  intense  competition  in  the  footwear  industry  from  other  established  companies.  A  number  of  our  competitors  have 
significantly  greater  financial,  technological,  engineering,  manufacturing,  marketing  and  distribution  resources  than  we  do.  Their 
greater  capabilities  in  these  areas  may  enable  them  to  better  withstand  periodic  downturns  in  the  footwear  industry,  compete  more 
effectively on the basis of price and production, and more quickly develop new products. In addition, new companies may enter the 
markets in which we compete, further increasing competition in the footwear industry. 

We believe that our ability to compete successfully depends on a number of factors, including the style and quality of our products 
and the strength of our brand name, as well as many factors beyond our control. We may not be able to compete successfully in the 
future,  and  increased  competition  may  result  in  price  reductions,  reduced  profit  margins,  loss  of  market  share  and  an  inability  to 
generate cash flows that are sufficient to maintain or expand our development and marketing of new products, which would adversely 
impact the trading price of our Class A Common Stock. 

Our Business Could Be Harmed If We Fail To Maintain Proper Inventory Levels. 

We place orders with our manufacturers for some of our products prior to the time we receive all of our customers’ orders. We do 
this  to  minimize  purchasing  costs,  the  time  necessary  to  fill  customer  orders  and  the  risk  of  non-delivery.  We  also  maintain  an 
inventory  of  certain  products  that  we  anticipate  will  be  in  greater  demand.  However,  similar  to  the  changes  in  the  marketplace  for 
toning  footwear  in  2011  that  led  to  excess  inventory,  discounted  pricing  and  inventory  write-downs,  continued  lower  levels  of 
consumer spending due to the global economic slowdown, an unanticipated decline in the popularity of Skechers footwear or other 
unforeseen circumstances may make it difficult for us and our customers to accurately forecast product demand trends, and we may be 
unable  to  sell  the  products  we  have  ordered  in  advance  from  manufacturers  or  that  we  have  in  our  inventory.  Inventory  levels  in 
excess of customer demand may result in inventory write-downs and the sale of excess inventory at discounted prices, which could 
significantly impair our brand image and have a material adverse effect on our operating results and financial condition. Conversely, if 
we underestimate consumer demand for our products or if our manufacturers fail to supply the quality products that we require at the 
time  we  need  them,  we  may  experience  inventory  shortages.  Inventory  shortages  might  delay  shipments  to  customers,  negatively 
impact retailer and distributor relationships, and diminish brand loyalty. 

The  Toning  Footwear  Category  Has  Come  Under  Public  And  Regulatory  Scrutiny  That  May  Have  A  Material  Negative 
Impact On Our Business And Results Of Operations.  

The  toning  footwear  product  category,  including  our  Shape-ups  products,  has  come  under  significant  public  scrutiny,  such  as 
highly  publicized  negative  professional  opinions,  negative  publicity  and  media  attention,  personal  injury  lawsuits  and  attorneys 
publicly marketing their services to consumers allegedly injured by toning products, including Shape-ups.  In addition, we have been 
responding  to  inquiries  by  state,  federal,  and  foreign  governmental  and  quasi-governmental  regulators  regarding  the  claims, 
advertising, and safety of our toning products, and are engaged as defendants in civil lawsuits that involve similar claims. This public 
and regulatory scrutiny has included the questioning of our advertising, promotional claims, and the overall safety of these products, 
as well as allegations of personal injuries.  We believe that Shape-ups and our other toning products are safe, but the negative publicity 
from this public and regulatory scrutiny appears to have had a negative impact on sales of toning footwear generally and our Shape-
ups products in particular.  We are not able to predict whether such publicity, regulatory review and related litigation will continue or 
what  the  continued  effect  will  be  on  the  sales  of  our  Shape-up  products,  our  business,  and  our  results  of  operations  beyond  that 
included in this annual report.  Further details regarding these legal and regulatory matters are discussed in greater detail under “Legal 
Proceedings” in Part I, Item 3 of this annual report. 

It  Is  Difficult  To  Predict  The  Effect  Of  Regulatory  Inquiries  About  Advertising  And  Promotional  Claims  Related  To  Our 
Toning Shoe Products. 

The toning footwear market is dominated by a handful of competitors who design, market and advertise their products to promote 
fitness benefits associated with wearing the footwear. Advertising that promotes fitness benefits associated with the toning footwear 
market  has  come  under  review  from  state,  federal,  and  foreign  governmental  and  quasi-governmental  regulators.  As  discussed  in 
greater detail under “Legal Proceedings” in Part I, Item 3 of this annual report, we announced on May 16, 2012 that we had settled all 
domestic legal proceedings relating to advertising claims made in connection with the marketing of our toning shoe products.  Under 
the  terms  of  the  global  settlement—without  admitting  any  fault  or  liability,  with  no  findings  being  made  that  our  company  had 
violated  any  law,  and  with  no  fines  or  penalties  being  imposed—we  made  payments  in  the  aggregate  amount  of  $45  million  and 
expect to pay up to $5 million in class action attorneys' fees to settle all domestic advertising class action lawsuits and related claims 
brought by the FTC and the SAGs.  On November 8, 2012, we were served with a Grand Jury Subpoena (“Subpoena”) that was issued 
by  a  Grand  Jury  of  the  United  States  District  Court  for  the  Northern  District  of  Ohio,  in  Cleveland,  Ohio  for  documents  and 
information relating to past advertising claims for our toning footwear, including Shape-ups and Resistance Runners.  The Subpoena, 
which  seeks  documents  and  information  related  to  outside  studies  conducted  on  our  toning  footwear,  appears  related  to  the  FTC’s 
inquiry into our claims and advertising for Shape-ups and our other toning shoe products.  The Grand Jury investigation is in its early 
stages and  we are fully cooperating in the process of producing documents and other information requested.  The  Assistant United 
States Attorney has informed us that neither we nor our employees are targets at the present time.  Although we do not believe this 
Grand Jury investigation will have a material adverse impact on our results of operations or financial position, it is too early to predict 

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the timing and outcome of this investigation, if there will be any additional regulatory inquiries or whether the final resolution of these 
matters  could  have  a  material  adverse  impact  on  our  advertising,  promotional  claims,  business,  results  of  operations  and  financial 
position. 

Our Future Success Depends On Our Ability To Respond To Changing Consumer Demands, Identify And Interpret Fashion 
Trends And Successfully Market New Products. 

The footwear industry is  subject to rapidly changing consumer demands and  fashion  trends.  Accordingly,  we  must identify and 
interpret  fashion  trends  and  respond  in  a  timely  manner.  Demand  for  and  market  acceptance  of  new  products  are  uncertain  and 
achieving  market  acceptance  for  new  products  generally  requires  substantial  product  development  and  marketing  efforts  and 
expenditures. If we do not continue to meet changing consumer demands and develop successful styles in the future, our growth and 
profitability  will  be  negatively  impacted.  We  frequently  make  decisions  about  product  designs  and  marketing  expenditures  several 
months in advance of the time when consumer acceptance can be determined. If we fail to anticipate, identify or react appropriately to 
changes  in  styles  and  trends  or  are  not  successful  in  marketing  new  products,  we  could  experience  excess  inventories,  higher  than 
normal  markdowns  or  an  inability  to  profitably  sell  our  products.  Because  of  these  risks,  a  number  of  companies  in  the  footwear 
industry specifically, and others in the fashion and apparel industry in general, have experienced periods of rapid growth in revenues 
and earnings and thereafter periods of declining sales and losses, which in some cases have resulted in companies in these industries 
ceasing to do business. Similarly, these risks could have a material adverse effect on our results of operations or financial condition. 

Our Business Could Be Adversely Affected By Changes In The Business Or Financial Condition Of Significant Customers Due 
To Global Economic Conditions. 

The  global  financial  crisis  affected  the  banking  system  and  financial  markets  and  resulted  in  a  tightening  in  the  credit  markets, 
more stringent lending standards and terms, and higher volatility in fixed income, credit, currency and equity markets.  There could be 
a number of follow-on effects from the credit crisis on our business,  including insolvency of certain of our  key distributors,  which 
could impair our distribution channels, or our significant customers, including our distributors, may experience diminished liquidity or 
an inability to obtain credit to finance purchases of our product.  Our customers may also experience weak demand for our products or 
other difficulties in their businesses.  If conditions in the global financial markets deteriorate in the future, demand may be lower than 
forecasted and insufficient to achieve our anticipated financial results.  Any of these events would likely harm our business, results of 
operations and financial condition. 

We May Have Difficulty Managing Our Costs If Global Economic Conditions Worsen. 

Our future results of operations will depend on our overall ability to manage our costs.  These challenges include (i) managing our 
infrastructure, including our distribution center in Rancho Belago, California, (ii) hiring and maintaining, as required, the appropriate 
number of qualified employees, (iii)  managing inventory levels and (iv) controlling other expenses.   If global economic conditions 
worsen and lead to an unexpected decline in our revenues without a corresponding and timely reduction in expenses or a failure to 
manage other aspects of our operations, that could have a material adverse effect on our business, results of operations or financial 
condition. 

The Popularity Of Skechers Footwear May Not Continue To Grow As Rapidly As It Has In The Past Or May Decline, Which 
Would Have A Material Adverse Effect On Our Business, Results Of Operations And Financial Condition. 

Although our company has generally exhibited steady growth since we began operations through 2010, we have suffered decreases 
in net sales at times in the past, including in 2011, our rate of growth has declined at times as well and we may experience similar 
decreases in net sales or declines in rate of growth again in the future. Our ability to grow in the future depends upon, among other 
things, the continued popularity of our footwear, the acceptance by customers of performance footwear including the Skechers GOrun 
and Skechers GOwalk lines, and the development of new lines and styles of footwear with widespread appeal to a broad demographic 
of customers. If the popularity of our footwear declines or does not increase in the future, we may experience, among other things, a 
decrease in our revenues and profitability, which could have a material adverse effect on our business and financial condition. 

We Depend Upon A Relatively Small Group Of Customers For A Large Portion Of Our Sales. 

During 2012, 2011 and 2010, our net sales to our five largest customers accounted for approximately 18.1%, 17.8% and 24.9% of 
total net sales, respectively.  No customer accounted for more than 10.0% of our net sales during 2012, 2011 and 2010.  No customer 
accounted  for  more  than  10%  of  net  trade  receivables  at  December  31,  2012.    One  customer  accounted  for  12.5%  and  another 

accounted  for  10.0%  of  net  trade  receivables  at  December  31,  2011.    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. 

Many Of Our Retail Stores Depend Heavily On The Customer Traffic Generated By Shopping And Factory Outlet Malls Or 
By Tourism. 

Many of our concept stores are located in shopping malls and some of our factory outlet stores are located in manufacturers’ outlet 
malls where we depend on obtaining prominent locations and the overall success of the malls to generate customer traffic. We cannot 
control the success of individual malls, and an increase in store closures by other retailers may lead to mall vacancies and reduced foot 
traffic. Some of our concept stores occupy street locations that are heavily dependent on customer traffic generated by tourism. Any 
substantial decrease in tourism resulting from the global economic slowdown, political, social or military events or otherwise, is likely 
to adversely affect sales in our existing stores, particularly those with street locations. The effects of these factors could reduce sales of 
particular existing stores or hinder our ability to open retail stores in new markets, which could negatively affect our operating results. 

Our International Sales And Manufacturing Operations Are Subject To The Risks Of Doing Business Abroad, Particularly In 
China,  Which  Could  Affect  Our  Ability  To  Sell  Or  Manufacture  Our  Products  In  International  Markets,  Obtain  Products 
From Foreign Suppliers Or Control The Costs Of Our Products. 

Substantially all of our net sales during the year ended December 31, 2012 were derived from sales of footwear manufactured in 
foreign countries, with most manufactured in China and, to a lesser extent, in Brazil and Vietnam. We also sell our footwear in several 
foreign countries and plan to increase our international sales efforts as part of our growth strategy. Foreign manufacturing and sales 
are  subject  to  a  number  of  risks,  including  the  following:  political  and  social  unrest,  including  the  military  presence  in  Iraq  and 
terrorism;  changing  economic  conditions,  including  higher  labor  costs;  increased  costs  of  raw  materials;  currency  exchange  rate 
fluctuations;  labor  shortages  and  work  stoppages;  electrical  shortages;  transportation  delays;  loss  or  damage  to  products  in  transit; 
expropriation; nationalization; the adjustment, elimination  or imposition of domestic and international duties, tariffs,  quotas, import 
and  export  controls  and  other  non-tariff  barriers;  exposure  to  different  legal  standards  (particularly  with  respect  to  intellectual 
property);  compliance  with  foreign  laws;  and  changes  in  domestic  and  foreign  governmental  policies.  We  have  not,  to  date,  been 
materially affected by any such risks, but we cannot predict the likelihood of such developments occurring or the resulting long-term 
adverse impact on our business, results of operations or financial condition. 

In  particular,  because  most  of  our  products  are  manufactured  in  China,  the  possibility  of  adverse  changes  in  trade  or  political 
relations with China, political instability in China, increases in labor costs, the occurrence of prolonged adverse weather conditions or 
a natural disaster such as an earthquake or typhoon in China, or the outbreak of a pandemic disease in China could severely interfere 
with  the  manufacture  and/or  shipment  of  our  products  and  would  have  a  material  adverse  effect  on  our  operations.  In  addition, 
electrical shortages, labor shortages or work stoppages may extend the production time necessary to produce our orders, and there may 
be  circumstances  in  the  future  where  we  may  have  to  incur  premium  freight  charges  to  expedite  the  delivery  of  product  to  our 
customers.  If  we  incur  a  significant  amount  of  premium  charges  to  airfreight  product  for  our  customers,  our  gross  profit  will  be 
negatively affected if we are unable to collect those charges. 

Currency Exchange Rate Fluctuations In China Could Result In Higher Costs And Decreased Margins. 

Our manufacturers located in China may be subject to the effects of exchange rate fluctuations should the Chinese currency not 
remain stable with the U.S. dollar. The value of the Chinese currency depends to a large extent on the Chinese government’s policies 
and China’s domestic and international economic and political developments. Since 1994, the official exchange rate for the conversion 
of the Chinese currency was pegged to the U.S. dollar at a virtually fixed rate of approximately 8.28 Yuan per U.S. dollar. However, 
on July 21, 2005, the Chinese government revalued the Yuan by 2.1%, setting the exchange rate at 8.11 Yuan per U.S. dollar, and 
adopted a more flexible system based on a trade-weighted basket of foreign currencies of China’s main trading partners. Since then, 
the  value  of  the  Yuan  has  gradually  appreciated  against  the  U.S.  dollar  to  6.30  Yuan  per  U.S.  dollar  on  December  31,  2012.   The 
valuation of the Yuan may continue to increase incrementally over time should the China central bank allow it to do so, which could 
significantly  increase  labor  and  other  costs  incurred  in  the  production  of  our  footwear  in  China,  resulting  in  a  potentially  material 
adverse effect on our results of operations and financial condition. 

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The Potential Imposition Of Additional Duties, Quotas, Tariffs And Other Trade Restrictions Could Have An Adverse Impact 
On Our Sales And Profitability. 

Our  Business  Could  Be  Harmed  If  Our  Contract  Manufacturers,  Suppliers  Or  Licensees  Violate  Labor,  Trade  Or  Other 
Laws. 

All of our products manufactured overseas and imported into the United States, the European Union (“EU”) and other countries are 
subject to customs duties collected by customs authorities.   Customs information  submitted by us is routinely  subject to review by 
customs  authorities.    We  are  unable  to  predict  whether  additional  customs  duties,  quotas,  tariffs,  anti-dumping  duties,  safeguard 
measures, cargo restrictions to prevent terrorism or other trade restrictions may be imposed on the importation of our products in the 
future.    Such  actions  could  result  in  increases  in  the  cost  of  our  products  generally  and  might  adversely  affect  the  sales  and 
profitability of Skechers and the imported footwear industry as a whole. 

Our  Quarterly  Revenues  And  Operating  Results  Fluctuate  As  A  Result  Of  A  Variety  Of  Factors,  Including  Seasonal 
Fluctuations In Demand For Footwear, Delivery Date Delays And Potential Fluctuations In Our  Estimated Annualized  Tax 
Rate, Which May Result In Volatility Of Our Stock Price. 

Our quarterly revenues and operating results have varied significantly in the past and can be expected to fluctuate in the future due 
to  a  number  of  factors,  many  of  which  are  beyond  our  control.  Our  major  customers  generally  have  no  obligation  to  purchase 
forecasted amounts, may and have canceled orders, and may change delivery schedules or change the mix of products ordered with 
minimal  notice  and  without  penalty.  As  a  result,  we  may  not  be  able  to  accurately  predict  our  quarterly  sales.  In  addition,  sales  of 
footwear products have historically been somewhat seasonal in nature with the strongest sales generally occurring in our second and 
third quarters  for the back-to-school selling  season. Back-to-school sales  typically  ship in June, July and  August, and delays in the 
timing, cancellation, or rescheduling of these customer orders and shipments by our wholesale customers could negatively impact our 
net  sales  and  results  of  operations  for  our  second  or  third  quarters.  More  specifically,  the  timing  of  when  products  are  shipped  is 
determined by the delivery schedules set by our wholesale customers, which could cause sales to shift between our second and third 
quarters.  Because  our  expense  levels  are  partially  based  on  our  expectations  of  future  net  sales,  our  expenses  may  be 
disproportionately large relative to our revenues, and we may be unable to adjust spending in a timely manner to compensate for any 
unexpected revenue shifts, which could have a material adverse effect on our operating results.  

Our annualized tax rate is based on projections of our domestic and international operating results for the year, which we review 
and revise as necessary at the end of each quarter, and it is highly sensitive to fluctuations in projected international earnings.  Any 
quarterly fluctuations in our annualized tax rate that may occur could have a material impact on our quarterly operating results. As a 
result of these specific and other general factors, our operating results will likely vary from quarter to quarter and the results for any 
particular quarter may not be necessarily indicative of results for the full year. Any shortfall in revenues or net earnings from levels 
expected by securities analysts and investors could cause a decrease in the trading price of our Class A Common Stock. 

We  require  our  independent  contract  manufacturers,  suppliers  and  licensees  to  operate  in  compliance  with  applicable  laws  and 
regulations. Manufacturers are required to certify that neither convicted, forced or indentured labor (as defined under United States 
law) nor child labor (as defined by law in the manufacturer’s country) is used in the production process, that compensation is paid in 
accordance  with  local  law  and  that  their  factories  are  in  compliance  with  local  safety  regulations.  Although  we  promote  ethical 
business practices and our sourcing personnel periodically visit and monitor the operations of our independent contract manufacturers, 
suppliers and licensees, we do not control them or their labor practices. If one of our independent contract manufacturers, suppliers or 
licensees violates labor or other laws or diverges from those labor practices generally accepted as ethical in the United States, it could 
result in adverse publicity for us, damage our reputation in the United States or render our conduct of business in a particular foreign 
country undesirable or impractical, any of which could harm our business. 

In addition, if we, or our foreign manufacturers, violate United States or foreign trade laws or regulations, we may be subject to 
extra duties, significant monetary penalties, the seizure and the forfeiture of the products we are attempting to import or the loss of our 
import privileges. Possible violations of United States or foreign laws or regulations could include inadequate record keeping of our 
imported  products,  misstatements  or  errors  as  to  the  origin,  quota  category,  classification,  marketing  or  valuation  of  our  imported 
products, fraudulent visas or labor violations. The effects of these factors could render our conduct of business in a particular country 
undesirable or impractical and have a negative impact on our operating results. 

Our Strategies Involve A Number Of Risks That Could Prevent Or Delay Any Successful Opening Of New Stores As Well As 
Impact The Performance Of Our Existing Stores. 

Our ability to open and operate new stores successfully depends on many factors, including, among others:  our ability to identify 
suitable store locations, the availability of which is outside of our control; negotiate acceptable lease terms, including desired tenant 
improvement allowances; source sufficient levels of inventory to meet the needs of new stores; hire, train and retain store personnel; 
successfully integrate new stores into our existing operations; and satisfy the fashion preferences in new geographic areas. 

In addition, some or a substantial number of new stores could be opened in regions of the United States in which we currently have 
few  or  no  stores.  Any  expansion  into  new  markets  may  present  competitive,  merchandising  and  distribution  challenges  that  are 
different from those currently encountered in our existing markets. Any of these challenges could adversely affect our business and 
results of operations. In addition, to the extent that any new store openings are in existing markets, we may experience reduced net 
sales volumes in existing stores in those markets. 

We  Rely  On  Independent  Contract  Manufacturers  And,  As  A  Result,  Are  Exposed  To  Potential  Disruptions  In  Product 
Supply. 

We Depend On Key Personnel To Manage Our Business Effectively In A Rapidly Changing Market, And If We Are Unable 
To Retain Existing Personnel, Our Business Could Be Harmed. 

Our  footwear  products  are  currently  manufactured  by  independent  contract  manufacturers.  During  2012  and  2011,  the  top  five 
manufacturers  of  our  products  produced  approximately  61.6%  and  62.5%  of  our  total  purchases,  respectively.  One  manufacturer 
accounted for 33.5% and 30.8% of total purchases during 2012 and 2011, respectively.  One other manufacturer accounted for 9.2% 
and 11.5% of our total purchases during 2012 and 2011, respectively.  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. 

Our future success depends upon the continued services of Robert Greenberg, Chairman of the Board and Chief Executive Officer; 
Michael  Greenberg,  President  and  a  member  of  our  Board  of  Directors;  and  David  Weinberg,  Executive  Vice  President,  Chief 
Operating  Officer,  Chief  Financial  Officer  and  a  member  of  our  Board  of  Directors.  The  loss  of  the  services  of  any  of  these 
individuals or any other  key  employee could  harm  us. Our future success also depends  on our ability  to identify, attract and retain 
additional qualified personnel. Competition for employees in our industry is intense and we may not be successful in attracting and 
retaining such personnel. 

The Disruption, Expense And Potential Liability Associated With  Existing And  Unanticipated Future  Litigation Against Us 
Could Have A Material Adverse Effect On Our Business, Results Of Operations And Financial Condition. 

In addition to the legal matters included in our reserve for loss contingencies, we occasionally become involved in litigation arising 
from  the  normal  course  of  business,  and  we  are  unable  to  determine  the  extent  of  any  liability  that  may  arise  from  any  such 
unanticipated future litigation. We have no reason to believe that there is a reasonable possibility or a probability our company may 
incur a material loss, or a material loss in excess of a recorded accrual, with respect to any other such loss contingencies. However, the 
outcome of litigation is inherently  uncertain and assessments and decisions on defense  and settlement can change significantly in a 
short period of time. Therefore, although we consider the likelihood of such an outcome to be remote with respect to those matters for 
which we have not reserved an amount for loss contingencies, if one or more of these legal matters were resolved against us in the 
same reporting period for amounts in excess of our expectations, our consolidated financial statements of a particular reporting period 
could  be  materially  adversely  affected.  Further,  any  unanticipated  litigation  in  the  future,  regardless  of  its  merits,  could  also 

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significantly divert management’s attention from our operations and result in substantial legal fees being incurred. Such disruptions, 
legal  fees  and  any  losses  resulting  from  these  unanticipated  future  claims  could  have  a  material  adverse  effect  on  our  business, 
consolidated financial statements and financial condition.   

For a discussion of risks related to regulatory inquiries, see the risks discussed on page 17 under “It Is Difficult To Predict The 
Effect  Of  Regulatory  Inquiries  About  Advertising  And  Promotional  Claims  Related  To  Our  Products  In  The  Fitness  Footwear 
Market.” 

Our Ability To Compete Could Be Jeopardized If We Are Unable To Protect Our Intellectual Property Rights Or If We Are 
Sued For Intellectual Property Infringement. 

We  believe  that  our  trademarks,  design  patents  and  other  proprietary  rights  are  important  to  our  success  and  our  competitive 
position. We use trademarks on nearly all of our products and believe that having distinctive marks that are readily identifiable is an 
important factor in creating a market for our goods, in identifying us and in distinguishing our goods from the goods of others. We 
consider  our  Skechers®,  S  in  Shield  Design,  Performance-S  Shifted  Design,  Shape-ups®,  Twinkle  Toes®,  Bella  Ballerina™, 
Skechers  GOrun®  and  Skechers  GOwalk™  trademarks  to  be  among  our  most  valuable  assets,  and  we  have  registered  these 
trademarks in many countries. In addition, we own many other trademarks that we utilize in marketing our products. We also have a 
number of design patents and a limited number of utility patents covering components and features used in various shoes. We believe 
that  our  patents  and  trademarks  are  generally  sufficient  to  permit  us  to  carry  on  our  business  as  presently  conducted.  While  we 
vigorously  protect  our  trademarks  against  infringement,  we  cannot  guarantee  that  we  will  be  able  to  secure  patents  or  trademark 
protection for our intellectual property in the future or that protection will be adequate for future products. Further, we have been sued 
for patent and trademark infringement and cannot be sure that our activities do not and will not infringe on the intellectual property 
rights  of  others.  If  we  are  compelled  to  prosecute  infringing  parties,  defend  our  intellectual  property  or  defend  ourselves  from 
intellectual property claims made by others, we may face significant expenses and liability as well as the diversion of management’s 
attention from our business, each of which could negatively impact our business or financial condition. 

In addition, the laws of foreign countries where we source and distribute our products may not protect intellectual property rights 
to the same extent as do the laws of the United States. We cannot assure you that the actions we have taken to establish and protect our 
trademarks and other intellectual property rights outside the United  States  will be adequate to prevent imitation of our products by 
others  or,  if  necessary,  successfully  challenge  another  party’s  counterfeit  products  or  products  that  otherwise  infringe  on  our 
intellectual property rights on the basis of trademark or patent infringement. Continued sales of these products could adversely affect 
our sales and our brand and result in the shift of consumer preference away from our products. We may face significant expenses and 
liability  in  connection  with  the  protection  of  our  intellectual  property  rights  outside  the  United  States,  and  if  we  are  unable  to 
successfully  protect  our  rights  or  resolve  intellectual  property  conflicts  with  others,  our  business  or  financial  condition  could  be 
adversely affected. 

Natural Disasters Or A Decline In Economic Conditions In California Could Increase Our Operating Expenses Or Adversely 
Affect Our Sales Revenue. 

As of December 31, 2012, a substantial portion of our operations are located in California, including 76 of our retail stores, our 
headquarters  in  Manhattan  Beach,  and  our  domestic  distribution  center  in  Rancho  Belago.  Because  a  significant  portion  of  our  net 
sales  is  derived  from  sales  in  California,  a  decline  in  the  economic  conditions  in  California,  whether  or  not  such  decline  spreads 
beyond California, could materially adversely affect our business. Furthermore, a natural disaster or other catastrophic event, such as 
an earthquake or wild fires affecting California, could significantly disrupt our business including the operation of our only domestic 
distribution  center.  We  may  be  more  susceptible  to  these  issues  than  our  competitors  whose  operations  are  not  as  concentrated  in 
California. 

entirely, and risks associated with each of these remain. In addition, we provide confidential, proprietary and personal information to 
third parties when it is necessary to pursue business objectives. While we obtain assurances that these third parties will protect this 
information and, where appropriate, monitor the protections employed by these third parties, there is a risk the confidentiality of data 
held by third parties may be compromised. If our data systems are compromised, our ability to conduct our business may be impaired, 
we may lose profitable opportunities or the value of those opportunities may be diminished and we may lose revenue as a result of 
unlicensed use of our intellectual property. If personal information of our customers or employees is misappropriated, our reputation 
with  our  customers  and  employees  may  be  injured  resulting  in  loss  of  business  or  morale,  and  we  may  incur  costs  to  remediate 
possible injury to our customers and employees or to pay fines or take other action with respect to judicial or regulatory actions arising 
out of the incident. 

One  Principal  Stockholder  Is  Able  To  Control  Substantially  All  Matters  Requiring  Approval  By  Our  Stockholders  And 
Another Stockholder Is Able To Exert Significant Influence Over All Matters Requiring A Vote Of Our Stockholders, And 
Their Interests May Differ From The Interests Of Our Other Stockholders. 

As of December 31, 2012, our Chairman of the Board and Chief Executive Officer, Robert Greenberg, beneficially owned 54.5% 
of our outstanding Class B common shares, members of Mr. Greenberg’s immediate family beneficially owned an additional 15.6% of 
our outstanding Class B common shares, and Gil Schwartzberg, trustee of several trusts formed by Mr. Greenberg and his  wife for 
estate  planning  purposes,  beneficially  owned  29.3%  of  our  outstanding  Class  B  common  shares.  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 December 31, 2012, Mr. Greenberg beneficially owned 40.4% 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,  Mr.  Greenberg  and  his 
immediate  family  beneficially  owned  52.9%  of  the  aggregate  number  of  votes  eligible  to  be  cast  by  our  stockholders,  and  Mr. 
Schwartzberg  beneficially  owned  21.7%  of  the  aggregate  number  of  votes  eligible  to  be  cast  by  our  stockholders.  Therefore,  Mr. 
Greenberg is able to control substantially all  matters requiring approval by our stockholders, and Mr. Schwartzberg 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 Messrs. Greenberg and Schwartzberg, 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 Messrs. Greenberg’s and Schwartzberg’s interests may differ from the interests of the other 
stockholders, their ability to significantly influence or substantially control, respectively, 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. 

Our Charter Documents And Delaware Law May Inhibit A Takeover, Which May Adversely Affect The Value Of Our Stock. 

Provisions of Delaware law, our certificate of incorporation or our bylaws could make it more difficult for a third party to acquire 
us,  even  if  closing  such  a  transaction  would  be  beneficial  to  our  stockholders.  Mr.  Greenberg’s  substantial  beneficial  ownership 
position, together with the authorization of Preferred Stock, the disparate voting rights between our Class A Common Stock and Class 
B Common Stock, the classification of our Board of Directors and the lack of cumulative voting in our certificate of incorporation and 
bylaws, may have the effect of delaying, deferring or preventing a change in control, may discourage bids for our Class A Common 
Stock at a premium over the market price of the Class A Common Stock and may adversely affect the market price of our Class A 
Common Stock. 

Breaches Of Our Information Technology Systems And Other Disruptions Could Compromise Our Information, Expose Us 
To Liability And Harm Our Reputation And Business. 

ITEM 1B. UNRESOLVED STAFF COMMENTS 

None. 

We maintain information necessary to conduct our business, including confidential and proprietary information as well as personal 
information regarding our customers and employees, in digital form. Data maintained in digital form is subject to the risk of intrusion, 
tampering and theft. We develop and maintain systems to prevent this from occurring, but the development and maintenance of these 
systems  is  costly  and  requires  ongoing  monitoring  and  updating  as  technologies  change  and  efforts  to  overcome  security  measures 
become  more  sophisticated.  Moreover,  despite  our  efforts,  the  possibility  of  intrusion  tampering  and  theft  cannot  be  eliminated 

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ITEM 2. 

PROPERTIES 

Our  corporate  headquarters  are  located  at  three  properties  in  Manhattan  Beach,  California,  which  consist  of  an  aggregate  of 

approximately 143,000 square feet. We own our corporate headquarters.  

Our  U.S.  distribution  center  is  located  in  Rancho  Belago,  California.  In  January  2010,  we  entered  into  an  agreement  with  HF 
Logistics  I,  LLC  (“HF”)  to  form  a  joint  venture,  HF  Logistics-SKX  (the  “JV”),  to  build  a  new  1.8  million  square  foot  distribution 
facility on approximately 110 acres, which was completed in 2011.  This single facility has replaced the previous six facilities located 
in or near Ontario, California.  We are leasing the new distribution center for 20 years from the JV for a base rent of $940,695 per 
month, or approximately $11.3 million per year.  The JV’s objective is to operate the facility for the production of income and profit.  
The  term  of  the  JV  is  fifty  years.  The  parties  are  equal  fifty  percent  partners.  In  April  2010,  Skechers,  through  our  wholly-owned 
subsidiary Skechers RB, LLC, made an initial cash capital contribution of $30 million and HF made an initial capital contribution of 
the land. Additional capital contributions, if necessary, would be made on an equal basis by Skechers RB, LLC and HF. 

Our European distribution center consists of a 490,000 square-foot facility in Liege, Belgium under a 20-year operating lease with 
base rent of approximately $2.8 million per year. The lease agreement also provides for early termination rights at five-year intervals 
beginning in April 2014, pending notification as prescribed in the lease, of which the first such right was not exercised. 

All of our domestic retail stores and showrooms are leased with terms expiring between April 2013 and January 2024. The leases 
provide for rent escalations tied to either increases in the lessor’s operating expenses, fluctuations in the consumer price index in the 
relevant geographical area or a percentage of the store’s gross sales in excess of the base annual rent.  Total base rent expense related 
to our domestic retail stores and showrooms was $47.1 million for the year ended December 31, 2012. 

We also lease all of our international administrative offices, retail stores and showrooms located in Canada, Switzerland, United 
Kingdom, Germany, France, Spain, Italy, Netherlands, Brazil, Malaysia, China, Hong Kong, Japan, Chile, Singapore, Thailand, and 
Portugal. The property leases expire at various dates between May 2013 and April 2025.  Total base rent for the leased administrative 
properties aggregated approximately $25.9 million for the year ended December 31, 2012. 

ITEM 3. 

LEGAL PROCEEDINGS 

Our claims and advertising for our toning products including for our Shape-ups are subject to the requirements of, and routinely 
come under review by regulators including the U.S. Federal Trade Commission (“FTC”), states’ Attorneys General and government 
and quasi-government regulators in foreign countries. We are currently responding to requests for information regarding our claims 
and  advertising  from  regulatory  and  quasi-regulatory  agencies  in  several  countries  and  are  fully  cooperating  with  those  requests. 
While  we  believe  that  our  claims  and  advertising  with  respect  to  our  core  toning  products  are  supported  by  scientific  tests,  expert 
opinions  and  other  relevant  data,  and  while  we  have  been  successful  in  defending  our  claims  and  advertising  in  several  different 
countries,  we  have  discontinued  using  certain  test  results  and  we  periodically  review  and  update  our  claims  and  advertising.    The 
regulatory  inquiries  may  conclude  in  a  variety  of  outcomes,  including  the  closing  of  the  inquiry  with  no  further  regulatory  action, 
settlement  of  any  issues  through  changes  in  its  claims  and  advertising,  settlement  of  any  issues  through  payment  to  the  regulatory 
entity, or litigation. 

As  we  disclosed  in  previous  periodic  SEC  filings,  the  FTC  and  Attorneys  General  for  44  states  and  the  District  of  Columbia 
(“SAGs”) had been reviewing the claims and advertising for Shape-ups and our other toning shoe products.  We also disclosed that we 
have  been  named  as  a  defendant  in  multiple  consumer  class  actions  challenging  our  claims  and  advertising  for  our  toning  shoe 
products, including Shape-ups, actions which are described below.  As we disclosed in our annual report on Form 10-K for the year 
ended  December  31,  2011  and  in  our  subsequent  quarterly  reports  on  Form  10-Q,  we  recorded  a  charge  of  $50  million  during  the 
fourth  quarter  ended  December  31,  2011  to  reserve  for  costs  and  potential  other  exposures  relating  to  the  existing  litigation  and 
regulatory matters. 

On  May  16,  2012,  we  announced  that  we  had  settled  all  domestic  legal  proceedings  relating  to  advertising  claims  made  in 
connection with the marketing of our toning shoe products.  Under the terms of the global settlement—without admitting any fault or 
liability, with no findings being made that our company had violated any law, and with no fines or penalties being imposed—we made 
payments  in  the  aggregate  amount  of  $45  million  and  expect  to  pay  up  to  $5  million  in  class  action  attorneys’  fees  to  settle  the 
domestic advertising class lawsuits and related claims brought by the FTC and the SAGs.  The FTC Stipulated Final Judgment was 
approved by the United States District Court for the Northern District of Ohio on July 12, 2012.  Consent judgments in the 45 SAG 
actions have been approved and entered by courts in those jurisdictions.  On August 13 and 17, 2012, the United States District Court 

for  the  Western  District  of  Kentucky  issued  orders that  preliminarily  approved  a  nationwide  consumer  class  action  settlement  and 
scheduled a hearing date for final approval on March 19, 2013. 

On November 8, 2012, we were served with a Grand Jury Subpoena (“Subpoena”) for documents and information relating to our 
past advertising claims for our toning footwear, including Shape-ups and Resistance Runners.   The Subpoena was issued by a Grand 
Jury of the United States District Court for the Northern District of Ohio, in Cleveland, Ohio.  The Subpoena seeks documents and 
information related to outside studies conducted on the Company’s toning footwear.   This Subpoena appears to grow out of the FTC’s 
inquiry  into  our  claims  and  advertising  for  Shape-ups  and  our  other  toning  shoe  products,  which  we  settled  with  the  FTC,  State 
Attorneys’ General and consumer class as part of a global settlement, as set forth above.   The Grand Jury investigation is in its early 
stages and we are fully cooperating and in the process of producing documents and other information requested in the Subpoena.  The 
Assistant  United  States  Attorney  has  informed  the  Company  that  neither  the  Company  nor  its  employees  are  targets  at  the  present 
time.  Although we do not believe this matter will have a material adverse impact on our results of operations or financial position, it 
is too early to predict the timing and outcome of this matter or reasonably estimate a range of potential losses, if any. 

The toning footwear category, including our Shape-ups products, has also been the subject of some media attention arising from a 
number  of  consumer  complaints  and  lawsuits  alleging  injury  while  wearing  Shape-ups.    We  believe  our  products  are  safe  and  are 
defending ourselves from these media stories and injury lawsuits.  It is too early to predict the outcome of any case or inquiry, whether 
there will be future personal injury cases filed, whether adverse results in any single case or in the aggregate would have a material 
adverse impact on our results of operations or financial position, and whether insurance coverage will be adequate to cover any losses. 

Tamara Grabowski v. Skechers U.S.A., Inc. — On June 18, 2010, Tamara Grabowski filed an action against our company in the 
United States District Court for the Southern District of California, Case No. 10 CV 1300 JM (MDD), on her behalf and on behalf of 
all others similarly situated. The complaint, as subsequently amended, alleges that our advertising for Shape-ups violates California’s 
Unfair  Competition  Law  and  the  California  Consumers  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. On March 7, 2011, the Court stayed the action 
on  the  ground  that  the  outcomes  in  pending  appeals  in  two  unrelated  actions  will  significantly  affect  whether  a  class  should  be 
certified.  On April 16, 2012, this action was transferred to the multidistrict litigation proceeding pending in the United States District 
Court for the Western District of Kentucky, entitled In re Skechers Toning Shoe Products Liability Litigation, MDL No. 2308.  On 
May  16,  2012,  the  plaintiff  in  Grabowski,  her  counsel,  and  counsel  for  the  plaintiff  in  the  Morga  action  (discussed  below)  filed  a 
motion  for preliminary approval of the class action settlement reached as part of the global settlement of advertising-related claims 
described above.  The Court held hearings on the motion for preliminary approval of the class action settlement on July 24, August 3, 
and August 10, 2012.  On August 13 and 17, 2012, the Court issued orders preliminarily approving the settlement and scheduled a 
hearing  date  for  final  approval  on  March  19,  2013.    On  December  28,  2012,  the  plaintiffs  in  the  Grabowski/Morga  actions  filed  a 
motion  for  final  approval  of  the  class  action  settlement.    If  the  Court  grants  final  approval  of  the  class  action  settlement,  and  the 
Court’s decision is affirmed in the event of an appeal, the settlement will resolve all domestic civil claims concerning our advertising 
of our toning shoes that were or could have been brought by the class of consumers, as defined in the settlement agreement, including 
the class claims asserted in the Stalker, Morga, Tomlinson, Hochberg, Loss, Boatright and Scovil actions described below.  While we 
expect the Court to grant final approval of the class action settlement, there are multiple class actions in several jurisdictions and we 
cannot predict the final outcome of the approval motions.  If the motion to grant final approval of the class action settlement is denied 
or approval is reversed on appeal, we cannot predict the outcome of the remaining advertising class actions or a reasonable range of 
potential losses or whether the outcome of the remaining advertising class actions would have a material adverse impact on our results 
of operations or financial position in excess of the existing $50 million settlement. 

Sonia Stalker v. Skechers U.S.A., Inc. — On July 2, 2010, Sonia Stalker filed an action against our 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 our 
advertising  for  Shape-ups  violates  California’s  Unfair  Competition  Law  and  the  California  Consumer  Legal  Remedies  Act.    The 
complaint  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, we 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 JAK (JEM).  On January 21, 
2011, the District Court stayed this case pending resolution of the Grabowski action discussed above.  On May 16, 2012, this action 
was ordered transferred to the multidistrict litigation proceeding pending in the United States District Court for the Western District of 
Kentucky, entitled In re Skechers Toning Shoe Products Liability Litigation, MDL No. 2308.  On August 13, 2012, the Court granted 
preliminary  approval  of  the  consumer  class  action  settlement  agreement  in  the  Grabowski/Morga  actions,  and  scheduled  a  hearing 
date for final approval on March 19, 2013.  The Court also issued a preliminary injunction further enjoining prosecution of this action.  
The settlement in the Grabowski/Morga class actions (described above and below), if finally approved by the Court and affirmed on 

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appeal in the event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Stalker.  If the motion 
to grant final approval of the class action settlement in the Grabowski/Morga class actions is denied or approval is reversed on appeal, 
we cannot predict the outcome of the Stalker action or a reasonable range of potential losses or whether the outcome of the Stalker 
action would have a material adverse impact on our results of operations or financial position in excess of the existing $50 million 
settlement. 

Venus Morga v. Skechers U.S.A., Inc. — On  August 25, 2010, Venus Morga  filed an action against our company in the United 
States  District  Court  for  the  Southern  District  of  California,  Case  No. 10  CV  1780  JM  (MDD),  on  her  behalf  and  on  behalf  of  all 
others  similarly situated.   The complaint, as subsequently  amended, alleges that our advertising  for Shape-ups  violates California’s 
Unfair  Competition  Law  and  the  California  Consumer  Legal  Remedies  Act,  and  constitutes  a  breach  of  express  warranty.    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.  On March 7, 2011, the Court stayed the action on the ground that the outcomes 
in pending appeals in two unrelated actions will significantly affect whether a class should be certified.  On April 16, 2012, this action 
was transferred to the multidistrict litigation proceeding pending in the Western District of Kentucky, entitled In re Skechers Toning 
Shoe Products Liability Litigation, MDL No. 2308.  On May 16, 2012, the plaintiff in Grabowski, her counsel, and counsel for the 
plaintiff  in  Morga filed a  motion for preliminary approval  of the class action settlement reached as part of the  global settlement of 
advertising-related  claims  described  above.    The  Court  held  a  hearing  on  the  motion  for  preliminary  approval  of  the  class  action 
settlement on July 24, August 3, and August 10, 2012.  On August 13 and 17, 2012, the Court issued orders preliminarily approving 
the  settlement  and  scheduled  a  hearing  date  for  final  approval  on  March  19,  2013.    On  December  28,  2012,  the  plaintiffs  in 
Grabowski/Morga filed a motion for final approval of the class action settlement.  If the Court grants final approval of the class action 
settlement,  and  the  Court’s  decision  is  affirmed  in  the  event  of  an  appeal,  the  settlement  will  resolve  all  domestic  civil  claims 
concerning  our  advertising  of  our  toning  shoes  that  were  or  could  have  been  brought  by  the  class  of  consumers,  as  defined  in  the 
settlement agreement, including the class claims asserted in the Grabowski, Stalker, Tomlinson, Hochberg, Loss, Boatright and Scovil 
actions described above and below.  While we expect the Court to grant final approval of the class action settlement, there are multiple 
class actions in several jurisdictions and we cannot predict the outcome of the approval motions.  If the motion to grant final approval 
of the class action settlement is denied or approval is reversed on appeal, we cannot predict the outcome of the remaining advertising 
class actions or a reasonable range of potential losses or whether the outcome of the remaining advertising class actions would have a 
material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement. 

Patty Tomlinson v. Skechers U.S.A., Inc. — On January 13, 2011, Patty Tomlinson filed a lawsuit against our company in Circuit 
Court  in  Washington  County,  Arkansas,  Case  No. CV11-121-7.    The  complaint  alleges,  on  her  behalf  and  on  behalf  of  all  others 
similarly situated, that our advertising for Shape-ups violates Arkansas’ Deceptive Trade Practices Act, constitutes a breach of certain 
express and implied warranties, and is resulting in unjust enrichment (the “Tomlinson action”).  The complaint seeks certification of a 
statewide class, compensatory damages, prejudgment interest, and attorneys’ fees and costs.  On February 18, 2011, we removed the 
case to the United States District Court for the Western District of Arkansas, where it  was pending as Patty Tomlinson v. Skechers 
U.S.A., Inc., CV 11-05042 JLH.  On March 21, 2011, Ms. Tomlinson moved to remand the action back to Arkansas state court, which 
motion we opposed.  On May 25, 2011, the Court ordered the case remanded to Arkansas state court and denied our motion to dismiss 
or transfer as moot, but stayed the remand pending completion of appellate review.    On September 11, 2012, the District Court lifted 
its  stay and remanded this case to the Circuit Court of Washington County,  Arkansas.   On  October 11, 2012, by stipulation of the 
parties,  the  state  Circuit  Court  issued  an  order  staying  the  case.    The  settlement  in  the  Grabowski/Morga  class  actions  (described 
above), if finally approved by the Court and affirmed on appeal in the event an appeal is taken, is expected entirely to resolve the class 
claims  brought  by  the  plaintiff  in  Tomlinson.    On  August  13,  2012,  the  United  States  District  Court  for  the  Western  District  of 
Kentucky  granted  preliminary  approval  of  the  consumer  class  action  settlement  agreement  in  the  Grabowski/Morga  actions,  and 
scheduled  a  hearing  date  for  final  approval  on  March  19,  2013.    The  Court  also  issued  a  preliminary  injunction  enjoining  the 
continued prosecution of this action. If the motion to grant final approval of the class action settlement in the Grabowski/Morga class 
actions is denied or approval is reversed on appeal, we cannot predict the outcome of the Tomlinson action or a reasonable range of 
potential losses or whether the outcome of the Tomlinson action would have a material adverse impact on our results of operations or 
financial position in excess of the existing $50 million settlement. 

Terena Lovston v. Skechers U.S.A., Inc. — On May 13, 2011, Terena Lovston filed a lawsuit against our company in Circuit Court 
in Lonoke County, Arkansas, Case No. CV-11-321.  The complaint alleges, on her behalf and on behalf of all others similarly situated, 
that  our  advertising  for  our  toning  footwear  products  violates  Arkansas’  Deceptive  Trade  Practices  Act,  and  is  resulting  in  unjust 
enrichment. The complaint seeks certification of a statewide class and compensatory damages.  On June 3, 2011, we removed the case 
to the United States District Court for the Eastern District of Arkansas, where it was pending as Terena Lovston v. Skechers U.S.A., 
Inc.,  4:11-cv-0460.        On  August 5,  2011,  the  District  Court  issued  an  order  staying  the  case  pending  completion  of  the  appellate 
process in the Tomlinson action described above.  On July 12, 2012, the district court ordered the Lovston case remanded to Arkansas 

state court, and on or about July 26, 2012, the plaintiff filed a renewed motion in the State Circuit Court for certification of a class of 
Arkansas residents who purchased our toning footwear products.  On August 10, 2012, the Circuit Court issued an order staying the 
Lovston case in light of the class action  settlement in the  Grabowski/Moraga actions.  On November 8, 2012, as allowed  under the 
Circuit Court’s stay order, the plaintiff gave  notice that  she intended to lift the stay and to proceed with the action by an amended 
complaint.  On November 27, 2012, an amended complaint was filed in which Ms. Lovston abandoned her class action allegations, 
asserted  a  new  personal  injury  claim,  and  added  eight  new  plaintiffs  with  personal  injury  claims.    On  December  20,  2012,  the 
Company filed a motion to dismiss the new plaintiffs’ claims for improper venue, to strike the amended complaint, or to sever and 
transfer the new plaintiffs’ claims to their home counties in Arkansas.  On February 11, 2013, the state Circuit Court took that motion 
and several discovery motions under submission and ordered the parties to mediation.  No trial date has been set.  While it is too early 
to predict the outcome of the litigation or a reasonable range of potential losses and whether an adverse result would have a material 
adverse  impact  on  our  results  of  operations  or  financial  position,  we  believe  we  have  meritorious  defenses,  vehemently  deny  the 
allegations, and intend to defend the case vigorously. 

Wendie  Hochberg  and  Brenda  Baum  v. Skechers  U.S.A.,  Inc.  —  On  November  23,  2011,  Wendie  Hochberg  and  Brenda  Baum 
filed a lawsuit against our company in the United States District Court for the Eastern District of New York, Case No. CV11-5751.  
The complaint alleges, on their behalf and on behalf of all others  similarly situated, that our advertising  for Shape-ups violates the 
New  York  Consumer  Protection  Act,  and  is  resulting  in  unjust  enrichment.    The  complaint  seeks  certification  of  a  statewide  class, 
damages,  restitution,  disgorgement,  injunctive  relief,  and  attorneys’  fees  and  costs.    On  May  16,  2012,  this  action  was  ordered 
transferred to the multidistrict litigation proceeding pending in the United States District Court for the Western District of Kentucky, 
entitled In re Skechers Toning Shoe Products Liability Litigation, MDL No. 2308.  On August 13, 2012, the United States District 
Court  for  the  Western  District  of  Kentucky  granted  preliminary  approval  of  the  consumer  class  action  settlement  agreement  in  the 
Grabowski/Morga actions, and issued a preliminary injunction enjoining the continued prosecution of this action.  The settlement in 
the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the event an appeal 
is taken, is expected entirely to resolve the class claims brought by the plaintiff in Hochberg.  If the motion to grant final approval of 
the class action settlement in the Grabowski/Morga class actions is denied or approval is reversed on appeal, we cannot predict the 
outcome of the Hochberg action or a reasonable range of potential losses or whether the outcome of the Hochberg action would have a 
material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement. 

Shannon Loss, Kayla Hedges and Donald Horner v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group — 
On  February  12,  2012,  Shannon  Loss,  Kayla  Hedges  and  Donald  Horner  filed  a  lawsuit  against  our  company  in  the  United  States 
District Court for the Western District of Kentucky, Case No. 3:12-cv-78-H.  The complaint alleges, on behalf of the named plaintiffs 
and all others similarly situated, that our advertising for Shape-ups is false and misleading, thereby constituting a breach of contract, 
breach of implied and express warranties, and resulting in unjust enrichment.  The complaint seeks certification of a nationwide class, 
compensatory  damages,  and  attorneys’  fees  and  costs.    On  March  9,  2012,  the  named  plaintiffs  filed  a  motion  to  consolidate  this 
action with In re Skechers Toning Shoe Products Liability Litigation, case no. 11-md-02308-TBR.  On August 13, 2012, the United 
States  District  Court  for  the  Western  District  of  Kentucky  granted  preliminary  approval  of  the  consumer  class  action  settlement 
agreement  in  the  Grabowski/Morga  actions,  and  issued  a preliminary  injunction  enjoining  the  continued  prosecution  of  this  action.  
The settlement in the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the 
event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Loss.  If the motion to grant final 
approval of the class action settlement in the Grabowski/Morga class actions is denied or approval is reversed on appeal, we cannot 
predict the outcome of the Loss action or a reasonable range of potential losses or whether the outcome of the Loss action would have 
a material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement. 

Elma Boatright and Sharon White v. Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group — On February 
15, 2012, Elma Boatright and Sharon White filed a lawsuit against our company in the United States District Court for the Western 
District  of  Kentucky,  Case  No.  3:12-cv-87-S.    The  complaint  alleges,  on  behalf  of  the  named  plaintiffs  and  all  others  similarly 
situated, that our advertising for Shape-ups is false and misleading, thereby constituting a breach of contract, breach of implied and 
express warranties, fraud, and resulting in unjust enrichment.  The complaint seeks certification of a nationwide class, compensatory 
damages, and attorneys’ fees and costs.  On March 6, 2012, the named plaintiffs filed a motion to consolidate this action with In re 
Skechers  Toning  Shoe  Products  Liability  Litigation,  case  no.  11-md-02308-TBR.    On  August  13,  2012,  the  United  States  District 
Court  for  the  Western  District  of  Kentucky  granted  preliminary  approval  of  the  consumer  class  action  settlement  agreement  in  the 
Grabowski/Morga actions, and issued a preliminary injunction enjoining the continued prosecution of this action.  The settlement in 
the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on appeal in the event an appeal 
is taken, is expected entirely to resolve the class claims brought by the plaintiff in Boatright.  If the motion to grant final approval of 
the class action settlement in the Grabowski/Morga class actions is denied or approval is reversed on appeal, we cannot predict the 
outcome of the Boatright action or a reasonable range of potential losses or whether the outcome of the Boatright action would have a 

26 

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material adverse impact on our results of operations or financial position in excess of the existing $50 million settlement. 

Jason  Angell  v.  Skechers  U.S.A.,  Inc.,  Skechers  U.S.A.,  Inc.  II  and  Skechers  U.S.A.  Canada,  Inc.  —  On  April  12,  2012,  Jason 
Angell  filed  a  motion  to  authorize  the  bringing  of  a  class  action  in  the  Superior  Court  of  Québec,  District  of  Montréal.    Petitioner 
Angell seeks to bring a class action on behalf of all residents of Canada (or in the alternative, all residents of Québec) who purchased 
Skechers Shape-ups footwear.  Petitioner’s motion alleges that we have marketed Shape-ups through the use of false and misleading 
advertisements and representations about the products’ ability to provide  health benefits  to users.   The  motion requests the Court’s 
authorization  to  institute  a  class  action  seeking  damages  (including  damages  for  bodily  injury),  punitive  damages,  and  injunctive 
relief.  Petitioner’s motion was formally presented to the Court on June 29, 2012.  A presiding judge has not yet been assigned to the 
case.  While it is too early to predict the outcome of the litigation or a reasonable range of potential losses and whether an adverse 
result  would  have  a  material  adverse  impact  on  our  results  of  operations  or  financial  position,  we  believe  we  have  meritorious 
defenses, vehemently deny the allegations, believe that authorization of a class action is not warranted and intend to defend the case 
vigorously. 

Brenda  Davies  v.  Skechers  U.S.A,  Inc.,  Skechers  U.S.A.,  Inc.  II,  and  Skechers  U.S.A.  Canada  Inc.  —  On  September  5,  2012, 
Brenda Davies filed a Statement of Claim in the Court of Queen’s Bench in  Edmonton, Alberta, on behalf of all residents of Canada 
who purchased Skechers Shape-ups footwear.  The Statement of Claim alleges that Skechers marketed Shape-ups through the use of 
false and misleading advertisements and representations about the products’ ability to provide fitness benefits to users.  The Statement 
of Claim seeks damages (including damages for bodily injury), restitution, punitive damages, and injunctive relief.  Skechers has not 
yet  responded  to  the  Statement  of  Claim.    While  it  is  too  early  to  predict  the  outcome  of  the  litigation  or  a  reasonable  range  of 
potential losses and whether an adverse result would have a material adverse impact on our results of operations or financial position, 
we believe we have meritorious defenses, vehemently deny the allegations, believe that authorization of a class action is not warranted 
and intend to defend the case vigorously. 

George  Niras  v.  Skechers  U.S.A.,  Inc.,  Skechers  U.S.A.,  Inc.  II,  and  Skechers  U.S.A.  Canada  Inc.  —  On  September  21,  2012, 
George Niras filed a Statement of Claim in the Ontario Superior Court of Justice on behalf of all residents of Canada who purchased 
Shape-ups,  Resistance  Runner,  Shape-ups  Toners/Trainers,  or  Tone-ups.    The  Statement  of  Claim  alleges  that  Skechers  marketed 
these toning shoes through the use of false and misleading advertisements and representations about the products’ ability to provide 
health  benefits  to  users.    The  Statement  seeks  damages,  restitution,  punitive  damages,  and  injunctive  relief.    Skechers  has  not  yet 
responded to the Statement.   While it is too early to predict the outcome of the litigation or a reasonable range of potential losses and 
whether an adverse result would have a material adverse impact on our results of operations or financial position, we believe we have 
meritorious  defenses,  vehemently  deny  the  allegations,  believe  that  authorization  of  a  class  action  is  not  warranted  and  intend  to 
defend the case vigorously. 

Frank Dedato v. Skechers U.S.A., Inc. and Skechers U.S.A. Canada, Inc. — On or about November 5, 2012, Frank Dedato filed a 
Statement of Claim in Ontario Superior Court of Justice on behalf of all residents of Canada who purchased Shape-ups, Tone-ups or 
Resistance  Runner  footwear.    The  Statement  of  Claim  alleges  that  Skechers  has  allegedly  made  misleading  statements  about  its 
footwear products’ ability to provide fitness benefits to users.  The Statement of Claim seeks damages, restitution, punitive damages, 
and injunctive relief.  Skechers has not yet responded to the Statement of Claim.  While it is too early to predict the outcome of any 
litigation or a reasonable range of potential losses should a claim be filed and whether an adverse result would have a material adverse 
impact on our results of operations or financial position, we believe we have meritorious defenses, vehemently deny the allegations, 
believe that authorization of a class action is not warranted and intend to defend the case vigorously. 

Michele Scovil v. Skechers U.S.A., Inc. — On April 25, 2012, Michele Scovil filed a lawsuit against our company in the District 
Court for Clark County, Nevada, Case No. A-12660756-C.  Plaintiff alleges that she suffered physical injuries that she attributes to the 
allegedly defective design of Shape-ups, and plaintiff asserts, in her individual capacity, claims for negligence, products liability, strict 
liability, and breach of warranty.  In addition, plaintiff also purports to bring a class action on behalf of all persons in Nevada who 
purchased  Shape-ups  shoes  at  retail,  and  seeks  class  certification  on  her  claims  for  alleged  violations  of  the  Nevada  Unfair  and 
Deceptive Trade Practices Act.  Plaintiff’s complaint seeks damages, restitution, punitive damages, and attorneys’ fees and costs.  On 
July 12, 2012, this action was transferred to the multidistrict litigation proceeding pending in the United States District Court for the 
Western  District  of  Kentucky,  entitled  In  re  Skechers  Toning  Shoe  Products  Liability  Litigation,  MDL  No.  2308.    On  August  13, 
2012, the United States District Court for the Western District of Kentucky granted preliminary approval of the consumer class action 
settlement agreement in the Grabowski/Morga actions, and issued a preliminary injunction that enjoins the continued prosecution of 
this action.  The settlement in the Grabowski/Morga class actions (described above), if finally approved by the Court and affirmed on 
appeal in the event an appeal is taken, is expected entirely to resolve the class claims brought by the plaintiff in Scovil.  While it is too 
early to predict the outcome of the remaining claims asserted in this litigation or a reasonable range of potential losses and whether an 

adverse result would have a material adverse impact on its results of operations or financial position, we believe we have meritorious 
defenses, vehemently deny the allegations, believe that class certification is not warranted and intend to defend the case vigorously.  If 
the motion to grant final approval of the class action settlement in the Grabowski/Morga class actions is denied or approval is reversed 
on appeal, we cannot predict the outcome of the Scovil action or a reasonable range of potential losses or whether the outcome of the 
Scovil  action  would  have  a  material  adverse  impact  on  our  results  of  operations  or  financial  position  in  excess  of  the  existing  $50 
million settlement. 

Ecko Litigation — On May 25, 2012, Skechers U.S.A., Inc. filed an action for breach of contract and account stated against Ecko 
Direct LLC (“Ecko”) in the Superior Court of the State of California for the County of Los Angeles, Case No. BC485488, arising out 
of Ecko’s failure to pay for footwear sold and delivered to Ecko in the fall of 2011.  We seek damages of $2,635,000 plus interest, 
attorneys’ fees and costs.  Ecko, now known as MEE Direct LLC (“MEE Direct”), removed the action to the United States District 
Court for the Central District of California, Case No. 12-cv-5788 ODW (MANx).  After MEE Direct’s motion to dismiss was denied, 
MEE  Direct  filed  an  Answer  denying  the  material  allegations  of  the  Complaint  and  filed  Counterclaims  against  Skechers  and  its 
affiliates arising out of its claim that it was overcharged by Skechers based on the discount to which MEE Direct claims it was entitled 
under a license agreement between its affiliates and our affiliates (the  “License  Agreement”).  MEE Direct’s counterclaims include 
claims  for  breach  of  the  License  Agreement,  unjust  enrichment,  an  accounting,  intentional  misrepresentation,  negligent 
misrepresentation and concealment, and seek unspecified compensatory and punitive damages, interest, and costs.  A settlement has 
been reached and the settlement did not have a material adverse impact on our operations or financial position or result in a material 
loss in excess of a recorded accrual. 

On July 27, 2012, IP Holdings Unltd LLC, as assignee of Ecko.Complex, LLC d/b/a Ecko Unltd (“IP Holdings”), filed an action 
against our affiliates in the Superior Court of New Jersey, Bergen County, Chancery Division, Case No. C-230-12, arising out of its 
claim  that  our  affiliates  breached  the  License  Agreement  referenced  above  by  allegedly  failing  to  pay  certain  royalties,  failing  to 
permit IP Holdings to conduct an audit, failing to design or manufacture new products, and failing  to market, promote, distribute and 
sell  the  licensed  products.    IP  Holdings  seeks  a  declaratory  judgment  that  it  is  entitled  to  terminate  the  License  Agreement,  and 
unspecified compensatory and punitive damages, interest, attorney’s fees, and costs on its claims for breach of contract, breach of the 
implied  covenant  of  good  faith  and  fair  dealing,  an  equitable  accounting,  and  conversion.    A  settlement  has  been  reached  and  the 
settlement did  not  have a  material adverse  impact on our operations or  financial position or result in a  material loss in excess of a 
recorded accrual. 

Esteban  Chavez  v.  Skechers  U.S.A.,  Inc.  —  On  September  18,  2012,  Esteban  Chavez  filed  a  class  action  lawsuit  against  our 
company in the Superior Court of the State of California for the County of Los Angeles, Case No. BC492357, alleging violations of 
the California Labor Code, including unpaid overtime, unpaid minimum wages, non-compliant wage statements, and wages not timely 
paid upon termination.  The complaint seeks actual, consequential and incidental losses and damages; general and special damages; 
civil,  statutory  and  waiting  time  penalties;  restitution  of  unpaid  wages;  injunctive  relief;  attorneys’  fees  and  costs;  pre-judgment 
interest on unpaid compensation; and appointment of a receiver.  On September 25, 2012, the Court issued an order staying the action 
until an initial status conference that was held on December 19, 2012.  While it is too early to predict the outcome of the litigation or a 
reasonable range of potential losses and whether an adverse result would have a material adverse impact on our results of operations 
or  financial  position,  we  believe  we  have  meritorious  defenses,  vehemently  deny  the  allegations,  and  intend  to  defend  the  case 
vigorously. 

Roneshia Sayles v. Skechers U.S.A., Inc. — On October 2, 2012, Roneshia Sayles filed a class action lawsuit against our company 
in the Superior Court of the State of California for the County of Los Angeles, Case No. BC473067.   The complaint involves a wage 
and hour claim, alleging violations of the California Labor Code, including unpaid time for certain breaks and when retail employees’ 
bags are checked upon leaving the store at the ends of their shifts.  The complaint seeks actual, consequential and incidental losses and 
damages;  general  and  special  damages;  civil,  statutory  and  waiting  time  penalties;  restitution  of  unpaid  wages;  injunctive  relief; 
attorneys’ fees and costs; pre-judgment interest on unpaid compensation.  On September 25, 2012, the Court issued an order staying 
the action until an initial status conference that was held on December 19, 2012.  While it is too early to predict the outcome of the 
litigation or a reasonable range of potential losses and whether an adverse result would have a material adverse impact on our results 
of operations or financial position, we believe we have meritorious defenses, vehemently deny the allegations, and intend to defend 
the case vigorously. 

Personal Injury Lawsuits Involving Shape-ups — As previously reported, on February 20, 2011, Skechers U.S.A., Inc., Skechers 
U.S.A., Inc. II and Skechers Fitness Group were named as defendants in a lawsuit that alleged, among other things, that Shape-ups are 
defective and unreasonably dangerous, negligently designed and/or manufactured, and do not conform to representations made by our 
company, and that we failed to provide adequate warnings of alleged risks associated with Shape-ups.  In total, we have been named 

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in 306 currently pending cases that assert further varying injuries but employ similar legal theories and assert similar claims to the first 
case,  as  well  as  claims  for  breach  of  express  and  implied  warranties,  loss  of  consortium,  and  fraud.    Although  there  are  some 
variations  in  the  relief  sought,  the  plaintiffs  generally  seek  compensatory  and/or  economic  damages,  exemplary  and/or  punitive 
damages,  and  attorneys’  fees  and  costs.    On  December  19,  2011,  the  Judicial  Panel  on  Multidistrict  Litigation  issued  an  order 
establishing  a  multidistrict  litigation  (“MDL”)  proceeding  in  the  United  States  District  Court  for  the  Western  District  of  Kentucky 
entitled  In  re  Skechers  Toning  Shoe  Products  Liability  Litigation,  case  no.  11-md-02308-TBR,  that  currently  encompasses  279 
personal  injury  cases  that  were  initiated  as  individual  lawsuits  in  various  federal  courts  and  374  additional  claims  submitted  by 
plaintiff  fact  sheets.     Skechers  U.S.A.,  Inc.,  Skechers  U.S.A.,  Inc.  II  and  Skechers  Fitness  Group  are  also  named  defendants  in  22 
personal injury actions filed in the Superior Court of California in Los Angeles (“LASC”) that have been brought on behalf of a total 
of  289  individual  plaintiffs.    Finally,  there  are  currently  five  other  personal  injury  actions—including  the  Lovston  action  described 
above—pending in various state courts.  Since 2011, the Company has resolved 41 personal injury claims in the MDL proceedings 
that  were  either  filed  as  formal  actions  or  submitted  by  plaintiff  fact  sheets.    The  personal  injury  cases  in  the  MDL  and  LASC 
proceedings are in many instances solicited and handled by the same plaintiff’s law firms.  It is too early to predict the outcome of any 
case, whether there will be future personal injury cases filed, whether adverse results in any single case or in the aggregate would have 
a  material  adverse  impact  on  our  operations  or  financial  position,  and  whether  insurance  coverage  will  be  adequate  to  cover  any 
losses. Notwithstanding, we believe we have meritorious defenses, vehemently deny the allegations and intend to defend each of these 
cases vigorously. 

As discussed above, during the fourth quarter ended December 31, 2011, we reserved $45 million for costs and potential exposure 
relating to existing litigation and regulatory matters and recorded a pre-tax expense of $5 million in additional legal and professional 
fees.  In addition to the matters included in its reserve for loss contingencies, we occasionally become involved in litigation arising 
from  the  normal  course  of  business,  and  we  are  unable  to  determine  the  extent  of  any  liability  that  may  arise  from  any  such 
unanticipated future litigation.  We have no reason to believe that there is a reasonable possibility or a probability that we may incur a 
material  loss,  or  a  material  loss  in  excess  of  a  recorded  accrual,  with  respect  to  any  other  such  loss  contingencies.    However,  the 
outcome of litigation is inherently  uncertain and assessments and decisions on defense  and settlement can change significantly in a 
short period of time. Therefore, although we consider the likelihood of such an outcome to be remote with respect to those matters for 
which we have not reserved an amount for loss contingencies, if one or more of these legal matters were resolved against our company 
in the same reporting period for amounts in excess of our expectations, our consolidated financial statements of a particular reporting 
period could be materially adversely affected. 

ITEM 4.  MINE SAFETY DISCLOSURES 

Not applicable. 

PART II 

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND 

ISSUER PURCHASES OF EQUITY SECURITIES 

Our Class A Common Stock trades on the New York Stock Exchange under the symbol “SKX.”  The following table sets forth, for 

the periods indicated, the high and low sales prices of our Class A Common Stock.  

   LOW    

   HIGH   

YEAR ENDED DECEMBER 31, 2011 
First Quarter ........................................................  
$  17.86 
Second Quarter ....................................................     13.29 
Third Quarter.......................................................     13.31 
Fourth Quarter .....................................................     11.75 
YEAR ENDED DECEMBER 31, 2012 
First Quarter ........................................................  
$  11.21 
Second Quarter ....................................................     12.50 
Third Quarter.......................................................     18.07 
Fourth Quarter .....................................................     15.18 

$  23.66 
  21.47 
  17.88 
  15.42 

$  14.70  
  21.50 
  22.37 
  20.74 

HOLDERS 

As of February 15, 2013, there were 96 holders of record of our Class A Common Stock (including holders who are nominees for 
an undetermined number of beneficial owners) and 30 holders of record of our Class B Common Stock. These figures do not include 
beneficial owners who hold shares in nominee name. The Class B Common Stock is not publicly traded but each share is convertible 
upon request of the holder into one share of Class A Common Stock. 

DIVIDEND POLICY 

Earnings have been and will be retained for the foreseeable future in the operations of our business. We have not declared or paid 
any  cash  dividends  on  our  Class  A  Common  Stock  and  do  not  anticipate  paying  any  cash  dividends  in  the  foreseeable  future.  Our 
current policy is to retain all of our earnings to finance the growth and development of our business. 

EQUITY COMPENSATION PLAN INFORMATION 

Our equity compensation plan information is provided as set forth in Part III, Item 12 of this annual report. 

30 

31 

  
  
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PERFORMANCE GRAPH 

ITEM 6. 

SELECTED FINANCIAL DATA 

The following graph demonstrates the total return to stockholders of our company’s Class A Common Stock from December 31, 
2007 to December 31, 2012, relative to the performance of the Russell 2000 Index, which includes our Class A Common Stock, and 
our peer group index, which consists of five companies believed to be engaged in similar businesses:  Nike, Inc., adidas AG, K-Swiss 
Inc., Steven Madden, Ltd., and Wolverine World Wide, Inc.   

The graph assumes an investment of $100 on December 31, 2007 in each of our company’s Class A Common Stock and the stocks 
comprising each of the Russell 2000 Index and the customized peer group index.  Each of the indices assumes that all dividends were 
reinvested.    The  stock  performance  of  our  company’s  Class  A  Common  Stock  shown  on  the  graph  is  not  necessarily  indicative  of 
future performance.  We will not make nor endorse any predictions as to our future stock performance. 

The following tables set forth our company’s selected consolidated financial data as of and for each of the years in the five-year 
period  ended  December  31,  2012  and  should  be  read  in  conjunction  with  our  audited  consolidated  financial  statements  and  notes 
thereto included under Part II, Item 8 of this annual report. 

(In thousands, except net earnings (loss) per share) 

STATEMENT OF OPERATIONS DATA: 

2012 

2011 

2010   

2009 

  2008 

       YEARS ENDED DECEMBER 31, 

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

$180

$160

$140

$120

$100

$80

$60

$40

$20

$0

12/07

12/08

12/09

12/10

12/11

12/12

Skechers U.S.A., Inc.

Russell 2000

Peer Group

12/07 

12/08 

12/09 

12/10 

12/11 

12/12 

Skechers U.S.A., Inc. 
Russell 2000 
Peer Group (1)  

100.00 
100.00 
100.00 

65.71 
66.21 
70.47 

150.74 
84.20 
96.05 

102.51 
106.82 
122.75 

62.12 
102.36 
135.30 

94.82 
119.09 
158.43 

(1)

  The peer group index excludes Kenneth Cole Productions, which was included in the peer group index in prior years, as the 

company was taken private in September 2012 and stock price information is no longer available. 

Net sales .............................................................................    $  1,560,321   $  1,606,016   $  2,006,868   $  1,436,440   $  1,440,743 
595,922 
Gross profit ........................................................................    
57,705 
Earnings (loss) from operations .........................................    
60,743 
Earnings (loss) before income taxes (benefit) ...................    
Net earnings (loss) attributable to Skechers U.S.A., Inc. ...    
55,396 
  Net earnings (loss) per share:(1) 

623,748   
(133,793)   
(131,047)   
(67,484)   

683,326   
22,319   
10,473   
9,512   

911,906   
195,568   
196,603   
136,148   

621,010   
70,255   
71,110   
54,699   

  Basic ..........................................................................  
  Diluted .......................................................................     

0.19 
0.19    

(1.39) 
(1.39)    

2.87 
2.78    

1.18 
1.16    

1.20 
1.19 

  Weighted average shares:(1) 

  Basic ..........................................................................  
  Diluted .......................................................................    

49,495 
49,942   

48,491 
48,491   

47,433 
49,050   

46,341 
47,105   

46,031 
46,708 

BALANCE SHEET DATA: 

2012 

2011 

2010 

2009   

2008 

        AS OF DECEMBER 31, 

  Working capital ............................................................  
  Total assets ...................................................................  
  Long-term debt, excluding current portion ..................  
  Skechers U.S.A., Inc. equity ........................................  

578,885   $ 

647,771   $ 

 $ 
  1,340,220    1,281,888    1,304,794   
51,650   
908,203   

128,517   
875,969   

76,531   
852,561   

666,054   $ 

558,468   $ 
995,552   
15,641   
745,922   

413,771 
876,316 
16,188 
668,693 

(1)  Basic earnings per share represents net earnings (loss) divided by the weighted-average number of common shares outstanding for 
the period. Diluted earnings (loss) per share, in addition to the weighted average determined for basic earnings (loss) per share, 
reflects the potential dilution that could occur if options to issue common stock were exercised or converted into common stock.  

32 

33 

 
 
 
 
  
  
 
 
     
   
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
  
 
  
 
  
 
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
  
  
  
  
 
ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 

OUTLOOK FOR 2013 

OF OPERATIONS 

GENERAL 

We design, market and sell contemporary footwear for men, women and children under the Skechers brand. Our footwear is sold 
through  a  wide  range  of  department  stores  and  leading  specialty  retail  stores,  mid-tier  retailers,  boutiques,  our  own  retail  stores, 
distributor and licensee-owned international retail stores and our e-commerce websites. Our objective is to continue to profitably grow 
our domestic operations while leveraging our brand name to expand internationally. 

Our operations are organized along our distribution channels, and we have the following four reportable sales segments: domestic 
wholesale sales, international wholesale sales, retail sales and e-commerce sales.  We evaluate segment performance based primarily 
on net sales and gross margins.  See detailed segment information in note 12 to our consolidated financial statements included under 
Part II, Item 8 of this annual report. 

FINANCIAL OVERVIEW 

Our net sales for 2012 were $1.560 billion, a decrease of $45.7 million, or 2.9%, compared to net sales of $1.606 billion in 2011, 
which  was primarily due to reduced sales of  toning products and, to a lesser extent, our non-Skechers  branded  fashion footwear in 
2012,  which  was  partially  offset  by  increased  domestic  wholesale  and  retail  sales  from  new  styles  and  lines  of  footwear  that  were 
launched in the second half of 2012.  Net earnings for 2012  was $9.5 million,  which  was an increase of $77.0 million, or 114.1%, 
compared to a net loss of $67.5 million in 2011.  Diluted income per share for 2012 was $0.19, which reflected a 113.7% increase 
from the $1.39 diluted loss per share reported in the prior year.  Our increased earnings for 2012 was primarily the result of increased 
margins  due  to  increased  sales  following  the  introduction  of  new  products  in  our  domestic  wholesale  and  retail  segments,  reduced 
selling expenses of $17.1 million, and reduced general and administrative expenses of $79.9 million.   This reduction in general and 
administrative  expenses  was  primarily  due  to  reduced  legal  settlements  of  $43.1  million  following  our  settlement  with  the  Federal 
Trade Commission in 2011, reduced professional fees of $19.6 million following this settlement, and reduced costs of $12.5 million 
related to a reduction in temporary staffing at our domestic distribution center.   Our working capital was $647.8 million at December 
31, 2012, which was an increase of $68.9 million from working capital of $578.9 million at December 31, 2011.  Our cash decreased 
to $325.8 million at December 31, 2012 from $351.1 million at December 31, 2011. This decrease in cash of $25.3 million was the 
result of increased inventory levels of $111.8 million and increased receivables of $37.0 million, which was partially offset by reduced 
prepaid expenses of $60.3 million, reduced capital expenditures and an increase in net earnings. 

2012 OVERVIEW 

In 2012, we focused on product development, domestic and international growth, and balance sheet and expense management.  

New product design and delivery.  Our success depends on our ability to design and deliver trend-right, affordable product in a 
diverse range. In 2012, we focused on continuously updating our core styles, adding fresh looks to our existing lines, and developing 
new  lines  that  included  lifestyle  and  performance  footwear,  which  has  broadened  our  collection  of  product  offerings,  while  we 
continued to reduce our inventory of older toning styles. 

Grow  our  domestic  business.    In  2012,  our  focus  was  on  maintaining  our  core  Skechers  business  in  our  domestic  wholesale 
accounts, while finding new opportunities to add shelf space and expand into new locations with new Skechers categories. We also 
focused  on  expanding  our  domestic  retail  distribution  channel  by  opening  25  additional  stores  while  closing  five  underperforming 
locations.  

Further  develop  our  international  businesses.    In  2012,  we  continued  to  focus  on  improving  our  international  operations  by  
transitioning  our  business  in  Japan  from  a  distributor  to  a  wholly-owned  subsidiary  and  increasing  our  customer  base  within  our 
existing  subsidiary  business,  reorganizing  and  re-launching  our  business  in  Brazil,  and  increasing  our  product  offering  to  accounts 
within each country. 

Balance  sheet  and  expense  management.    During  2012,  we  also  focused  on  managing  our  inventory  levels  and  bringing  our 
marketing expenses and general and administrative expenses in line with expected sales, which enabled us to return to profitability by 
the second half of the year.   

During  2013,  we  will  continue  to  develop  new  lifestyle  and  performance  product  at  affordable  prices  in  an  effort  to  offset  the 
decline in sales of our toning products that we continued to experience in 2012.  The global footwear market is competitive; however, 
we believe our  new  styles and lines  that  we  will be launching in  the  spring and fall seasons  will enable  us to broaden the targeted 
demographic profile of our consumer base, increase our shelf space and open new locations without detracting from existing business. 

YEAR ENDED DECEMBER 31, 2012 COMPARED TO THE YEAR ENDED DECEMBER 31, 2011 

Net sales 

Net sales for 2012 were $1.560 billion, which was a decrease of $45.7 million, or 2.9%, compared to net sales of $1.606 billion for 
2011.  The decrease in net sales was primarily attributable to lower sales in our international and domestic wholesale segments due to 
reduced sales of toning footwear and non-Skechers branded fashion footwear in 2012, partially offset by increased domestic wholesale 
and retail sales from new styles and lines of footwear that we launched in the second half of 2012.  

Our domestic  wholesale  net sales decreased $35.5 million, or 5.2%, to $652.7 million  for 2012 compared to $688.2 million  for 
2011.  The  decrease  in  our  domestic  wholesale  segment  was  primarily  due  to  overall  lower  demand  for  toning  and  non-Skechers 
branded footwear, which was partially offset by increased domestic sales from new styles and lines of footwear that we launched in 
the second half of 2012.  The largest decrease in our domestic wholesale segment came in our women’s and men’s toning divisions.  
The average selling price per pair within the domestic wholesale segment increased to $21.50 per pair for 2012 from $20.49 for 2011, 
which was primarily the result of decreased sales of discounted toning products following the sell-through of excess toning inventory 
in 2011 and increased sales of newer products that were introduced in 2012.  The decrease in the domestic wholesale segment’s net 
sales also resulted from a 9.6% unit sales volume decrease to 30.4 million pairs in 2012 from 33.6 million pairs in 2011.  

Our international wholesale segment net sales decreased $55.1 million, or 11.3%, to $432.2 million for 2012 compared to sales of 
$487.3 million for 2011.  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 directly.  Direct subsidiary sales decreased $49.5 million, or 14.4%, to $294.4 million compared to sales 
of $343.9 million for 2011.  The sales decrease was due to reorganization of our business in Brazil with new management and a re-
launch of our products in Brazil and reduced sales in our European subsidiaries as a result of reduced sales of toning products and the 
challenging economic environment in Europe, which was partially offset by increased sales from our joint ventures in Asia and our 
new  subsidiary  in  Japan.    Our  distributor  sales  decreased  $5.7  million,  or  4.0%,  to  $137.7  million  for  2012,  compared  to  sales  of 
$143.4 million for 2011.  This was primarily attributable to decreased sales to our distributors in Panama and Japan. 

Our retail segment net sales increased $43.1 million, or 10.5% to $453.6 million for 2012, compared to sales of $410.5 million for 
2011. The increase in retail sales was attributable to positive comparable store sales and a net increase of 20 domestic stores and five 
international  stores.    For  2012,  we  realized  positive  comparable  store  sales  of  2.5%  in  our  domestic  retail  stores  and  0.3%  in  our 
international retail stores.  The comparable store sales increase  was principally driven by increased demand for our newer products 
and improved retail pricing as the remaining inventory of discounted toning was reduced.  During 2012, we opened five new domestic 
concept stores, 12 domestic outlet stores, eight domestic warehouse stores and four international concept stores.  In addition, we also 
took over the operations of one concept store and two outlet stores from our distributor in Japan.  Our domestic retail sales increased 
10.8% for 2012 in comparison to 2011 as the result of the positive comparable store sales and the net increase of 20 domestic stores.  
Our international retail sales increased 8.7% for 2012 compared to 2011, which was primarily attributable to increases in net sales in 
Chile and the United Kingdom as well as a net increase of five international retail stores. 

We  had  295  domestic  stores  and  54  international  retail  stores  as  of  February  15,  2013,  and  we  currently  plan  to  open 
approximately 30 to 35 stores in 2013.  We closed five domestic stores and two international concept stores in 2012, and we closed 
three domestic stores and one international concept store in 2011.  We periodically review all of our stores for impairment.  During 
2012, we did not record an impairment charge.  During 2011, we recorded an impairment charge of $1.5 million related to eleven of 
our underperforming domestic stores.  Further, we carefully review our under-performing stores and may consider the non-renewal of 
leases upon completion of the current term of the applicable lease. 

Our e-commerce net sales increased $1.8 million to $21.9 million for 2012, a 9.2% increase compared to sales of $20.1 million for 

2011.  Our e-commerce sales made up approximately 1% of our consolidated net sales for 2012 and 2011. 

34 

35 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
Gross profit 

Gross profit for 2012 increased $59.6 million to $683.3 million from $623.7 million for 2011.  Gross profit as a percentage of net 
sales,  or  gross  margin,  increased  to  43.8%  in  2012  from  38.8%  for  2011.    Our  domestic  wholesale  segment  gross  profit  increased 
$56.9 million, or 30.6%, to $242.9 million for 2012 from $186.0 million for 2011. Domestic wholesale margins increased to 37.2% for 
2012  from  27.0%  for  2011,  which  was  primarily  attributable  to  sales  of  more  full-priced  product  in  the  second  half  of  2012  and 
reduced close-outs of shape-ups and toning products as well as inventory write-downs in 2012 as compared to 2011.   

Gross profit for our international wholesale segment decreased $29.7 million, or 15.2%, to $166.5 million for 2012 compared to 
$196.2 million for 2011.  Gross margins were 38.5% for 2012 compared to 40.3% for 2011.  The decrease in gross margins for our 
international  wholesale  segment  was  primarily  attributable  to  decreased  sales  in  our  European  subsidiaries,  which  achieved  higher 
gross  margins  than  our  international  wholesale  sales  through  our  foreign  distributors.    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 44.7% for 2012 as compared to 46.5% for 2011.  Gross margins for 
our distributor sales were 25.3% for 2012 as compared to 25.4% for 2011.  

Gross profit for our retail segment increased $32.2 million, or 13.9%, to $264.0 million for 2012 as compared to $231.8 million for 
2011.  Gross margins for all stores were 58.2% for 2012 compared to 56.5% for 2011.  Gross margins for our domestic stores were 
58.6%  for  2012  as  compared  to  56.8%  for  2011.    Gross  margins  for  our  international  stores  were  56.1%  for  2012  as  compared  to 
54.7% for 2011.  The increases in domestic and overall retail margins were primarily due to higher average selling prices and positive 
comparable sales as a result of reduced sales of discounted toning products in the first half of 2012 and increased sales of our newer 
products in the second half of 2012.  

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 decreased by $17.1 million, or 11.2%, to $134.9 million for 2012 from $152.0 million for 2011.  As a percentage 
of net sales, selling expenses were 8.7% and 9.5% for 2012 and 2011, respectively.  The decrease in selling expenses was primarily 
the result of lower advertising expenses.  Selling expenses consist primarily of the following: sales representative sample costs, sales 
commissions,  trade  shows,  advertising  and  promotional  costs,  which  may  include  television  and  ad  production  costs,  and  point-of-
purchase costs.   

General and administrative expenses 

General and administrative expenses decreased by $79.9 million, or 13.0%, to $533.2 million  for 2012 from $613.1  million  for 
2011.  As a percentage of sales, general and administrative expenses were 34.2% and 38.2% for 2012 and 2011, respectively.  The 
decrease in general and administrative expenses was primarily attributable to reduced legal settlements of $43.1 million following our 
settlement  with  the  Federal  Trade  Commission  in  2011,  reduced  professional  fees  of  $19.6  million  following  this  settlement  and 
reduced  costs  of  $12.5  million  related  to  a  reduction  in  temporary  staffing  at  our  domestic  distribution  center,  which  was  partially 
offset  by  increased  depreciation  expense  of  $4.5  million,  and  increased  rent  expense  of  $3.7  million  primarily  attributable  to  an 
additional  32  stores  in  comparison  to  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  $119.3  million  and 
$114.2 million for 2012 and 2011, respectively. 

General and administrative expenses consist primarily of the following:  salaries, wages and related taxes, various overhead costs 
associated with our corporate staff, stock-based compensation, domestic and international retail operations, non-selling related costs of 
our international operations,  costs associated  with our domestic and European distribution centers, professional fees  related to both 
legal  and  accounting,  insurance,  and  depreciation  and  amortization,  asset  impairment,  amongst  other  expenses.    Our  distribution 
network related costs are included in general and administrative expenses and are not allocated to specific segments. 

We believe that we have established our presence in most major domestic retail markets. We opened 25 domestic retail stores and 
four international retail stores in 2012, while closing five domestic stores and two international stores.  During 2013, we currently plan 
to open between 30 and 35 stores. 

Interest income 

Interest income for 2012 decreased $1.3 million to $0.6 million as compared to $1.9 million for 2011.  The decrease in interest 

income was primarily due lower cash balances and unfavorable currency translations as compared to 2011.  

Interest expense 

Interest  expense  for  2012  was  incurred  on  amounts  owed  to  our  foreign  manufacturers  and  the  financing  of  our  domestic 
distribution center and related equipment, which increased $5.4 million to $13.3 million as compared to $7.9 million for 2011.  The 
increase was primarily due to interest on the financing of our domestic distribution center and related equipment being recorded as an 
expense in 2012, while such interest related to the financing of our distribution center was capitalized until the facility was completed 
in November 2011.  

Gain on disposal of assets 

Gain on disposal of assets for 2012 decreased $9.8 million to a loss of $0.2 million as compared to a gain of $9.6 million primarily 

related to the $9.9 million gain on the sale of our Ontario, California distribution center in 2011.   

Income taxes 

The effective tax rate for 2012 was (0.4%) as compared to 48.4% for 2011.  Income tax benefit for 2012 was $39,000 compared to 
$63.5  million  for  2011.    The  decrease  in  the  effective  tax  rate  was  primarily  due  to  decreased  domestic  losses  and  increased 
profitability in foreign jurisdictions with lower tax rates. 

Income taxes were computed using the effective tax rates applicable to each of our domestic and international taxable jurisdictions. 
The rate for 2012 was lower than the expected domestic federal and state rate of approximately 40% primarily due the tax benefit from 
the rate differential on 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, 
we did not provide for deferred income taxes on accumulated undistributed earnings of our non-U.S. subsidiaries. As of December 31, 
2012, withholding and U.S. taxes have not been recorded on approximately $171.2 million of cumulative undistributed earnings. 

Non-controlling interest in net income and loss of consolidated subsidiaries 

Non-controlling  interest  for  2012  increased  $1.1  million  to  expense  of  $1.0  million  as  compared  to  income  of  $0.1  million  for 

2011.  Non-controlling interest represents the share of net earnings or loss that is attributable to our joint venture partners. 

YEAR ENDED DECEMBER 31, 2011 COMPARED TO THE YEAR ENDED DECEMBER 31, 2010 

Net sales 

Net sales for 2011 were $1.606 billion, which was a decrease of $400.9 million, or 20.0%, compared to net sales of $2.007 billion 
for 2010.  The decrease in net sales was primarily attributable to lower sales in our domestic wholesale segment due to reduced sales 
of  toning  products  and  lower  average  selling  prices  for  our  products  partially  offset  by  higher  sales  in  our  international  wholesale 
segment. 

Our domestic  wholesale net sales decreased $443.8 million, or 39.2%, to $688.2 million in 2011 compared to $1.132 billion in 
2010.  The  decrease  in  our  domestic  wholesale  segment  was  broad-based  and  across  key  divisions  primarily  due  to  overall  lower 
demand for toning footwear and a weak U.S. retail environment.  The largest decrease in our domestic wholesale segment came in our 
women’s and men’s toning divisions.  The average selling price per pair within the domestic wholesale segment decreased to $20.49 
per pair for 2011 from $24.33 in 2010, as a result of the sell-through of our excess toning inventory.  The decrease in the domestic 
wholesale segment’s net sales also resulted from a 27.8% unit sales volume decrease to 33.6 million pairs in 2011 from 46.5 million 
pairs in 2010.  

36 

37 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
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.    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. 

Our retail  segment  net sales  decreased $0.2 million, or 0.1% to $410.5 million in 2011, compared to sales of $410.7  million in 
2010. The decrease in retail sales was attributable to negative comparable store sales partially offset by a net increase of 37 domestic 
stores.  For the year ended December 31, 2011, we realized negative comparable store sales of 11.9% in our domestic retail stores and 
2.1% in our international retail stores.  The comparable store sales decline was principally driven by reduced demand for our toning 
product as well as decreased average retail pricing.  During the year ended December 31, 2011, we opened 17 new domestic concept 
stores,  nine  domestic  outlet  stores,  14  domestic  warehouse  stores,  and  six  international  concept  stores.    Our  domestic  retail  sales 
decreased 3.0% for the year ended December 31, 2011 compared to the same period in 2010 as the result of negative comparable store 
sales  partially  offset  by  a  net  increase  of  37  domestic  stores.    Our  international  retail  sales  increased  22.2%  for  the  year  ended 
December 31, 2011 compared to the same period in 2010 attributable to a net increase of five international stores.     

We  closed  three  domestic  stores  and  one  international  concept  store  in  2011  and  one  domestic  store  in  2010.    We  periodically 
review  all  of  our  stores  for  impairment.    During  2011,  we  recorded  an  impairment  charge  of  $1.5  million  related  to  eleven  of  our 
underperforming domestic stores.  During 2010, we did not record an impairment charge.   

Our e-commerce net sales decreased $7.5 million to $20.1 million in 2011, a 27.2% decrease compared to sales of $27.6 million in 

2010.  Our e-commerce sales made up approximately 1% of our consolidated net sales in 2011 and 2010. 

General and administrative expenses 

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. 

Interest income 

Interest income  for 2011 decreased $0.9 million to  $1.9  million as compared to $2.8 million  for the same period in 2010.  The 
decrease in interest income was primarily due to interest received on refunds of customs and duties payments during the year ended 
December 31, 2010.  

Interest expense 

Interest expense for 2011 increased $4.9 million to $7.9 million as compared to $3.0 million for the same period in 2010.  The 
increase  was attributable to increased interest paid to our  foreign  manufacturers and interest paid on our equipment loans.  Interest 
expense  was  incurred  on  amounts  owed  to  our  foreign  manufacturers  and  loans  on  property,  plant  and  equipment  for  our  new 
distribution center.    

Gross profit 

Gain on disposal of assets 

Gross profit for 2011 decreased $288.2 million to $623.7 million from $911.9 million in 2010.  Gross profit as a percentage of net 
sales,  or  gross  margin,  decreased  to  38.8%  in  2011  from  45.4%  in  2010.    Our  domestic  wholesale  segment  gross  profit  decreased 
$274.4 million, or 59.6%, to $186.0 million in 2011 from $460.4 million in 2010. Domestic wholesale margins decreased to 27.0% in 
2011 from 40.7% for 2010.  The decrease in domestic  wholesale margins was primarily attributable to lower average selling prices 
due to the sell-through of our excess toning inventory and inventory write-downs.  In the second quarter 2011, we reduced our excess 
toning  inventory  by  selling  two  million  pairs  of  our  original  Shape-ups  at  a  loss  of  $21.0  million  and  recorded  an  additional  $4.4 
million reserve for our remaining toning product.  In the fourth quarter of 2011, we recorded an additional reserve of $5.6 million on 
our original Shape-ups. The reserves were taken to reflect the current wholesale selling price for our remaining toning inventory.   

Gross  profit  for  our  international  wholesale  segment  increased  $14.7  million,  or  8.1%,  to  $196.2  million  for  2011  compared  to 
$181.5  million  in  2010.    Gross  margins  were  40.3%  for  2011  compared  to  41.6%  in  2010.   The  decrease  in  gross  margins  for  our 
international  wholesale  segment  was  attributable  to  increased  distributor  sales,  which  achieved  lower  gross  margins  than  our 
international  wholesale  sales  through  our  foreign  subsidiaries.    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 46.5% in 2011 as compared to 47.3% in 2010.  Gross margins for our distributor sales were 25.4% 
in 2011 as compared to 26.8% in 2010. Our international wholesale segment was not impacted as severely by the decline in demand 
for our toning product that we experienced in our domestic wholesale segment. 

Gross profit for our retail segment decreased $24.1 million, or 9.4%, to $231.8 million in 2011 as compared to $255.9 million in 
2010.  Gross margins for all stores were 56.5% for 2011 compared to 62.3% in 2010.  Gross margins for our domestic stores were 
56.8% in 2011 as compared to 62.3% in 2010.  Gross margins for our international stores were 54.7% in 2011 as compared to 62.3% 
in 2010.  The decrease in retail margins was primarily due to lower average selling prices and negative comparable sales.  

Gain  on  disposal  of  assets  for  2011  increased  $9.6  million  to  $9.6  million  primarily  from  the  gain  on  the  sale  of  our  Ontario, 

California distribution center of $9.9 million for which we received cash proceeds of $17.1 million.   

Income taxes 

The  effective  tax  rate  for  2011  was  48.4%  as  compared  to  30.6%  in  2010.    Income  tax  benefit  for  2011  was  $63.5  million 
compared to expense of $60.2 million for 2010.  As a result of the net operating loss realized in 2011, we carried back these losses to 
prior tax years and in 2012 received a refund of approximately $52.0 million of income taxes previously paid. 

Income taxes were computed using the effective tax rates applicable to each of our domestic and international taxable jurisdictions. 
The rate for the year ended December 31, 2011 was higher than the expected domestic federal and state rate of approximately 40% 
due to a combination of the tax benefit from our U.S. net operating loss with the tax benefit from the rate differential on 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,  we  did  not  provide  for  deferred 
income  taxes on accumulated undistributed earnings of our non-U.S.  subsidiaries.  As of  December 31, 2011, withholding and U.S. 
taxes have not been recorded on approximately $158.9 million of cumulative undistributed earnings. 

Non-controlling interest in net income and loss of consolidated subsidiaries 

Non-controlling  interest  for  2011  decreased  $0.4  million  to  loss  of  $0.1  million  as  compared  to  income  of  $0.3  million  for  the 
same  period  in  2010.    Non-controlling  interest  represents  the  share  of  net  earnings  or  loss  that  is  attributable  to  our  joint  venture 
partners. 

Selling expenses 

LIQUIDITY AND CAPITAL RESOURCES 

Selling expenses decreased by $34.7 million, or 18.6%, to $152.0 million for 2011 from $186.7 million in 2010.  As a percentage 
of net sales, selling expenses were 9.5% and 9.3% in 2011 and 2010, respectively.  The decrease in selling expenses was primarily the 
result of lower advertising expenses.     

Our  working  capital  at  December  31,  2012  was  $647.8  million,  an  increase  of  $68.9  million  from  working  capital  of  $578.9 
million at December 31, 2011. Our cash at December 31, 2012 was $325.8 million compared to $351.1 million at December 31, 2011.  
This  decrease  in  cash  of  $25.3  million  was  the  result  of  increased  inventory  levels  of  $111.8  million  and  increased  receivables  of 
$37.0 million, which was partially offset by reduced prepaid expenses of $60.3 million, reduced capital expenditures, the refinancing 
of our domestic distribution center and an increase in net earnings.  Our primary sources of operating cash are customer collections 

38 

39 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
Agreement matures in June 2015.  The Amended Credit Agreement permits us and certain of our subsidiaries to borrow up to $250.0 
million based upon a borrowing base of eligible accounts receivable and inventory, which amount can be increased to $300.0 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 our 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 (1.00%, 1.25% or 1.50% 
for Base Rate loans and 2.00%, 2.25% or 2.50% for LIBOR loans).  We pay a monthly unused line of credit fee of 0.375% or 0.5% 
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 Amended Credit Agreement further provides for a limit on the issuance of letters of 
credit to a maximum of $50.0 million.  The Amended Credit Agreement contains customary affirmative and negative covenants for 
secured credit facilities of this type, including a fixed charge coverage ratio that applies  when excess availability is less than $40.0 
million.  In addition, the Amended Credit Agreement places limits on additional indebtedness that we are permitted to incur as well as 
other restrictions on certain transactions.  We paid syndication and commitment fees of $6.7 million on this facility, which are being 
amortized over the four-year life of the facility. 

We  had  outstanding  short-term  and  long-term  borrowings  of  $142.6  million  as  of  December  31,  2012,  of  which  $58.2  million 
relates  to  notes  payable  for  warehouse  equipment  for  our  new  distribution  center  that  are  secured  by  the  equipment,  $82.0  million 
relates  to  our  construction  loans  for  our  new  distribution  center  and  the  remaining  balance  primarily  relates  to  our  joint  venture  in 
China. 

We  believe  that  anticipated  cash  flows  from  operations,  available  borrowings  under  our  secured  line  of  credit,  existing  cash 
balances  and  current  financing  arrangements  will  be  sufficient  to  provide  us  with  the  liquidity  necessary  to  fund  our  anticipated 
working capital and capital requirements through December 31, 2013 and for the foreseeable future.  We did not provide for deferred 
income  taxes  on  accumulated  undistributed  earnings  of  our  non-U.S.  subsidiaries  on  approximately  $171.2  million  of  cumulative 
undistributed  earnings  as  of  December  31,  2012.    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,  the  global  recession  and  the  pace  of  recovery  in  our  markets,  the  levels  at  which  we  maintain  inventory,  sale  of  excess 
inventory  at  discounted  prices,  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.  Recently, we have been successful in raising additional funds through financing 
activities however, we cannot be assured that additional financing will be available to us or that, if available, it can be obtained on past 
terms  which  have  been  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. 

and retail sales collections.  Our primary uses of cash are inventory purchases, selling, general and administrative expenses and debt 
service payments. 

During 2012, net cash used in operating activities was $3.4 million compared to net cash provided of $164.9 million for 2011. The 
decrease in net cash provided by operating activities in 2012 in comparison to 2011 was the result of increased inventory levels due to 
new products and to support the increase in our retail store count and increased receivable balances resulting from increased revenues 
for the fourth quarter of 2012 as compared to 2011, partially offset by increased earnings and reduced prepaid expenses. 

Net cash used in investing activities was $52.5 million for 2012 as compared to $105.1 million in 2011.  The decrease in cash used 
in investing activities in 2012 as compared to 2011  was the result of decreased capital  expenditures.  Capital expenditures  for 2012 
were approximately $52.5 million, which consisted of $26.9 million of development costs for our new distribution center, $6.6 million 
in  warehouse  equipment  upgrades,  and  $16.0  million  for  new  store  openings  and  remodels.    This  was  compared  to  capital 
expenditures of $122.2 million in the prior year, which primarily consisted of new store openings and remodels and development costs 
for our new distribution center.  We expect our ongoing capital expenditures for the remainder of 2013 to be between $10 million and 
$15 million, which include opening 30 to 35 retail stores, store remodels and investments in information technology.  We believe our 
operating  cash  flows,  current  cash,  available  lines  of  credit  and  current  financing  arrangements  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 $29.8 million during 2012 compared to $60.4 million during 2011.  The decrease in 
cash  provided  by  financing  activities  was  primarily  attributable  to  reduced  borrowings  from  the  refinancing  of  our  domestic 
distribution  center  as  compared  to  2011,  when  we  completed  the  construction  of  the  building  and  completed  the  financing  on  the 
distribution center equipment. 

On April 30, 2010, we entered into a construction loan agreement (the “Loan Agreement”), by and among HF Logistics-SKX T1, 
LLC, a wholly-owned subsidiary of the JV (“HF-T1”), Bank of America, N.A. and Raymond James Bank, FSB.  Borrowings made 
pursuant  to  the  Loan  Agreement  were  up  to  a  maximum  limit  of  $55.0  million  (the  “Loan”),  which  were  used  to  construct  our 
domestic distribution  facility  in Rancho Belago, California.  Borrowings bore interest based on LIBOR, and the Loan Agreement’s 
original maturity date was April 30, 2012, which was extended to November 30, 2012.  On November 16, 2012, HF-T1 executed a 
modification  to  the  Loan  Agreement  (the  “Modification”),  which  increased  the  borrowings  under  the  Loan  to  $80.0  million  and 
extended the maturity date of the Loan to November 16, 2015.  The $80.0 million was used to (i) repay $54.7 million in outstanding 
borrowings under the original Loan, (ii) repay a loan of $18.3 million including accrued interest from HF to the JV, (iii) repay a loan 
to the JV of $2.5 million including accrued interest from Skechers RB, LLC, a wholly-owned subsidiary of our company (iv) pay a 
deferred management fee of $1.9 million to HF, and (iv) pay distributions of $0.9 million to each of HF and Skechers RB, LLC, with 
(v) $0.8 million used for loan fees and other closing costs.  Under the Modification, OneWest Bank, FSB is an additional lender that 
funded in part the increase to the Loan, and the interest rate on the Loan is the daily British Bankers Association LIBOR rate plus a 
margin of 3.75%, which is no longer subject to a minimum rate.  The Loan Agreement and the Modification are subject to customary 
covenants and events of default.  We were in compliance with all debt covenant provisions related to the Loan Agreement as of the 
date of this annual report.  We had $79.9 million outstanding under the Loan Agreement and the Modification, which is included in 
long-term borrowings on December 31, 2012.  We paid commitment fees of $0.6 million on the Loan, which are being amortized to 
interest expense over the three-year life of the Loan. 

On December 29, 2010, we entered into a master loan and security agreement (the “Master Agreement”), by and between us and 
Banc  of  America  Leasing  &  Capital,  LLC,  and  an  Equipment  Security  Note  (together  with  the  Master  Agreement,  the  “Loan 
Documents”),  by  and  among  us,  Banc  of  America  Leasing  &  Capital,  LLC,  and  Bank  of  Utah,  as  agent  (“Agent”).    We  used  the 
proceeds to refinance certain equipment already purchased and to purchase new equipment for use in our Rancho Belago distribution 
facility.  Borrowings made pursuant to the Master Agreement may be in the form of one or more equipment security notes (each a 
“Note,” and, collectively, the “Notes”) up to a maximum limit of $80.0 million and each for a term of 60 months. The Note entered 
into on the same date as the Master Agreement represents a borrowing of approximately $39.3 million.  Interest will accrue at a fixed 
rate of 3.54% per annum.  On June 30, 2011, we entered into another Note agreement for approximately $36.3 million.  Interest will 
accrue  at  a  fixed  rate  of  3.19%  per  annum.    We  had  $58.2  million  outstanding  under  the  Notes,  which  is  included  in  long-term 
borrowings  on  December  31,  2012.    We  paid  commitment  fees  of  $825,000  on  this  loan,  which  are  being  amortized  to  interest 
expense over the five-year life of the Notes. 

On June 30, 2009, we entered into a $250.0 million secured credit agreement, (the “Credit Agreement”) with a syndicate of seven 
banks that replaced the previous $150 million credit agreement.  On November 5, 2009, March 4, 2010 and May 3, 2011, we entered 
into three successive amendments to the  Credit Agreement  (collectively, the  “Amended Credit Agreement”).  The Amended Credit 

40 

41 

 
 
 
 
       
 
 
 
 
DISCLOSURE ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS 

The  following  table  summarizes  our  material  contractual  obligations  and  commercial  commitments  as  of  December  31,  2012  (In 
thousands): 

Total 

Less than 
One 
Year 

One to 
Three 
  Years 

Three to 
Five 
Years 

  More Than 
Five 
Years 

$ 

Short-term borrowings (1) ......................
Long-term borrowings (1) ......................
Operating lease obligations (2) ................
Purchase obligations (3).............................
Minimum payments related to  
3,068 
   other arrangements ............................
  Total (4) .......................................... $  1,281,664 

2,425 
154,741 
801,043 
320,387 

$ 

2,425 
16,879 
  109,608 
   320,387 

$ 
0 
  122,460 
  194,350 
0 

$ 

0  $ 

14,822   

0 
580 
  152,046    345,039 
0 
0    

2,579 
$  451,878 

489 
$  317,299 

0 
0    
$  166,868  $  345,619 

__________ 

(1)  Amounts include anticipated interest payments based on interest rates currently in effect. 
(2)  Operating  lease  obligations  consists  primarily  of  real  property  leases  for  our  retail  stores,  corporate  offices  and  European 
distribution center. These leases frequently include options that permit us to extend beyond the terms of the initial fixed term. 
Payments for these lease terms are provided for by cash flows generated from operations and existing cash balances. 

(3)  Purchase obligations include the following: (i) accounts payable balances for the purchase of footwear of $87.7 million, (ii) 
outstanding letters of credit of $3.2 million and (iii) open purchase commitments with our foreign manufacturers for $229.5 
million. We currently expect to fund these commitments with cash flows from operations and existing cash balances. 

(4)  Our consolidated balance sheet as of December 31, 2012, included $10.2 million in unrecognized tax benefits.  The future 
payments related to these unrecognized tax benefits have not been presented in the table above due to the uncertainty of the 
amounts and potential timing of cash settlements with the tax authorities, and whether any settlement would 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. 

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES 

Management’s 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 of America. 
The preparation of these financial statements requires us to make difficult, subjective and complex 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  and  judgments  on  historical  experience,  other  available  information,  and  on  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.  In determining whether an estimate is critical, we consider if the nature of the estimates or assumptions is 
material  due  to  the  levels  of  subjectivity  and  judgment  or  the  susceptibility  of  such  matters  to  change,  and  if  the  impact  of  the 
estimates and assumptions on financial condition or operating performance is material.  Actual results may differ from these estimates 
under different assumptions or conditions. 

We  believe  the  following  critical  accounting  estimates  are  affected  by  significant  judgments  used  in  the  preparation  of  our 
consolidated financial statements: revenue recognition, allowance for bad debts, returns, sales allowances and customer chargebacks, 
inventory write-downs, valuation of long-lived assets, litigation reserves, valuation of deferred income taxes. 

Revenue  Recognition.   We  derive  income  from  the  sale  of  footwear  and  royalties  earned  from  licensing  the  Skechers  brand. 
Domestically,  goods  are  shipped  Free  on  Board  (“FOB”)  shipping  point  directly  from  our  domestic  distribution  center  in  Rancho 
Belago, California.  For our international  wholesale customers in the European community, product is shipped FOB shipping point 
direct  from  our  distribution  center  in  Liege,  Belgium.  For  our  distributor  sales,  the  goods  are  generally  delivered  directly  from  the 

independent  factories  to  our  distributors’  freight  forwarders  on  a  Free  Named  Carrier  (“FCA”)  basis.    We  recognize  revenue  on 
wholesale sales when products are shipped and the customer takes title and assumes risk of loss, collection of the 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.    While  customers  do  not  have  the right  to  return  goods,  we  periodically  decide  to  ac cept  returns  or  provide 
customers with credits.   

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.  We recognize revenue from retail sales at the 
point of sale. 

Royalty  income  is  earned  from  our  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 or, in some cases minimum royalty payments. Typically, at each quarter-end 
we  receive  correspondence  from  our  licensees  indicating  what  the  actual  sales  for  the  period  were.  This  information  is  used  to 
calculate and accrue the related royalties currently receivable based on the terms of the agreement. 

Allowance for bad debts, returns, sales allowances and customer chargebacks.  We provide a reserve against our receivables for 
estimated losses that may result from our customers’ inability to pay. To minimize the likelihood of uncollectibility, customers’ credit-
worthiness is reviewed periodically based on external credit reporting services, financial statements issued by the customer and our 
experience with the account, and it is adjusted accordingly. When a customer’s account becomes significantly past due, we generally 
place  a  hold  on  the  account  and  discontinue  further  shipments  to  that  customer,  minimizing  further  risk  of  loss.  We  determine  the 
amount of the reserve by analyzing known uncollectible accounts, aged receivables, economic conditions in the customers’ countries 
or  industries,  historical  losses  and  our  customers’  credit-worthiness.  Amounts  later  determined  and  specifically  identified  to  be 
uncollectible  are  charged  or  written  off  against  this  reserve.  Allowance  for  bad  debts,  returns,  sales  allowances  and  customer 
chargebacks are recorded against revenue. 

We  also  reserve  for  potential  disputed  amounts  or  chargebacks  from  our  customers.  Our  chargeback  reserve  is  based  on  a 
collectibility  percentage  based  on  factors  such  as  historical  trends,  current  economic  conditions,  and  nature  of  the  chargeback 
receivables. We also reserve for potential sales returns and allowances based on historical trends. 

The likelihood of a material loss on an uncollectible account would be mainly dependent on deterioration in the overall economic 
conditions in a particular country or region. Reserves are fully provided for all probable losses of this nature.  For receivables that are 
not specifically identified as high risk, we provide a reserve based upon our historical loss rate as a percentage of sales.   Gross trade 
accounts receivable balance were $230.6 million and $196.4 million and the allowance for bad debts, returns, sales allowances and 
customer  chargebacks  was  $16.9  million  and  $20.4  million,  at  December  31,  2012  and  2011,  respectively.  The  Company’s  credit 
losses due to  write-off’s for the  years ended December 31, 2012, 2011 and 2010  were $1.5 million, $7.0  million and  $4.8 million, 
respectively. 

Inventory write-downs.  Inventories are stated at the lower of cost or market. We continually review our inventory for excess and 
slow  moving  inventory.  Our  review  is  based  on  inventory  on  hand,  prior  sales  and  our  expected  net  realizable  value.  Our  analysis 
includes a review of inventory quantities on hand at period end in relation to year-to-date sales, existing orders from customers and 
projections for sales in the foreseeable future. The net realizable value, or market value, is determined based on our estimate of sales 
prices  of  such  inventory  based  upon  historical  sales  experience  on  a  style  by  style  basis.  A  write-down  of  inventory  is  considered 
permanent and creates a new cost basis for those units. The likelihood of any material inventory write-down is dependent primarily on 
our expectation of future consumer demand for our product. A misinterpretation or misunderstanding of future consumer demand for 
our product or of the economy, or other failure to estimate correctly, could result in inventory valuation changes, either favorably or 
unfavorably, compared to the requirement determined to be appropriate as of the balance sheet date.   Our gross inventory value was 
$348.1 million and $238.7 million and our inventory reserve  was $9.1  million and $12.3  million, at December 31, 2012 and 2011, 
respectively.  

Valuation of long-lived assets.  When circumstances warrant, we test for recoverability of the asset groups’ carrying value using 
estimates of undiscounted future cash flows based on the existing service potential of the applicable asset group in determining the fair 
value of each asset group.  We evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying 
amount based upon our assessment of the following events or changes in circumstances: 

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•  macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations 

EXCHANGE RATES 

in foreign exchange rates, or other developments in equity and credit markets;  

We receive U.S. dollars for substantially all of our domestic and a portion of our international product sales as well as our royalty 
income.  Inventory  purchases  from  offshore  contract  manufacturers  are  primarily  denominated  in  U.S.  dollars;  however,  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. During 2012 and 2011, 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 7A. 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Market risk is the potential loss arising from the adverse changes in market rates and prices, such as interest rates, marketable debt 
security prices and foreign currency exchange rates. Changes in interest rates, marketable debt security prices and changes in foreign 
currency  exchange  rates  have  and  will  have  an  impact  on  our  results  of  operations.  We  do  not  hold  any  derivative  securities  that 
require fair value presentation under ASC 815-10.  

Interest rate fluctuations.  Interest rates charged on our long-term debt are based on either the prime rate of interest or the LIBOR, 
and  changes  in  the  either  of  these  rates  of  interest  could  have  an  effect  on  the  interest  charged  on  our  outstanding  balances.    At 
December 31, 2012 we had $2.4 million and $79.9 million of outstanding short-term and long-term borrowings, respectively subject to 
changes in interest rates; however, we do not expect that 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  subsidiary’s  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 currently engage in hedging activities with respect to such exchange rate risks. A 200 basis 
point reduction in the exchange rates used to calculate foreign currency translations at December 31, 2012 would have reduced the 
values of our net investments by approximately $7.7 million. 

• 

industry  and  market  considerations  such  as  a  deterioration  in  the  environment  in  which  an  entity  operates,  an  increased 
competitive environment, a decline in market-dependent multiples or metrics, or a change in the market for an entity’s products 
or services, or a regulatory or political development;  

•  cost factors such as increases in raw materials, labor, or other costs that have a negative effect on earnings and cash flows; 

•  overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings 

compared with actual and projected results of relevant prior periods; 

•  other relevant entity-specific events such as changes in management, key personnel, strategy, or customers, contemplation of 

bankruptcy, or litigation; 

•  events affecting a reporting unit such as a change in the composition or carrying amount of its net assets, a more-likely-than-
not expectation of selling or disposing all, or a portion, of a reporting unit, the testing for recoverability of a significant asset 
group within a reporting unit, or recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a 
component of a reporting unit; 

•  a sustained decrease in share price.  
If the assets are considered to be impaired, the impairment we recognize is the amount by which the carrying value of the assets 
exceeds  the  fair  value  of  the  assets.    In  addition,  we  base  the  useful  lives  and  related  amortization  or  depreciation  expense  on  our 
estimate of the period that the assets will generate revenues or otherwise be used by us.  In addition, we prepare a summary of cash 
flows for each of our retail stores to assess potential impairment of the fixed assets and leasehold improvements. Stores with negative 
cash  flows  opened  in  excess  of  twenty-four  months  are  then  reviewed  in  detail  to  determine  if  impairment  exists.    Management 
reviews both quantitative and qualitative factors to asses if a triggering event occurred.  For the years ended December 31, 2012 and 
2010,  respectively  we  did  not  record  an  impairment  charge.    For  the  year  ended  December  31,  2011,  we  recorded  a  $1.5  million 
impairment charge for eleven of our underperforming domestic stores and $1.6 million for intangible assets.   

Litigation reserves.  Estimated amounts for claims that are probable and can be reasonably estimated are recorded as liabilities in 
our  consolidated  balance  sheets.  The  likelihood  of  a  material  change  in  these  estimated  reserves  would  depend  on  additional 
information or new claims as they may arise and the favorable or unfavorable outcome of the particular litigation.  Both the likelihood 
and amount (or range of loss) on a large portion of our remaining pending litigation is uncertain.  As such, we are unable to make a 
reasonable estimate of the liability that could result from unfavorable in outcomes in our remaining pending litigation. As additional 
information becomes available, we will assess the potential liability related to our pending litigation and revise our estimates. Such 
revisions in our estimates of the potential liability could materially impact our results of operations and financial position.  

Valuation of deferred income taxes.   We record a valuation allowance  when  necessary to reduce our deferred tax assets to the 
amount that is more likely than not to be realized. The likelihood of a material change in our expected realization of our deferred tax 
assets  depends  on  future  taxable  income  and  the  effectiveness  of  our  tax  planning  strategies  amongst  the  various  domestic  and 
international tax jurisdictions in which we operate. We evaluate our projections of taxable income to determine the recoverability of 
our deferred tax assets and the need for a valuation allowance.  As of December 31, 2012, we had net deferred tax assets of $57.4 
million reduced by a valuation allowance of $14.6 million against loss carry-forwards not expected to be utilized by certain foreign 
subsidiaries.   

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.  Although  higher  rates  of  inflation  have  been  experienced  in  a  number  of  foreign  countries  in  which  our  products  are 
manufactured, we do not believe that inflation has had 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. 

44 

45 

 
 
 
 
 
 
 
 
 
 
ITEM 8. 

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE 

Report of Independent Registered Public Accounting Firm 

Page 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ......................................................................... 47 

CONSOLIDATED BALANCE SHEETS ............................................................................................................................................ 48 

CONSOLIDATED STATEMENTS OF OPERATIONS ................................................................................................................... 49 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) .......................................................................... 50 

CONSOLIDATED STATEMENTS OF EQUITY .............................................................................................................................. 51 

CONSOLIDATED STATEMENTS OF CASH FLOWS ................................................................................................................... 52 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................................................................................................ 53 

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS ............................................................................................. 73 

The Board of Directors and Stockholders 
Skechers U.S.A., Inc.: 

We have audited the accompanying consolidated balance sheets of Skechers U.S.A., Inc. and subsidiaries (the Company) as of 
December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income (loss), equity, and 
cash  flows  for  each  of  the  years  in  the  three-year  period  ended  December 31,  2012.  In  connection  with  our  audits  of  the 
consolidated  financial  statements,  we  also  have  audited  the  related  financial  statement  schedule.  These  consolidated  financial 
statements  and  financial  statement  schedule  are  the  responsibility  of  the  Company’s  management.  Our  responsibility  is  to 
express an opinion on these consolidated financial statements and financial statement schedule based on our audits. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements 
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures 
in  the  financial  statements.  An  audit  also  includes  assessing  the  accounting  principles  used  and  significant  estimates  made  by 
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable 
basis for our opinion. 

In  our  opinion,  the  consolidated  financial  statements  referred  to  above  present  fairly,  in  all  material  respects,  the  financial 
position of Skechers U.S.A., Inc. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their 
cash flows for each of the years in the three-year period ended December 31, 2012, in conformity with U.S. generally accepted 
accounting  principles.  Also  in  our  opinion,  the  related  financial  statement  schedule,  when  considered  in  relation  to  the  basic 
consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. 

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the  
internal  control  over  financial  reporting  of  Skechers  U.S.A.,  Inc.  as  of  December 31,  2012,  based  on  criteria  established  in 
Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 
(COSO), and our report dated March 1, 2013, expressed an unqualified opinion on the effectiveness of the internal control over 
financial reporting of Skechers U.S.A., Inc. 

/s/ KPMG LLP 

Los Angeles, California 
March 1, 2013 

46 

47 

 
 
 
 
 
 
 
 
SKECHERS U.S.A., INC. AND SUBSIDIARIES 
CONSOLIDATED BALANCE SHEETS 
(In thousands, except par values) 

SKECHERS U.S.A., INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF OPERATIONS 
(In thousands, except per share data) 

Current Assets: 

ASSETS 

  December 31, 
2012 

 December 31, 
2011 

Inventories ........................................................................................................................   
Prepaid expenses and other current assets ........................................................................   
Deferred tax assets ............................................................................................................     

Cash and cash equivalents ................................................................................................    $  325,826 
213,697 
Trade accounts receivable, less allowances of $16,922 in 2012 and $20,423 in 2011 .....   
7,491 
Other receivables ..............................................................................................................     
Total receivables .......................................................................................................      221,188 
339,012 
27,755 
26,531 
Total current assets ...................................................................................................      940,312 
362,446 
3,242 
16,387 
17,833 
  Total non-current assets ..........................................................................................      399,908 
TOTAL ASSETS .................................................................................................................    $1,340,220 

Property, plant and equipment, at cost, less accumulated depreciation and amortization ....   
Goodwill and other intangible assets, less accumulated amortization ..................................   
Deferred tax assets ...............................................................................................................   
Other assets, at cost ..............................................................................................................     

  $  351,144 
176,018 
6,636 
    182,654 
226,407 
88,005 
39,141 
    887,351 
376,446 
4,148 
530 
13,413 
    394,537 
  $1,281,888 

LIABILITIES AND EQUITY 

Current Liabilities: 

Current installments of long-term borrowings ..................................................................     $  11,668 
2,425 
Short-term borrowings ......................................................................................................   
241,525 
Accounts payable ..............................................................................................................   
36,923 
Accrued expenses .............................................................................................................     
Total current liabilities ..............................................................................................      292,541 
Long-term borrowings, excluding current installments ........................................................      128,517 
73 
Deferred tax liabilities ..........................................................................................................     
  Total non-current liabilities ....................................................................................      128,590 
  Total liabilities ........................................................................................................      421,131 

   $  10,059 
50,413 
231,000 
16,994 
    308,466 
76,531 
4,364 
80,895 
    389,361 

Commitments and contingencies 
Stockholders’ equity: 
  Preferred Stock, $.001 par value; 10,000 authorized; none issued and outstanding ...........   
  Class A Common Stock, $.001 par value; 100,000 shares authorized; 39,021 and 
    37,959 shares issued and outstanding at December 31, 2012 and 2011, respectively ......   
  Class B Common Stock, $.001 par value; 60,000 shares authorized; 11,274 and 
11 
   11,297 shares issued and outstanding at December 31, 2012 and 2011, respectively .......   
336,278 
  Additional paid-in capital ...................................................................................................   
  Accumulated other comprehensive loss .............................................................................   
(2,400) 
  Retained earnings ...............................................................................................................      542,041 
Skechers U.S.A., Inc. equity .....................................................................................      875,969 
43,120 
Total equity ...............................................................................................................      919,089 
TOTAL LIABILITIES AND EQUITY ................................................................................    $1,340,220 

  Noncontrolling interests .....................................................................................................     

39 

0 

0 

38 

11 
320,877 
(894) 
    532,529 
    852,561 
39,966 
    892,527 
  $1,281,888 

Years Ended December 31, 

2012 

2011 

2010 

Net sales .........................................................................................................    $ 1,560,321 
  876,995 
Cost of sales ....................................................................................................  
683,326 
           Gross profit ..........................................................................................  
7,104 
Royalty income, net ........................................................................................  
  690,430 

   $ 1,606,016 
  982,268 
623,748 
7,558 
  631,306 

   $ 2,006,868 
 1,094,962 
911,906 
4,568 
  916,474 

Operating expenses: 
   Selling ..........................................................................................................  
   General and administrative ..........................................................................  
   Legal settlements .........................................................................................  

           Earnings (loss) from operations ...........................................................  

134,920 
  532,373 
818 
  668,111 
22,319 

152,000 
  569,164 
43,935 
  765,099 
  (133,793) 

186,738 
  532,996 
1,172 
  720,906 
  195,568 

Other income (expense): 
   Interest income ............................................................................................  
   Interest expense ...........................................................................................  
   Gain (loss) on disposal of assets ..................................................................  
   Gain (loss) on foreign currency transactions ...............................................  

          Earnings (loss) before income taxes (benefit) 
Income tax expense (benefit) ..........................................................................  
Net earnings (loss) ...............................................................................  
Less: Net earnings (loss) attributable to noncontrolling interests ........       

          Net earnings (loss) attributable to Skechers U.S.A., Inc.......................

559 
(13,324) 
(216) 
1,135 
(11,846) 
10,473 
(39) 
10,512 
1,000   
$     9,512 

1,851 
(7,853) 
9,632 
(884) 
2,746 
(131,047) 
(63,467) 
(67,580) 

(96)   

$  (67,484) 

2,802 
(3,022) 
44 
1,211 
1,035 
196,603 
60,198 
  136,405 
257   

$ 136,148 

Net earnings (loss) per share attributable to Skechers U.S.A., Inc.: 
   Basic ............................................................................................................   $ 
   Diluted .........................................................................................................   $ 

0.19 
0.19 

  $ 
  $ 

(1.39) 
(1.39) 

  $ 
  $ 

2.87 
2.78 

Weighted  average  shares  used  in  calculating  earnings  (loss)  per  share 
attributable to Skechers U.S.A., Inc.: 
   Basic ............................................................................................................  
   Diluted .........................................................................................................  

49,495 
49,942 

48,491 
48,491 

47,433 
49,050 

See accompanying notes to consolidated financial statements. 

49 

48 

See accompanying notes to consolidated financial statements. 

 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
      
      
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 
 
 
 
 
 
   
 
 
   
 
 
 
   
 
 
 
 
 
 
 
 
 
 
   
   
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
SKECHERS U.S.A., INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 
 (In thousands) 

Years Ended December 31, 

2012 

2011 

2010 

Net earnings (loss) ..........................................................................................  
Other comprehensive income (loss), net of tax: 

Loss on foreign currency translation adjustment, net of tax ....................  
Comprehensive income (loss) .........................................................................  
  Less: Comprehensive income attributable to noncontrolling  

interests. ......................................................................................................  
 Comprehensive income (loss) attributable to Skechers U.S.A., Inc. ..............  

     $  10,512 

     $  (67,580) 

     $  136,405 

(1,251) 
9,261 

(4,843) 
(72,423) 

(4,657) 
  131,748 

1,255 
8,006 

220 
  $  (72,643) 

683 
  $  131,065 

  $ 

Balance at December 31, 2009
Net earnings
Foreign currency translation adjustment
Capital contribution
Stock compensation expense
Proceeds from issuance of common stock
   under the employee stock purchase plan
Proceeds from issuance of common stock
   under the employee stock option plan
Tax benefit of stock options exercised
Shares redeemed for employee tax withholdings
Conversion of Class B Common Stock into
   Class A Common Stock
Balance at December 31, 2010
Net loss
Foreign currency translation adjustment
Capital contribution
Stock compensation expense
Proceeds from issuance of common stock
   under the employee stock purchase plan
Proceeds from issuance of common stock
   under the employee stock option plan
Tax benefit of stock options exercised
Conversion of Class B Common Stock into
   Class A Common Stock
Balance at December 31, 2011
Net earnings
Foreign currency translation adjustment
Contribution from noncontrolling interest of consolidated entity
Distribution to noncontrolling interest of consolidated entity
Stock compensation expense
Proceeds from issuance of common stock
   under the employee stock purchase plan
Proceeds from issuance of common stock
   under the employee stock option plan
Tax benefit of stock options exercised
Conversion of Class B Common Stock into
   Class A Common Stock
Balance at December 31, 2012

S TO CK

S TO CK

34,229
--
--
--
--

103

1,513
--
--

1,049
36,894
--
--
--
--

178

873
--

14
37,959
--
--
--
--
--

186

853
--

12,360
--
--
--
--

--

--
--
--

(1,049)
11,311
--
--
--
--

--

--
--

(14)
11,297
--
--
--
--
--

--

--
--

SKECHERS U.S.A., INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF EQUITY  
(In thousands)  

S HAR ES

AMO UN T

ACC UMULATED

C LAS S  A

C LAS S  B

CLA S S  A

C LAS S  B

ADD ITIO NAL

O THER

S KEC HERS

NO N

TO TAL

CO MMO N

CO MMO N  

CO MMO N

CO MMO N  

S TO C K
$               

34
--
--
--
--

S TO CK
$                

13
--
--
--
--

P AID - IN 

CAP ITA L

$            

272,662
--
--
--
13,739

CO MP REHEN S IVE

RETAIN ED

U. S . A. ,  IN C.

CO NTRO LLING

S TO CKHO LD ERS '

IN CO ME (LO S S )

EA RNING S

EQ UITY

IN TERES TS

$                          

9,348
--
(5,083)
--
--

$           

463,865
136,148
--
--
--

$            

745,922
136,148
(5,083)
--
13,739

$                    

3,448
257
426
33,500
--

EQ UITY
$                    

749,370
136,405
(4,657)
33,500
13,739

--

2
--
--

--

--
--
--

2,143

11,895
9,042
(5,604)

--

--
--
--

--

--
--
--

2,143

11,897
9,042
(5,604)

--

--
--
--

2,143

11,897
9,042
(5,604)

$               

1
37
--
--
--
--

$                

(2)
11
--
--
--
--

$            

--
303,877
--
--
--
14,320

$                          

--
4,265
--
(5,159)
--
--

$           

--
600,013
(67,484)
--
--
--

$            

(1)
908,203
(67,484)
(5,159)
--
14,320

$                  

--
37,631
(96)
316
2,115
--

$                    

(1)
945,834
(67,580)
(4,843)
2,115
14,320

--

1
--

$               

--
38
--
--
--
--
--

--

--
--

2,023

1,297
(640)

--

--
--

--

--
--

2,023

1,298
(640)

--

--
--

2,023

1,298
(640)

$                

--
11
--
--
--
--
--

$            

--
320,877
--
--
--
--
11,527

$                            

--
(894)
--
(1,506)
--
--
--

$           

--
532,529
9,512
--
--
--
--

$            

--
852,561
9,512
(1,506)
--
--
11,527

$                  

--
39,966
1,000
255
3,501
(1,602)
--

$                    

--
892,527
10,512
(1,251)
3,501
(1,602)
11,527

--

1
--

--

--
--

2,374

1,050
450

--

--
--

--

--
--

2,374

1,051
450

--

--
--

2,374

1,051
450

23 --

39,021

(23)
11,274

$               

--
39

$                

--
11

--
336,278

$            

$                         

--
(2,400)

--
542,041

$           

--
875,969

$            

$                  

--
43,120

$                    

--
919,089

See accompanying notes to consolidated financial statements. 

50 

See accompanying notes to consolidated financial statements 

51 

 
                   
                   
                        
                                
                   
                   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SKECHERS U.S.A., INC. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(In thousands) 

Cash flows from operating activities: 

Net earnings (loss) attributable to Skechers, U.S.A., Inc. ................................$ 
Adjustments to reconcile net earnings (loss) to net cash (used in) 

9,512  $  (67,484)  $  136,148 

provided by operating activities: 

provided by (used in) operating activities: 

Years Ended December 31, 

2012 

2011 

2010 

        1,000 
Noncontrolling interests in subsidiaries ................................................................
Depreciation of property, plant and equipment ............................................................
41,542 
1,195 
Amortization of deferred financing costs ................................................................
906 
Amortization of intangible assets ................................................................ 
Provision for bad debts and returns ................................................................ 
1,112 
Tax benefits from share-based compensation ..............................................................
Non-cash share-based compensation ................................................................
 11,527 
Deferred income taxes ................................................................................................
0 
Inventory write-down ................................................................................................
216 
Loss (gain) on disposal of property, plant and equipment ................................
Impairment of property, plant and equipment ..............................................................
0 
Impairment of intangible assets ....................................................................................
0 
(Increase) decrease in assets: 

(78)   

14,320 
       (7,538)        (7,863) 
9,971 
(9,632)   
1,481 
1,649 

           (96) 
33,652 
1,128 
1,580 
5,882 
(640)   

           257 
24,707 
1,482 
1,683 
6,212 
0 
13,739 
       (5,170) 
0 
36 
0 
0 

Receivables ................................................................................................
86,114 
Inventories ................................................................................................  (111,813)    160,241 
60,266 
Prepaid expenses and other current assets ..............................................................
(4,955)   
Other assets ................................................................................................

(38,247)   
3,291 

(36,989)   

(50,040) 
  (172,417) 
(21,402) 
(7,571) 

Increase (decrease) in liabilities: 

Accounts payable ................................................................................................
Accrued expenses ................................................................................................
Net cash (used in) provided by operating activities ................................ 

9,958 
20,692 
(3,447)    164,919 

(18,074)   
(12,354)   

Cash flows from investing activities: 

Capital expenditures ................................................................................................
0 
Maturities of investments .............................................................................................
0 
Proceeds from the sale of property, plant and equipment ................................
0 
Intangible additions ................................................................................................

Net cash (used in) investing activities ................................................................

(10)   
(52,452)    (105,148)   

(52,452)    (122,238)   

0 
17,100 

32,829 
(7,872) 
(47,379) 

(82,269) 
30,000 
0 
(41) 
(52,310) 

Cash flows from financing activities: 

Net proceeds from the issuances of stock through employee 

stock purchase plan and the exercise of stock options ................................
3,321 
3,425 
0 
   Shares redeemed for employee tax withholdings .........................................................
0 
2,115 
3,501 
   Contributions from noncontrolling interest of consolidated entity ...............................
0 
(1,602)   
   Distribution to noncontrolling interest of consolidated entity ................................
0 
528 
Excess tax benefits from share-based compensation ....................................................
31,958 
(Decrease) increase in short-term borrowings ..............................................................
(47,998)   
37,326 
82,143 
Proceeds from long-term debt ......................................................................................
(14,287)   
Payments on long-term debt .........................................................................................
(10,243)   
60,433 
29,754 
Net cash provided by financing activities ..............................................................
Net (decrease) increase in cash and cash equivalents ...................................................
(26,145)    120,204 
Effect of exchange rates on cash and cash equivalents ................................ 
827 
  351,144 
Cash and cash equivalents at beginning of year ...........................................................

14,040 
(5,604) 
3,500 
0 
9,042 
16,271 
39,293 
(9,121) 
67,421 
(32,268) 
151 
  265,675 
Cash and cash equivalents at end of year ...........................................................$  325,826  $  351,144  $  233,558 

  233,558 

(2,618)   

SKECHERS U.S.A., INC. AND SUBSIDIARIES 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
DECEMBER 31, 2012, 2011 and 2010 

(1)  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

(a) 

The Company and Basis of Presentation 

Skechers U.S.A., Inc. and subsidiaries (the “Company”) designs, develops, markets and distributes footwear. The Company also 

operates 354 retail stores and an e-commerce business as of December 31, 2012. 

The  consolidated  financial  statements  have  been  prepared  in  accordance  with  accounting  principles  generally  accepted  in  the 
United States and include the accounts of the Company and its subsidiaries.  All significant intercompany balances and transactions 
have been eliminated in consolidation. During the year ended December 31, 2012, the Company recorded an adjustment to increase 
rent expense by $1.9 million, or $1.1 million net of tax relating to percentage and deferred rent for the periods ending December 31, 
2008 through December 31, 2011.  These adjustments were immaterial both in the current year and in prior years. 

(b)  Use of Estimates 

Management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses 
and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting 
principles  generally  accepted  in  the  United  States.  Significant  areas  requiring  the  use  of  management  estimates  relate  primarily  to 
revenue recognition, allowance for bad debts, returns, sales allowances and customer chargebacks, inventory write-downs, valuation 
of long-lived assets, litigation reserves and valuation of deferred income taxes.  Actual results could differ from those estimates. 

(c)  Noncontrolling interests 

The  Company  has  equity  interests  in  several  joint  ventures  that  were  established  either  to  distribute  the  Company’s  products 
throughout  Asia  or  to  construct  the  Company’s  domestic  distribution  facility.    These  joint  ventures  are  variable  interest  entities 
(VIE)’s under Accounting Standards Codification (“ASC”) 810-10-15-14. The Company’s determination of the primary beneficiary of 
a VIE considers all relationships between the Company and the VIE, including management agreements, governance documents and 
other contractual arrangements.   The Company has determined for its VIE’s the Company is the primary beneficiary because it has 
both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the entity’s economic 
performance, and (b) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or 
the  right  to  receive  benefits  from  the  entity  that  could  potentially  be  significant  to  the  variable  interest  entity.  Accordingly,  the 
Company  includes  the  assets  and  liabilities  and  results  of  operations  of  these  entities  in  its  consolidated  financial  statements,  even 
though the Company may not hold a majority equity interest. There have been no changes during 2012 in the accounting treatment or 
characterization  of  any  previously  identified  VIE.  The  Company  continues  to  reassess  these  relationships  quarterly.    The  assets  of 
these joint ventures are restricted in that they are not available for general business use outside the context of such joint ventures. The 
holders of the liabilities of each joint venture have no recourse to the Company.  The Company does not have a variable interest in any 
unconsolidated VIEs. 

Supplemental disclosures of cash flow information: 
   Cash paid (received) during the year for: 
      Interest ........................................................................................................ $  11,812  $ 
      Income taxes paid (recovered) ...................................................................      (48,706)   
   Non-cash transactions: 
      Land contribution from noncontrolling interest .........................................  
      Note payable contribution from noncontrolling interest ............................  

0 
0 

7,692  $ 
15,772 

3,438 
87,063 

0 
0 

30,000 
17,358 

See accompanying notes to consolidated financial statements. 

52 

53 

 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
  
  
  
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The  following  VIEs  are  consolidated  into  the  Company’s  consolidated  financial  statements  and  the  carrying  amounts  and 

classification of assets and liabilities were as follows (in thousands): 

HF Logistics-SKX, LLC 

December 31, 2012   December 31, 2011  

Current assets 
Noncurrent assets ................................................................ 
  Total assets ..............................................................................

5,239 
$ 
  133,235 
$  138,474 

Current liabilities ................................................................  
Noncurrent liabilities ................................................................
  Total liabilities ................................................................  

$ 

1,958 
80,678 
$  82,636 

$  11,400 
  132,925 
$  144,325 

$  62,076 
18,297 
$  80,373 

Distribution joint ventures (1) 

December 31, 2012  December 31, 2011 

Current assets 
Noncurrent assets ................................................................ 
  Total assets ..............................................................................

$  34,781 
7,978 
$  42,759 

Current liabilities ................................................................  
Noncurrent liabilities ................................................................
  Total liabilities ................................................................  

$  13,222 
34 
$  13,256 

$  28,028 
7,225 
$  35,253 

$  12,495 
73 
$  12,568 

(1) Distribution joint ventures include Skechers China Limited, Skechers Southeast Asia Limited, Skechers Thailand Limited 

and Skechers South Asia Private Limited. 

Noncontrolling interest income (loss) was $1.0 million, ($0.1) million and $0.3 million for the years ended December 31, 2012, 
2011  and  2010,  respectively,  which  represents  the  share  of  net  earnings  or  loss  that  is  attributable  to  the  Company’s  joint  venture 
partners.  HF Logistics-SKX, LLC made a cash capital distribution of $1.6 million during the year ended December 31, 2012.  Our 
distribution joint venture partners made cash capital contributions of $3.5 and $2.1 million during the year ended December 31, 2012 
and 2011, respectively.  

(d)  Business Segment Information  

Skechers’ operations and segments are organized along its distribution channels and consist of the following: domestic wholesale, 

international wholesale, retail and e-commerce sales.  Information regarding these segments is summarized in Note 12. 

(f)  Allowance for Bad Debts, Returns, Sales Allowances and Customer Chargebacks   

The  Company  provides  a  reserve  charged  against  revenue  against  its  receivables  for  estimated  losses  that  may  result  from  its 
customers’ inability to pay. To minimize the likelihood of uncollectibility, customers’ credit-worthiness is reviewed periodically based 
on external credit reporting services, financial statements issued by the customer and the Company’s experience with the account, and 
it is adjusted accordingly. When a customer’s account becomes significantly past due, the Company  generally places a hold on the 
account and discontinues further shipments to that customer, minimizing further risk of loss.  The Company determines the amount of 
the  reserve  by  analyzing  known  uncollectible  accounts,  aged  receivables,  economic  conditions  in  the  customers’  countries  or 
industries,  historical  losses  and  its  customers’  credit-worthiness.  Amounts  later  determined  and  specifically  identified  to  be 
uncollectible are charged or written off against this reserve.  

The Company also reserves for potential disputed amounts or chargebacks from its customers. The Company’s chargeback reserve 
is  based  on  a  collectibility  percentage  based  on  factors  such  as  historical  trends,  current  economic  conditions,  and  nature  of  the 
chargeback receivables. The Company also reserves for potential sales returns and allowances based on historical trends. 

The likelihood of a material loss on an uncollectible account would be mainly dependent on deterioration in the overall economic 
conditions in a particular country or environment. Reserves are fully provided for all probable losses of this nature.  For receivables 
that are not specifically identified as high risk, the Company provides a reserve based upon our historical loss rate as a percentage of 
sales.    

(g)  Cash  and Cash Equivalents  

Cash and cash equivalents consist primarily of certificates of deposit with an initial term of less than three months.  For purposes 
of  the  consolidated  statements  of  cash  flows,  the  Company  considers  all  highly  liquid  debt  instruments  with  original  maturities  of 
three months or less to be cash equivalents. 

(h)  Foreign Currency Translation  

In accordance with ASC 830-30, certain international operations use the respective local currencies as their functional currency, 
while other international operations use the U.S. Dollar as their functional currency.  The Company considers the U.S. dollar as its 
functional currency.   The Company operates internationally through  several  foreign subsidiaries.  Translation adjustments  for these 
subsidiaries are included in other comprehensive income (loss). Additionally, one international subsidiary, Skechers S.a.r.l. located in 
Switzerland, operates with a functional currency of the U.S. dollar. Resulting re-measurement gains and losses from this subsidiary are 
included in the determination of net earnings (loss).  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.  Translations  of  intercompany  loans  of  a  long-term  investment  nature  are  included  as  a  component  of 
translation adjustment in other comprehensive income (loss).  

(e)  Revenue Recognition 

(i) 

Inventories 

The Company recognizes revenue on wholesale sales when products are shipped and the customer takes ownership and assumes 
risk  of  loss,  collection  of  the  relevant  receivable  is  reasonably  assured,  persuasive  evidence  of  an  arrangement  exists  and  the  sales 
price is fixed or determinable.  This generally occurs at the time of shipment.   Wholesale and e-commerce sales are recognized on a 
net  sales  basis,  which  reflects  allowances  for  estimated  returns,  sales  allowances,  discounts,  chargebacks  and  amounts  billed  for 
shipping  and  handling  costs.    Shipping  and  handling  costs  paid  by  the  Company  are  included  in  cost  of  sales.    The  Company 
recognizes revenue from retail sales at the point of sale. The Company currently presents sales tax collected from customers on a net 
basis. 

Net royalty income is earned from our 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 when earned based 
on the terms of the contract 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 actual sales for the period. This information is used to calculate and accrue the related 
royalties based on the terms of the agreement. 

Inventories,  principally  finished  goods,  are  stated  at  the  lower  of  cost  (based  on  the  first-in,  first-out  method)  or  market  (net 
realizable value). Cost includes shipping and handling fees and costs, which are subsequently expensed to cost of sales.  The Company 
provides  for  estimated  losses  from  obsolete  or  slow-moving  inventories  and  writes  down  the  cost  of  inventory  at  the  time  such 
determinations  are  made.  Reserves  are  estimated  based  upon  inventory  on  hand,  historical  sales  activity,  industry  trends,  the  retail 
environment, and the expected net realizable value. The net realizable value is determined based upon estimated sales prices of such 
inventory through off-price or discount store channels.  

(j) 

Income Taxes 

The Company accounts for income taxes in accordance with ASC 740-10, which requires that the Company recognize deferred tax 
liabilities  for  taxable  temporary  differences  and  deferred  tax  assets  for  deductible  temporary  differences  and  operating  loss  carry-
forwards using enacted tax rates in effect in the years the differences are expected to reverse. Deferred income tax benefit or expense 
is recognized as a result of changes in net deferred tax assets or deferred tax liabilities. A valuation allowance is recorded when it is 
more likely than not that some or all of any deferred tax assets will not be realized.  

54 

55 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(k)  Depreciation and Amortization 

Depreciation and amortization of property, plant and equipment is computed using the straight-line method based on the following 

estimated useful lives: 

Buildings 
Building improvements 
Furniture, fixtures and equipment 
Leasehold improvements   

20 years  
10 years 
5 to 20 years  
Useful life or remaining lease term, whichever is shorter 

(l)  Goodwill and Intangible assets 

Goodwill and intangible assets are measured for impairment at least annually and more often when events indicate that impairment 
exists.    Intellectual  property,  which  include  purchased  intellectual  property,  artwork  and  design,  trade  name  and  trademark  are 
amortized over their useful lives ranging from 1–10 years, generally on a straight-line basis. Intangible assets, which were primarily 
allocated to the domestic wholesale segment, as of December 31, 2012 and 2011 are as follows (in thousands): 

Intellectual property ................................................................
Goodwill...................................................................................
Less accumulated amortization ................................................
Total Intangible Assets .............................................................

2012 
$  7,840 
1,575 
(6,173) 
$    3,242 

2011 

$  7,840 
1,575 
(5,267) 
$  4,148 

We recorded amortization expense of $2.1 million, $2.7 million and $3.2 million for the years ended December 31, 2012, 2011 and 
2010, respectively, in general and administrative expenses. The Company did not record impairment charges during the years ended 
December  31,  2012  or  December  31,  2010.    The  Company  recorded  $1.6  million  in  impairment  charges  during  the  year  ended 
December 31, 2011.  

(m)   Long-Lived Assets 

Long-lived  assets  such  as  property,  plant  and  equipment  and  purchased  intangibles  subject  to  amortization  are  reviewed  for 
impairment  whenever  events  or  changes  in  circumstances  indicate  that  the  carrying  amount  of  an  asset  may  not  be  recoverable. 
Management  reviews  both  quantitative  and  qualitative  factors  to  assess  if  a  triggering  event  occurred.      The  Company  prepares  a 
summary  of  store  cash  flows  from  our  retail  stores  to  assess  potential  impairment  of  the  fixed  assets  and  leasehold  improvements.  
Stores with negative cash flows opened in excess of twenty-four months are then reviewed in detail to determine if impairment exists.  
Recoverability  of  assets  to  be  held  and  used  is  measured  by  a  comparison  of  the  carrying  amount  of  an asset  to  the  estimated 
undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future 
cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the 
asset.  The  Company  did  not  record  impairment  charges  during  the  year  ended  December  31,  2012  or  December  31,  2010.    The 
Company recorded $1.5 million in impairment charges during the year ended December 31, 2011.   

(n)  Advertising Costs 

Advertising costs are expensed in the period in which the advertisements are first run or over the life of the endorsement contract. 
Advertising expense for the years ended December 31, 2012, 2011 and 2010 was approximately $103.9 million, $119.3 million and 
$154.6  million,  respectively.    Prepaid  advertising  costs  were  $3.8  million  and  $4.7  million  at  December  31,  2012  and  2011, 
respectively.  Prepaid  amounts  outstanding  at  December  31,  2012  and  2011,  represent  the  unamortized  portion  of  endorsement 
contracts,  advertising  in  trade  publications  and  media  productions  created  which  had  not  run  as  of  December  31,  2012  and  2011, 
respectively. 

(o)  Net Earnings (loss) Per Share Attributable to Skechers U.S.A., Inc. 

Basic  earnings  (loss)  per  share  represents  net  earnings  (loss)  divided  by  the  weighted  average  number  of  common  shares 
outstanding for the period. Diluted earnings (loss) per share, in addition to the weighted average determined for basic earnings (loss) 
per share, includes potential common shares which would arise from the exercise of stock options using the treasury stock method. 

The  following  is  a  reconciliation  of  net  earnings  (loss)  and  weighted  average  common  shares  outstanding  for  purposes  of 

calculating earnings (loss) per share (in thousands): 

Basic earnings (loss) per share 

Years Ended December 31, 
2011 

2010 

2012 

Net earnings (loss) ....................................................   $ 
Weighted average common shares outstanding ........  
Basic earnings (loss) per share ..................................   $ 

  49,495 

 9,512  $ (67,484)  $ 136,148 
  47,433 
2.87 

   0.19  $    (1.39)  $ 

  48,491 

Diluted earnings (loss) per share 

Years Ended December 31, 
2011 

2010 

2012 

Net earnings (loss) ......................................................     $  9,512 
49,495 
Weighted average common shares outstanding..........    
Dilutive stock options.................................................    
447 
Weighted average common shares outstanding..........       49,942 

  $ (67,484)    $ 136,148 
47,433 
1,617 
    49,050 

48,491 
0 
    48,491 

Diluted earnings (loss) per share ................................  

  $      0.19 

  $     (1.39) 

  $ 

2.78 

There  were  no  options  excluded  from  the  computation  of  diluted  earnings  per  share  for  the  year  ended  December  31,  2012, or 

2010, respectively.   

(p)  Product Design and Development Costs 

The Company charges all product design and development costs to general and administrative expenses when incurred.  Product 
design  and  development  costs  aggregated  approximately  $9.5  million,  $15.9  million  and  $12.6  million  during  the  years  ended 
December 31, 2012, 2011 and 2010, respectively. 

(q)  Fair Value of Financial Instruments 

The carrying amount of the Company’s financial instruments, which principally include cash and cash equivalents, investments, 
accounts  receivable,  accounts  payable  and  accrued  expenses,  approximates  fair  value  due  to  the  relatively  short  maturity  of  such 
instruments. 

The  carrying  amount  of  the  Company’s  long-term  borrowings  approximates  the  fair  value  based  upon  current  rates  and  terms 

available to the Company for similar debt.  

(r)  Comprehensive Income 

Comprehensive  income  consists  of  net  earnings  (loss),  foreign  currency  translation  adjustments.  Comprehensive  income  is 
presented  in  the  consolidated  statements  comprehensive  income  (loss).    Components  of  accumulated  other  comprehensive  income 
(loss) consist of foreign currency  translation adjustments and income (loss) attributable  to non-controlling interests.   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 intercompany loans of a long-term nature are included in the translation adjustment in other comprehensive income (loss).  

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(2)  PROPERTY, PLANT AND EQUIPMENT 

(5)  LONG-TERM BORROWINGS 

Property, plant and equipment at December 31, 2012 and 2011 is summarized as follows (in thousands): 

Long-term debt at December 31, 2012 and 2011 is as follows (in thousands):  

2012 

2011 

Land ........................................................................................ $  59,113  $  59,113 
Buildings and improvements ..................................................   173,691    172,959 
Furniture, fixtures and equipment ...........................................   184,722    177,443 
Leasehold improvements ........................................................   154,828    139,051 
   Total property, plant and equipment ....................................   572,354    548,566 
Less accumulated depreciation and amortization ...................   209,908    172,120 
   Property, plant and equipment, net ...................................... $  362,446  $  376,446 

The  Company  capitalized  $4.2  million  and  $2.1  million  of  interest  expense  during  2011  and  2010,  respectively,  relating  to  the 

construction of our corporate headquarters and equipment for our domestic distribution facility, which was completed in 2011. 

(3)  ACCRUED EXPENSES 

Accrued expenses at December 31, 2012 and 2011 are summarized as follows (in thousands):  

Accrued inventory purchases ..................................................$  18,368  $  1,518 
Accrued payroll and related taxes ...........................................  18,425 
  15,399 
Accrued interest ...................................................................... 
77 
130 
   Accrued expenses .................................................................$  36,923  $  16,994 

2012 

2011 

(4)  LINE OF CREDIT AND SHORT-TERM BORROWINGS 

On June 30, 2009, we entered into a $250.0 million secured credit agreement, (the “Credit Agreement”) with a syndicate of seven 
banks that replaced the previous $150 million credit agreement.  On November 5, 2009, March 4, 2010 and May 3, 2011, we entered 
into three successive amendments to the  Credit Agreement  (collectively, the  “Amended Credit Agreement”).  The Amended Credit 
Agreement matures in June 2015.  The Amended Credit Agreement permits us and certain of our subsidiaries to borrow up to $250.0 
million based upon a borrowing base of eligible accounts receivable and inventory, which amount can be increased to $300.0 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 our 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 (1.00%, 1.25% or 1.50% 
for Base Rate loans and 2.00%, 2.25% or 2.50% for LIBOR loans).  We pay a monthly unused line of credit fee of 0.375% or 0.5% 
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 Amended Credit Agreement further provides for a limit on the issuance of letters of 
credit to a maximum of $50.0 million.  The Amended Credit Agreement contains customary affirmative and negative covenants for 
secured credit facilities of this type, including a fixed charge coverage ratio that applies  when excess availability is less than $40.0 
million.  In addition, the Amended Credit Agreement places limits on additional indebtedness that we are permitted to incur as well as 
other restrictions on certain transactions.  We paid syndication and commitment fees of $6.7 million on this facility, which are being 
amortized to interest expense over the life of the facility. 

2012 

2011 

Note payable to bank, due in monthly installments of $357.0 (includes principal 
and interest), variable rate interest at 3.96%, secured by property, balloon 
payment of $76,976 due November 2015 ................................................................ 

$  79,916 

$ 

0 

Note payable to bank, due in monthly installments of $531.4 (includes principal 

and interest), fixed rate interest at 3.54%, secured by property, balloon payment 
of $12,635 due December 2015 ............................................................................... 

Note payable to bank, due in monthly installments of $483.9 (includes principal 

and interest), fixed rate interest at 3.19%, secured by property, balloon payment 
of $11,670 due June 2016 ........................................................................................ 
Loan from HF Logistics I, LLC  ..................................................................................   
Note payable to TCF Equipment Finance, Inc., due in monthly installments of 

29,010 

34,259 

29,213 

0    

34,005 
18,297 

$30.5, (includes principal and interest) fixed rate interest at 5.24%, maturity date 
0 
of July 2019 .............................................................................................................. 
   29 
Capital lease obligations ..............................................................................................   
   10    
86,590 
Subtotal ........................................................................................................................   140,185   
Less current installments .............................................................................................   
10,059 
11,668    
Total long-term debt ....................................................................................................  $  128,517   $  76,531 

2,036 

The aggregate maturities of long-term borrowings at December 31, 2012 are as follows: 

2013 .....................................................................................................................  
2014 .....................................................................................................................  
2015 .....................................................................................................................  
2016 .....................................................................................................................  
2017 .....................................................................................................................  
Thereafter ............................................................................................................  

$  11,668 
12,028 
  101,407 
14,198 
328 
556 
 $  140,185 

The Company’s long-term debt obligations contain both financial and non-financial covenants, including cross-default provisions.  
The Company is in compliance with its non-financial covenants, including any cross default provisions, and financial covenants of our 
long-term debt as of December 31, 2012. 

On April 30, 2010, we entered into a construction loan agreement (the “Loan Agreement”), by and among HF Logistics-SKX T1, 
LLC, a wholly-owned subsidiary of the JV (“HF-T1”), Bank of America, N.A. and Raymond James Bank, FSB.  Borrowings made 
pursuant  to  the  Loan  Agreement  were  up  to  a  maximum  limit  of  $55.0  million  (the  “Loan”),  which  were  used  to  construct  our 
domestic distribution  facility  in Rancho Belago, California.  Borrowings bore interest based on LIBOR, and the Loan Agreement’s 
original maturity date was April 30, 2012, which was extended to November 30, 2012.  On November 16, 2012, HF-T1 executed a 
modification  to  the  Loan  Agreement  (the  “Modification”),  which  increased  the  borrowings  under  the  Loan  to  $80.0  million  and 
extended the maturity date of the Loan to November 16, 2015.  The $80.0 million was used to (i) repay $54.7 million in outstanding 
borrowings under the original Loan, (ii) repay a loan of $18.3 million including accrued interest from HF to the JV, (iii) repay a loan 
to the JV of $2.5 million including accrued interest from Skechers RB, LLC, a wholly-owned subsidiary of our company (iv) pay a 
deferred management fee of $1.9 million to HF, and (iv) pay distributions of $0.9 million to each of HF and Skechers RB, LLC, with 
(v) $0.8 million used for loan fees and other closing costs.  Under the Modification, OneWest Bank, FSB is an additional lender that 
funded in part the increase to the Loan, and the interest rate on the Loan is the daily British Bankers Association LIBOR rate plus a 
margin of 3.75%, which is no longer subject to a minimum rate.  The Loan Agreement and the Modification are subject to customary 
covenants  and  events  of  default.    We  had  $79.9  million  outstanding  under  the  Loan  Agreement  and  the  Modification,  which  is 
included in long-term borrowings on December 31, 2012.  We paid commitment fees of $0.6 million on the Loan, which are being 
amortized to interest expense over the life of the Loan. 

On  December  29,  2010,  the  Company  entered  into  a  master  loan  and  security  agreement  (the  “Master  Agreement”),  by  and 
between us and Banc of America Leasing & Capital, LLC, and an Equipment Security Note (together with the Master Agreement, the 

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“Loan Documents”), by and among us, Banc of America Leasing & Capital, LLC, and Bank of Utah, as agent (“Agent”).  We used the 
proceeds to refinance certain equipment already purchased and to purchase new equipment for use in our Rancho Belago distribution 
facility.  Borrowings made pursuant to the Master Agreement may be in the form of one or more equipment security notes (each a 
“Note,” and, collectively, the “Notes”) up to a maximum limit of $80.0 million and each for a term of 60 months. The Note entered 
into on the same date as the Master Agreement represents a borrowing of approximately $39.3 million.  Interest will accrue at a fixed 
rate of 3.54% per annum.  On June 30, 2011, we entered into another Note agreement for approximately $36.3 million.  Interest will 
accrue at a fixed rate of 3.19% per annum.  As of December 31, 2012, the total outstanding amount on these notes was $58.2 million.  
We  paid  commitment  fees  of  $825,000  on  this  loan,  which  are  being  amortized  to  interest  expense  over  the  five-year  life  of  the 
facility.    

(6)    STOCK COMPENSATION 

(a)  Equity Incentive Plans 

In January 1998, the Company’s Board of Directors adopted the Amended and Restated 1998 Stock Option, Deferred Stock and 
Restricted Stock Plan for the grant of incentive stock options (“ISOs”), non-qualified stock options and deferred and restricted stock 
(the “Equity Incentive Plan”). In June 2001, the stockholders approved an amendment to the plan to increase the number of shares of 
Class A Common Stock authorized for issuance under the plan to 8,215,154.  In May 2003, stockholders approved an amendment to 
the  plan  to  increase  the  number  of  shares  of  Class  A  Common  Stock  authorized  for  issuance  under  the  plan  to  11,215,154.   Stock 
option awards are generally granted with an exercise price per share equal to the market price of a share of Class A Common Stock on 
the date of grant.  Stock option awards generally become exercisable over a three-year graded vesting period and expire ten years from 
the date of grant. 

On  April  16,  2007,  the  Company’s  Board  of  Directors  adopted  the  2007  Plan,  which  became  effective  upon  approval  by  the 
Company’s stockholders on May 24, 2007.  The Company’s Board of Directors terminated the Equity Incentive Plan as of May 24, 
2007, with no granting of awards being permitted thereafter, although any awards then outstanding under the Equity Incentive Plan 
remain in force according to the terms of such terminated plan and the applicable award agreements.  A total of 7,500,000 shares of 
Class A Common Stock are reserved for issuance under the 2007 Plan, which provides for grants of ISOs, non-qualified stock options, 
restricted stock and various other types of equity awards as described in the plan to the employees, consultants and directors of the 
Company and its subsidiaries.  The 2007 Plan is administered by the Compensation Committee of the Company’s Board of Directors. 

(b)  Valuation Assumptions 

There  were  no  stock  options  granted  under  the  Equity  Incentive  Plan  or  the  2007  Plan  during  2012,  2011  or  2010.    The  total 

intrinsic value of options exercised during 2012, 2011 and 2010 was $1.9 million, $1.2 million and $20.9 million, respectively. 

(c)  Stock-Based Payment Awards 

Stock options granted pursuant to the 1998 Stock Option, Deferred Stock and Restricted Stock Plan and the 2007 Incentive Award 

Plan (the “Equity Incentive Plans”) were as follows:  

SHARES 

  WEIGHTED AVERAGE 
OPTION EXERCISE  PRICE 

    1,505,694 
Outstanding at December 31, 2009 ................................
   Granted................................................................ 
0 
   Exercised ................................................................  (1,030,516) 
(23,870) 
   Cancelled ................................................................
    451,308 
Outstanding at December 31, 2010 ................................
0 
   Granted................................................................ 
(137,197) 
   Exercised ................................................................ 
    (107,711) 
   Cancelled ................................................................
    206,400 
Outstanding at December 31, 2011 ................................
   Granted................................................................ 
0 
(149,489) 
   Exercised ................................................................ 
(4,215) 
   Cancelled ................................................................
52,696 
Outstanding at December 31, 2012 ................................

$  12.01 
0 
12.53 
4.10 
11.26 
0 
9.46 
20.55 
7.62 
0 
7.03 
6.95 
9.34 

$ 

60 

There was no unrecognized compensation cost related to stock option shares as of December 31, 2012 and 2011, respectively. 

A summary of the status and changes of our nonvested shares related to our Equity Incentive Plans as of and for the period ended 

December 31, 2012 is presented below: 

SHARES   

WEIGHTED AVERAGE 
GRANT-DATE FAIR 
VALUE 

Nonvested at December 31, 2009 ................................
   Granted ................................................................   
   Vested ................................................................   
   Cancelled ................................................................
Nonvested at December 31, 2010 ................................
   Granted ................................................................   
   Vested ................................................................   
   Cancelled ................................................................
Nonvested at December 31, 2011 ................................
   Granted ................................................................   
   Vested ................................................................   
   Cancelled ................................................................
Nonvested at December 31, 2012 ................................

  2,158,644 
 139,000 
(804,315) 
0 
  1,493,329 
 10,000 
(735,337) 
         (27,499) 
740,493 
 281,000 
(704,160) 
         (33,000) 
284,333 

$ 

$ 

17.86 
30.38 
17.96 
0 
18.97 
21.00 
18.95 
18.74 
19.02 
17.58 
18.58 
27.60 
17.69 

As of December 31, 2012, a total of 4,868,881 shares remain available for grant as equity awards under the 2007 Plan. 

There was $4.7 million and $11.3 million of unrecognized compensation cost related to nonvested common shares as of December 
31, 2012 and 2011, respectively. That cost is expected to be recognized over a weighted average period of 3.7 years and 0.9 years, 
respectively.  The total fair value of shares vested during the period ended December 31, 2012 and 2011 was $13.1 million and $13.9 
million, respectively.   

(d)  Stock Purchase Plans 

Effective July 1, 1998, the Company’s Board of Directors adopted the 1998 Employee Stock Purchase Plan (the “1998 ESPP”). 
The 1998 ESPP provides that a total of 2,781,415 shares of Class A Common Stock are reserved for issuance under the plan.  The 
1998 ESPP, which is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code of 
1986, as amended, was implemented utilizing six-month offerings with purchases occurring at six-month intervals.  The 1998 ESPP 
administration was overseen by the Board of Directors.  Employees were eligible to participate if they are employed by the Company 
for  at  least  20  hours  per  week  and  more  than  five  months  in  any  calendar  year.    The  1998  ESPP  permitted  eligible  employees  to 
purchase Class A Common Stock through payroll deductions, which may not exceed 15% of an employee’s compensation.  The price 
of Class A Common Stock purchased under the 1998 ESPP was 85% of the lower of the fair market value of the Class A Common 
Stock at the beginning of each six-month offering period or on the applicable purchase date.   

On April 16, 2007, the Company’s Board of Directors adopted the 2008 Employee Stock Purchase Plan (the “2008 ESPP”), and 
the Company’s stockholders approved the 2008 ESPP on May 24, 2007.  The 2008 ESPP became effective on January 1, 2008, and 
the Company’s Board of Directors terminated the 1998 ESPP as of such date, with no additional granting of rights being permitted 
under the 1998 ESPP.  The 2008 ESPP provides that a total of 3,000,000 shares of Class A Common Stock are reserved for issuance 
under the plan.  This number of shares that may be made available for sale is subject to automatic increases on the first day of each 
fiscal year during the term of the 2008 ESPP as provided in the plan.  The 2008 ESPP is intended to qualify as an “employee stock 
purchase  plan”  under  Section  423  of  the  Internal  Revenue  Code  of  1986,  as  amended.    The  terms  of  the  2008  ESPP,  which  are 
substantially similar to those of the 1998 ESPP, permit eligible employees to purchase Class A Common Stock at six-month intervals 
through  payroll  deductions,  which  may  not  exceed  15%  of  an  employee’s  compensation.    The  price  of  Class  A  Common  Stock 
purchased under the 2008 ESPP is 85% of the lower of the fair market value of the Class A Common Stock at the beginning of each 
six-month offering period or on the applicable purchase date. Employees may end their participation in an offering at any time during 
the offering period.  The 2008 ESPP is administered by the Company’s Board of Directors. 

During 2012, 2011 and 2010, 186,199 shares, 178,189 shares and 103,430 shares were issued under the 2008 ESPP for which the 

Company received approximately $2.4 million, $2.0 million and $2.1 million, respectively. 

61 

 
   
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
          
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
  
 
 
  
 
 
 
 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
 
 
   
 
 
(7)  STOCKHOLDERS’ EQUITY 

The authorized capital stock of the Company consists of 100,000,000 shares of Class A Common Stock, par value $.001 per share, 
60,000,000 shares of Class B Common Stock, par value $.001 per share, and 10,000,000 shares of preferred stock, $.001 par value per 
share. 

The Class A Common Stock and Class B Common Stock have identical rights other than with respect to voting, conversion and 
transfer. The Class A Common Stock is entitled to one vote per share, while the Class B Common Stock is entitled to ten votes per 
share on all matters submitted to a vote of stockholders. The shares of Class B Common Stock are convertible at any time at the option 
of the holder into shares of Class A Common Stock on a share-for-share basis. In addition, shares of Class B Common Stock will be 
automatically converted into a like number of shares of Class A Common Stock upon any transfer to any person or entity which is not 
a permitted transferee. 

During  2012,  2011  and  2010,  certain  Class  B  stockholders  converted  22,880  shares,  13,640  shares  and  1,049,005  shares, 

respectively, of Class B Common Stock to Class A Common Stock. 

(8)  INCOME TAXES 

The provisions for income tax expense (benefit) were as follows (in thousands):  

  2012 

  2011 

  2010 

   Federal: 
      Current .......................................................................................  $ 
      Deferred .....................................................................................   
         Total federal ...........................................................................   
   State: 
      Current .......................................................................................   
      Deferred .....................................................................................   
           Total state .............................................................................   
   Foreign: 
      Current .......................................................................................   
      Deferred .....................................................................................   
         Total foreign ...........................................................................   
         Total income taxes (benefit) ...................................................  $ 

(67)  $ (53,696)  $   45,304 
(2,090) 
  43,214 

(1,896) 
  (55,592) 

(6,381) 
(6,448) 

1,796 
(307) 
1,489 

(241) 
  (10,522) 
  (10,763) 

8,535 
473 
9,008 

5,325 
(405) 
4,920 

  11,529 
(1,027) 
(3,553) 
3,915 
2,888 
7,976 
(39)  $ (63,467)  $  60,198 

Income taxes differ from the statutory tax rates as applied to earnings (loss) before income taxes as follows (in thousands): 

  2012 

  2011 

  2010 

Expected income tax expense (benefit) ............................................$  3,666 
1,406 
State income tax, net of federal benefit ............................................
(8,752) 
Rate differential on foreign income .................................................
(149) 
Change in unrecognized tax benefits ...............................................
194 
Non-deductible expenses ................................................................ 
  0 
Prior year R&D credit claims ...........................................................
Other ................................................................................................
79 
3,517 
Change in valuation allowance ........................................................
(39) 
   Total provision (benefit) for income taxes ................................$ 

(7,320) 
  (11,808) 
2,906 
168 
     (6,253) 
304 
4,402 

$ (45,866)  $  68,811 
6,590 
  (16,398) 
(160) 
569 
  0 
(197) 
983 
$ (63,467)  $  60,198 

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at 

December 31, 2012 and 2011 are presented below (in thousands): 

DEFERRED TAX ASSETS: 

  2012   

  2011   

Deferred tax assets - current: 

Inventory adjustments .................................................   $  8,184 
Accrued legal settlement .............................................    
0 
Accrued expenses ........................................................     16,082 
Allowances for bad debts and chargebacks .................     6,751 
    Total current assets ..................................................     31,017 

$  8,741 
  19,344 
  13,664 
  5,867 
  47,616 

Deferred tax assets - long term: 

Loss carryforwards ......................................................     50,399 
Business credit carryforward .......................................     5,034 
Share-based compensation ..........................................    
191 
Valuation allowance ....................................................    (14,599) 
    Total long term assets..............................................     41,025 
        Total deferred tax assets ..........................................      72,042 
Deferred tax liabilities - current: 

  37,177 
  5,452 
  1,131 
 (11,082) 
  32,678 
   80,294 

Prepaid expenses .........................................................     4,486 

  8,475 

Deferred tax liabilities – long term: 

Depreciation on property, plant and equipment ..........     24,711 
        Total deferred tax liabilities .....................................      29,197 
    Net deferred tax assets .................................................   $ 42,845 

  36,512 
   44,987 
$ 35,307 

Management  believes  it  is  more  likely  than  not  that  the  results  of  future  operations  will  generate  sufficient  taxable  income  to 

realize the net deferred tax assets. 

Consolidated U.S. income (loss) before income taxes was $(27.4) million, $(162.0) million and $127.7 million for the years ended 
December 31, 2012, 2011 and 2010, respectively. The corresponding income before income taxes for non-U.S. based operations was 
$37.9 million, $31.0 million and $68.9 million for the years ended December 31, 2012, 2011 and 2010, respectively. 

The U.S. net operating loss for the year ended December 31, 2011 was carried back to offset federal taxable income for 2009 and 
2010, generating tax refunds of approximately $52.0 million in the first quarter of 2012. The U.S. net operating loss for the year ended 
December 31, 2012, along with the remaining unused net operating loss carryback from December 31, 2011, can be carried forward to 
reduce future taxable income.  These net operating losses can be carried forward for 20 years and do not begin to expire until 2032. As 
of December 31, 2012 and 2011, no valuation allowance  against the related deferred tax asset  has been set  up for these loss carry-
forwards as it is believed the loss carry-forwards will be fully utilized in reducing future taxable income.   

As of December 31, 2012 and 2011, the Company had combined foreign operating loss carry-forwards available to reduce future 
taxable income of approximately $52.1 million and $38.9 million, respectively.  Some of these net operating losses expire beginning 
in  2014;  however  others  can  be  carried  forward  indefinitely.    As  of  December  31,  2012  and  2011,  a  valuation  allowance  against 
deferred tax assets of $14.6 million and $11.1 million, respectively, had been set up for those loss carry-forwards that are not more 
likely than not to be fully utilized in reducing future taxable income.  

As  of  December  31,  2012,  withholding  and  U.S.  taxes  have  not  been  provided  on  approximately  $171.2  million  of  cumulative 
undistributed earnings of the Company’s non-U.S. subsidiaries because the Company intends to indefinitely reinvest these earnings in 
its non-U.S. subsidiaries. 

62 

63 

 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
 
  
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
  
 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
The balance of unrecognized tax benefits included in net prepaid expenses in the consolidated balance sheets decreased by $0.7 
million  during  the  year.    A  reconciliation  of  the  beginning  and  ending  amount  of  unrecognized  tax  benefits  is  as  follows  (in 
thousands): 

2012 

2011 

Beginning balance ...................................................................$  10,948  $  9,325 
  Additions for current year tax positions ............................. 
595 
  Additions for prior year tax positions ................................. 
2,206 
  Reductions for prior year tax positions ............................... 
        (6)           (177) 
  Settlement of uncertain tax positions .................................. 
(1,001) 
  Reductions related to lapse of statute of limitations ........... 
0 
Ending balance ........................................................................$  10,221  $  10,948 

(301)   
(908)   

464 
24 

If recognized, $9.9 million of unrecognized tax benefits would be recorded as a reduction in income tax expense.  

Estimated interest and penalties related to the underpayment of income taxes are classified as a component of income tax expense 
and totaled $0.2 million for the year ended December 31, 2012, $0.6 million for the year ended December 31, 2011, and less than $0.1 
million for  year ended December 31, 2010.  Accrued interest and penalties  were $1.6 million and $1.6 million as of December 31, 
2012 and 2011, respectively. 

The  amount  of  income  taxes  the  Company  pays  is  subject  to  ongoing  audits  by  taxing  jurisdictions  around  the  world.  The 
Company’s estimate of the potential outcome of any uncertain tax position is subject to management’s assessment of relevant risks, 
facts, and circumstances existing at that time. The Company believes that it has adequately provided for these matters. However, the 
Company’s  future  results  may  include  favorable  or  unfavorable  adjustments  to  its  estimates  in  the  period  the  audits  are  resolved, 
which may impact the Company’s effective tax rate.  

As  of  December 31,  2012,  the  Company’s  tax  filings  are  generally  subject  to  examination  in  the  U.S.  and  several  Asian  and 
European tax jurisdictions for years ending on or after December 31, 2007. During the year, the Company reduced the balance of 2012 
and prior year unrecognized tax benefits by $0.9 million as a result of expiring statutes. It is reasonably possible that the statute of 
limitations  will  lapse  for  federal  and  state  jurisdictions  during  2013,  which  would  reduce  the  balance  of  2012  and  prior  year 
unrecognized tax benefits by $1.0 million. 

The Company is currently under examination by the IRS for the 2008 and 2009 tax years. The Company is also under examination 
by a number of states.  During the year ended December 31, 2012, settlements were reached with certain state tax jurisdictions which 
reduced the balance of 2012 and prior year unrecognized tax benefits by $0.3 million. It is reasonably possible that certain federal and 
state  examinations  could  be  settled  during  the  next  twelve  months  which  would  reduce  the  balance  of  2012  and  prior  year 
unrecognized tax benefits by $2.8 million. 

(9)    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  subject  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  management’s  estimates and the Company’s 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,  amounted  to  $111.8 
million  and  $90.9  million  before  allowances  for  bad  debts  and  sales  returns,  and  chargebacks  at  December  31,  2012  and  2011, 
respectively.    Foreign  accounts  receivable,  which  generally  are  collateralized  by  letters  of  credit,  amounted  to  $118.8  million  and 
$105.5  million  before  allowance  for  bad  debts,  sales  returns,  and  chargebacks  at  December  31,  2012  and  2011,  respectively.  
International net sales amounted to $496.0 million, $546.0 million and $484.7 million for the years ended December 31, 2012, 2011 
and 2010, respectively. The Company’s credit losses due to write-offs for the years ended December 31, 2012, 2011 and 2010 were 
$1.5 million, $7.0 million and $4.8 million, respectively. 

Assets located outside the United States consist primarily of cash, accounts receivable, inventory, property, plant and equipment, 
and other assets.  Net assets held outside the United States were $387.2 million and $325.3 million at December 31, 2012 and 2011, 
respectively. 

During 2012, 2011 and 2010, no customer accounted for 10.0% or more of net sales.  No customer accounted for more than 10% 
of net trade receivables at December 31, 2012 or December 31, 2010, respectively. One customer accounted for 12.5% and another 
accounted  for  10.0%  of  net  trade  receivables  at  December  31,  2011.    During  2012,  2011  and  2010,  net  sales  to  our  five  largest 
customers were approximately 18.1%, 17.8% and 24.9%, respectively. 

The  Company’s  top  five  manufacturers  produced  the  following  for  the  years  ended  December  31,  2012,  2011  and  2010, 

respectively:  

Years Ended December 31, 
2011 

2012 

2010 

Manufacturer #1 .........................................................    
Manufacturer #2 .........................................................  
Manufacturer #3 .........................................................  
Manufacturer #4 .........................................................  
Manufacturer #5 .........................................................  

33.5%     
9.2%   
6.7%   
6.6%   
5.6%   
61.6%   

30.8%     
11.5%   
7.7%   
6.6%   
5.9%   
62.5%   

34.7% 
13.0% 
9.4% 
8.7% 
4.8% 
70.6% 

The majority of the Company’s products are produced in China. The Company’s 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 Company’s operations. 

(10)   EMPLOYEE BENEFIT PLAN 

The Company has a 401(k) profit sharing plan covering all employees who are 21 years of age and have completed six months of 
service.  Employees  may contribute up to 15.0% of annual compensation. Company contributions  to the plan are discretionary and 
vest over a six year period. 

The  Company  did  not  make  a  contribution  to  the  plan  for  the  years  ended  December  31,  2012  and  2011,  respectively.  The 

Company’s cash contributions to the plan amounted to $1.3 million during the year ended December 31, 2010.  

(11)  COMMITMENTS AND CONTINGENCIES 

(a)  Leases 

The  Company  leases  facilities  under  operating  lease  agreements  expiring  through  November  2031.  The  Company  pays  taxes, 
maintenance and insurance in addition to the lease obligations. The Company also leases certain equipment and automobiles  under 
operating lease agreements expiring at various dates through September 2016.  Rent expense for the years ended December 31, 2012, 
2011 and 2010 approximated $88.7 million, $85.0 million and $74.5 million, respectively. 

The  Company  also  leases  certain  property,  plant  and  equipment  under  capital  lease  agreements  requiring  monthly  installment 

payments through June 2013. 

Minimum lease payments, which takes into account escalation clauses, are recognized on a straight-line basis over the minimum 
lease term.  Subsequent adjustments to our lease payments due to changes in an existing index, usually the consumer price index, are 
typically included in our calculation of the minimum lease payments when the adjustment is known.  Reimbursements for leasehold 
improvements are recorded as liabilities and are amortized over the lease term.   Lease  concessions, in our case,  usually a free rent 
period, are considered in the calculation of our minimum lease payments for the minimum lease term. 

64 

65 

 
 
  
  
 
 
 
 
   
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future minimum lease payments under noncancellable leases at December 31, 2012 are as follows (in thousands): 

  CAPITAL 
  LEASES 

  OPERATING 
LEASES 

Year ending December 31: 
2013 ..................................................................................    $ 
2014 ..................................................................................    
2015 ..................................................................................    
2016 ..................................................................................    
2017 ..................................................................................    
Thereafter ..........................................................................     
$  

10    $  109,608 
100,654 
0   
93,697 
0   
83,613 
0   
0   
68,432 
0      345,039 
  $  801,043 

10 

(b)  Litigation 

The Company recognizes legal expense in connection with loss contingencies as incurred. 

The Company’s claims and advertising for its toning products including for its Shape-ups are subject to the requirements of, and 
routinely  come  under  review  by  regulators  including  pending  inquiries  from  the  U.S.  Federal  Trade  Commission  (“FTC”),  states’ 
Attorneys General and government and quasi-government regulators in foreign countries.  The Company is currently responding to 
requests for information regarding its claims and advertising from regulatory and quasi-regulatory agencies in several countries and is 
fully cooperating with those requests.  While the Company believes that its claims and advertising with respect to its core toning shoe 
products  are  supported  by  scientific  tests,  expert  opinions  and  other  relevant  data,  and  while  the  Company  has  been  successful  in 
defending  its  claims  and  advertising  in  several  different  countries,  it  has  discontinued  using  certain  test  results  and  periodically 
reviews and updates its claims and advertising.  The regulatory inquiries may conclude in a variety of outcomes, including the closing 
of the inquiry with no further regulatory action, settlement of any issues through changes in our claims and advertising, settlement of 
any issues through payment to the regulatory entity, or litigation. 

In  accordance  with  U.S.  generally  accepted  accounting  principles,  the  Company  records  a  liability  in  its  consolidated  financial 
statements for loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated.  When 
determining  the  estimated  loss  or  range  of  loss,  significant  judgment  is  required  to  estimate  the  amount  and  timing  of  a  loss  to  be 
recorded.    Estimates  of  probable  losses  resulting  from  litigation  and  governmental  proceedings  are  inherently  difficult  to  predict, 
particularly when the matters are in the procedural stages or with unspecified or indeterminate claims for damages, potential penalties, 
or fines.  During the  fourth quarter ended December 31, 2011, the Company reserved $45  million  for costs and potential exposure 
relating to existing litigation and regulatory matters.  Additionally, the Company recorded a pre-tax expense of $5 million in legal and 
professional fees related to the aforementioned matters, which was included in general and administrative expense in our consolidated 
statement  of  operations  for  the  year  ended  December  31,  2011.    On  May  16,  2012,  the  Company  announced  that  it  had  settled  all 
domestic  legal  proceedings  relating  to  advertising  claims  made  in  connection  with  marketing  its  toning  shoe  products,  including 
Shape-ups.  Under the terms of the global settlement—without admitting any fault or liability, with no findings being made that the 
Company  had  violated  any  law,  and  with  no  fines  or  penalties  being  imposed—it  made  payments  in  the  aggregate  amount  of  $45 
million  and  expects  to  pay  a  maximum  of  $5  million  in  class  action  attorneys’  fees  to  settle  the  domestic  advertising  lawsuits  and 
related  claims  brought  by  the  FTC  and  states’  Attorneys  General  for  44  states  and  the  District  of  Columbia  (“SAG”).    The  FTC 
Stipulated Final Judgment was approved by the United States District Court for the Northern District of Ohio on July 12, 2012, and 
consent judgments have been approved and entered in the 45 SAG actions.  On August 13 and 17, 2012, the United States District 
Court for the Western District of Kentucky entered orders that preliminarily approved a nationwide consumer class action settlement 
and scheduled a hearing date for final approval on March 19, 2013.  Although the Company believes the $50 million global settlement 
reflects the current estimated range of loss, the consumer class action settlement has not obtained final Court approval and therefore it 
is not possible to predict the final outcome of the related proceedings or any other pending legal proceedings.  Consequently, the final 
exposure and costs associated with pending legal proceedings could have a further material adverse impact on the Company’s result of 
operations or financial position. 

(c)  Product and Other Financing  

The Company finances production activities in part through the use of interest-bearing open purchase arrangements with certain of 
its international manufacturers. These arrangements currently bear interest at rates between 0% and 1.0% for 30- to 60- day financing. 
The  amounts  outstanding  under  these  arrangements  at  December  31,  2012  and  2011  were  $87.7  million  and  $71.8  million, 
respectively, which are included in accounts payable in the accompanying consolidated balance sheets.  Interest expense incurred by 

the  Company  under  these  arrangements  amounted  to  $3.8  million  in  2012,  $3.2  million  in  2011,  and  $2.1  million  in  2010.    The 
Company  has  open  purchase  commitments  with  our  foreign  manufacturers  of  $229.5  million,  which  are  not  included  in  the 
accompanying consolidated balance sheets.   

(12)   SEGMENT 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  margins.    All  other  costs  and  expenses  of  the 
Company are analyzed on an aggregate basis, and these costs are not allocated to the Company’s segments.  Net sales, gross margins 
and identifiable assets for the domestic wholesale, international wholesale, retail, and the e-commerce segment on a combined basis 
were as follows (in thousands): 

2012 

2011 

2010 

Net sales 
Domestic wholesale................................................................  $ 
International wholesale ................................................................
Retail ...............................................................................................
E-commerce ....................................................................................
Total ................................................................................................

652,651    $ 
432,163   
453,600   
21,907   

688,194 
487,296 
410,458 
20,068 
  $  1,560,321    $  1,606,016 

  $  1,131,929 
436,637 
410,695 
27,607 
  $  2,006,868 

2012 

2011 

2010 

Gross profit 
Domestic wholesale................................................................  $ 
International wholesale ................................................................
Retail ...............................................................................................
E-commerce ....................................................................................
Total ................................................................................................

  $ 

242,931    $ 
166,454   
264,010   
9,931   
683,326    $ 

186,010 
196,248 
231,835 
9,655 
623,748 

  $ 

  $ 

460,355 
181,528 
255,894 
14,129 
911,906 

2012 

2011 

Identifiable assets 
Domestic wholesale................................................................
 $  820,253 
International wholesale ................................................................ 
367,005 
152,795 
Retail ................................................................................................
E-commerce ................................................................................................
167 
 $1,340,220 
Total ................................................................................................

 $  844,383 
304,025 
133,081 
399 
 $1,281,888 

Additions to property, plant and equipment 
Domestic wholesale................................................................
International wholesale ................................................................
Retail ................................................................................................
Total ................................................................................................

 $  33,488 
2,939 
16,025 
 $  52,452 

 $  92,496 
2,236 
27,506 
 $  122,238 

 $  57,375 
4,241 
20,653 
 $  82,269 

2012 

2011 

2010 

66 

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Geographic Information 

The following summarizes our operations in different geographic areas for the year indicated: 

Net Sales (1) 
United States ...................................................................................
Canada ............................................................................................
Other International (2) ................................................................
Total ................................................................................................

 $  1,064,298 
49,460 
  446,563 
 $  1,560,321 

 $  1,059,990 
48,057 
  497,969 
 $  1,606,016 

 $  1,522,187 
54,476 
  430,205 
 $  2,006,868 

2012 

2011 

2010 

Property, plant and equipment 
United States ...................................................................................
Canada ............................................................................................
Other International (2) ................................................................
Total ................................................................................................

  $  345,202 
1,252 
15,992 
  $   362,446 

  $  358,405 
1,179 
16,862 
  $   376,446 

2012 

2011 

(1)  The Company has subsidiaries in Canada, United Kingdom, Germany, France, Spain, Portugal, Italy, Netherlands, Japan, Brazil 
and Chile that generate net sales within those respective countries and in some cases the neighboring regions. The Company has 
joint ventures in India, 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 that country 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,  Austria,  France,  Spain,  Portugal,  Italy,  Netherlands, 

China, Hong Kong, Malaysia, Singapore, Thailand, Brazil, Chile, Vietnam and Japan. 

(13)   RELATED PARTY TRANSACTIONS 
The Company paid approximately $162,000, $188,000, and $319,000 during 2012, 2011 and 2010, respectively, to the Manhattan 
Inn  Operating  Company,  LLC  (“MIOC”)  for  lodging,  food  and  events  including  the  Company’s  holiday  party  at  the  Shade  Hotel, 
which  is  owned  and  operated  by  MIOC.    Michael  Greenberg,  President  and  a  director  of  the  Company,  owns  a  12%  beneficial 
ownership  interest  in  MIOC,  and  four  other  officers,  directors  and  senior  vice  presidents  of  the  Company  own  in  aggregate  an 
additional 5% beneficial ownership in MIOC.  The Company had no outstanding accounts receivable or payable with MIOC or the 
Shade Hotel at December 31, 2012. 

On July 29, 2010, the Company formed the 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 and directors of the Company, Michael 
Greenberg, the Company’s President, and David Weinberg, the Company’s Chief Operating Officer and Chief Financial Officer, are 
also  officers  and  directors  of  the  Foundation.   During  the  years  ended  December  31,  2012  and  2011,  respectively,  the  Company 
contributed $1.0 million and $1.3 million, respectively, to the Foundation to use for various charitable causes. 

The  Company  had  receivables  from  officers  and  employees  of  $0.4  million  and  $0.3  million  at  December  31,  2012  and  2011, 
respectively.  These amounts primarily relate to travel advances and incidental personal purchases on Company-issued credit cards.  
These  receivables  are  short-term  and  are  expected  to  be  repaid  within  a  reasonable  period  of  time.    We  had  no  other  significant 
transactions with or payables to officers, directors or significant shareholders of the Company. 

(14)   SUBSEQUENT EVENTS 
The Company has evaluated events subsequent to December 31, 2012, to assess the need for potential recognition or disclosure in 
this  filing.  Based  upon  this  evaluation,  it  was  determined  that  no  subsequent  events  occurred  that  require  recognition  in  the 
consolidated financial statements. 

(15)   SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED) 

Summarized unaudited financial data are as follows (in thousands):  

2012 

  MARCH 31   

  JUNE 30 

  SEPTEMBER 30 

  DECEMBER 31 

Net sales .................................    $  351,274 
155,696 
Gross profit .............................   
(3,666) 
Net earnings (loss) ..................     

$  384,001 
  171,342 
(1,782) 

$  429,429 
187,824 
11,004 

$  395,617 
168,464 
3,956 

Net earnings (loss) per share:   

   Basic ....................................    $ 
   Diluted .................................     

(0.07) 
(0.07) 

$ 

(0.04) 
(0.04) 

$ 

0.22 
0.22 

$ 

0.08 
0.08 

2011 

  MARCH 31   

  JUNE 30 

  SEPTEMBER 30 

  DECEMBER 31 

Net sales .................................   $  476,234 
192,610 
Gross profit ............................  
11,808 
Net earnings (loss)* ................    

$  434,351 
  143,330 
    (29,916) 

$  412,183 
175,195 
8,285 

$  283,248 
112,613 
(57,661) 

Net earnings (loss) per share:   

   Basic ...................................     $ 
   Diluted ................................      

0.24 
0.24 

$ 

(0.62) 
(0.62) 

$ 

0.17 
0.17 

$ 

(1.18) 
(1.18) 

*  Included  in  the  quarter  ended  December  31,  2011  is  an  impairment  of  property,  plant  and  equipment  of  $1.5  million  and  an 

impairment of intangible assets of $1.6 million (see note 1). 

ITEM 9. 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
FINANCIAL DISCLOSURE 

None. 

ITEM 9A.  CONTROLS AND PROCEDURES 

Attached  as  exhibits  to  this  annual  report  on  Form  10-K  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 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 

We maintain disclosure controls and procedures 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 and 
that such information is accumulated and communicated to allow timely decisions regarding required disclosures. As of the end of the 
period covered by this annual report on Form 10-K, 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, at the reasonable assurance level as of such time. 

68 

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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is 

defined in Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting includes those policies and procedures that: 

The Board of Directors and Stockholders 
Skechers U.S.A., Inc.: 

Report of Independent Registered Public Accounting Firm 

(i) 

(ii) 

pertain  to  the  maintenance  of  records  that,  in  reasonable  detail,  accurately  and  fairly  reflect  the  transactions  and 
dispositions of our assets;  

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in 
accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in 
accordance with authorizations of our management and directors; and  

(iii) 

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of 
our assets that could have a material effect on our financial statements. 

We conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal 
Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Based 
on  our  evaluation  under  the  framework  in  Internal  Control  –  Integrated  Framework,  our  management  has  concluded  that  as  of 
December 31, 2012, our internal control over financial reporting is effective. 

Our independent registered public accountants, KPMG LLP, audited the consolidated financial statements included in this annual 
report on Form 10-K and have issued an attestation report on the effectiveness of our internal control over financial reporting as of 
December 31, 2012, which is set forth below. 

INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS 

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls 
and procedures 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 system’s 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  as  a 
result of error or fraud may occur and not be detected. 

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING 

There were no significant changes to our internal controls over financial reporting that have materially affected, or are reasonably 
likely  to  materially  affect,  our  internal  controls  over  financial  reporting  during  the  fourth  quarter  of  2012.    The  results  of  our 
evaluation are discussed above in Management’s Report on Internal Control Over Financial Reporting.  

We have audited the internal control over financial reporting of Skechers U.S.A., Inc. (the Company) as of December 31, 2012, based 
on  criteria  established  in  Internal  Control  –  Integrated  Framework  issued  by  the  Committee  of  Sponsoring  Organizations  of  the 
Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial 
reporting  and  for  its  assessment  of  the  effectiveness  of  internal  control  over  financial  reporting,  included  in  the  accompanying 
Management’s Report on Internal Control over Financial Reporting included in Item 9A. Our responsibility is to express an opinion 
on the Company’s internal control over financial reporting based on our audit. 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those 
standards  require  that  we  plan  and  perform  the  audit  to  obtain  reasonable  assurance  about  whether  effective  internal  control  over 
financial  reporting  was  maintained  in  all  material  respects.  Our  audit  included  obtaining  an  understanding  of  internal  control  over 
financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness 
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in 
the circumstances. We believe that our audit provides a reasonable basis for our opinion. 

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of 
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting 
principles.  A  company’s  internal  control  over  financial  reporting  includes  those  policies  and  procedures  that  (1) pertain  to  the 
maintenance  of  records  that,  in  reasonable  detail,  accurately  and  fairly  reflect  the  transactions  and  dispositions  of  the  assets  of  the 
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in 
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in 
accordance  with  authorizations  of  management  and  directors  of  the  company;  and  (3) provide  reasonable  assurance  regarding 
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect 
on the financial statements. 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections 
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in 
conditions, or that the degree of compliance with the policies or procedures may deteriorate. 

In  our  opinion,  Skechers  U.S.A.,  Inc.  maintained,  in  all  material  respects,  effective  internal  control  over  financial  reporting  as  of 
December 31, 2012, based on criteria established in Internal Control – Integrated Framework issued by the COSO. 

We  also  have  audited,  in  accordance  with  the  standards  of  the  Public  Company  Accounting  Oversight  Board  (United  States),  the 
consolidated balance sheets of Skechers U.S.A., Inc. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated 
statements of operations, comprehensive  income (loss), equity, and cash flows  for each  of the  years  in the three-year period ended 
December 31,  2012,  and  the  related  financial  statement  schedule,  and  our  report  dated  March  1,  2013,  expressed  an  unqualified 
opinion on those consolidated financial statements and financial statement schedule.  

/s/ KPMG LLP 

Los Angeles, California 
March 1, 2013 

70 

71 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 9B.   OTHER INFORMATION 

None. 

PART III 

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 

DESCRIPTION 

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS 
(in thousands) 

Years Ended December 31, 2012, 2011, and 2010 

  BALANCE AT 
  BEGINNING OF 
PERIOD 

   CHARGED TO 
REVENUE 
  COSTS AND 
EXPENSES 

  DEDUCTIONS 
AND 
  WRITE-OFFS 

  BALANCE 
  AT END 
  OF PERIOD   

The  information  required  by  this  Item  10  is  hereby  incorporated  by  reference  from  our  definitive  proxy  statement,  to  be  filed 

pursuant to Regulation 14A within 120 days after the end of our 2012 fiscal year. 

ITEM 11.  EXECUTIVE COMPENSATION 

The  information  required  by  this  Item  11  is  hereby  incorporated  by  reference  from  our  definitive  proxy  statement,  to  be  filed 

pursuant to Regulation 14A within 120 days after the end of our 2012 fiscal year. 

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND 

RELATED STOCKHOLDER MATTERS 

The  information  required  by  this  Item  12  is  hereby  incorporated  by  reference  from  our  definitive  proxy  statement,  to  be  filed 

pursuant to Regulation 14A within 120 days after the end of our 2012 fiscal year. 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR 

INDEPENDENCE 

The  information  required  by  this  Item  13  is  hereby  incorporated  by  reference  from  our  definitive  proxy  statement,  to  be  filed 

pursuant to Regulation 14A within 120 days after the end of our 2012 fiscal year. 

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES 

The  information  required  by  this  Item  14  is  hereby  incorporated  by  reference  from  our  definitive  proxy  statement,  to  be  filed 

pursuant to Regulation 14A within 120 days after the end of our 2012 fiscal year. 

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES 

PART IV 

1. 

2. 

3. 

Financial Statements:  See “Index to Consolidated Financial Statements and Financial Statement Schedule” in Part II, Item 8 
on page 46 of this annual report on Form 10-K. 

Financial Statement Schedule:  See “Schedule II—Valuation and Qualifying Accounts” on page 73 of this annual report on 
Form 10-K. 

Exhibits:  The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this 
Form 10-K.  

72 

Year-ended December 31, 2010: 
   Allowance for chargebacks ................................    $ 
   Allowance for doubtful accounts .......................   
   Reserve for sales returns and allowances ...........   
   Reserve for shrinkage .........................................   
   Reserve for obsolescence ...................................   
Year-ended December 31, 2011: 
   Allowance for chargebacks ................................    $ 
   Allowance for doubtful accounts .......................   
   Reserve for sales returns and allowances ...........   
   Reserve for shrinkage .........................................   
   Reserve for obsolescence ...................................   
Year-ended December 31, 2012: 
   Allowance for chargebacks ................................    $ 
   Allowance for doubtful accounts .......................   
   Reserve for sales returns and allowances ...........   
   Reserve for shrinkage .........................................   
   Reserve for obsolescence ...................................   

               200    
            3,455    

  $ 

1,943 
4,328 
8,090 

  $ 

2,993 
1,782 
1,437 

(1,909)   $ 
(465)    
1,498 

            1,100   
                   0   

              (1,100)     
            (17)     

  $ 

  $ 

(2,150)   $ 
1,463 
(874)    
5,560 
(2,132)    
(1,141) 
            1,100   
              (1,000)     
            9,971                  (1,450)    

  $ 

(896)   $ 

  $ 

1,357 
(3,350)    
186 
(367)    
(431) 
            1,300   
              (1,300)     
              931                  (4,041)    

3,027 
5,645 
11,025 
200 
3,438 

2,340 
10,331 
7,752 
300 
11,959 

3,027 
5,645 
11,025 
200 
3,438 

2,340 
10,331 
7,752 
300 
11,959 

2,801 
7,167 
6,954 
300 
8,849 

See accompanying report of independent registered public accounting firm 

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INDEX TO EXHIBITS 

  EXHIBIT 
  NUMBER 
3.1 

3.2 

3.2(a) 

3.2(b) 

4.1 

Amended and Restated Certificate of Incorporation dated April 29, 1999 (incorporated by reference to 
exhibit number 3.1 of the Registrant’s Registration Statement on Form S-1, as amended (File No. 333-
60065), filed with the Securities and Exchange Commission on May 12, 1999).  

DESCRIPTION OF EXHIBIT 

Bylaws dated May 28, 1998 (incorporated by reference to exhibit number 3.2 of the Registrant’s 
Registration Statement on Form S-1 (File No. 333-60065) filed with the Securities and Exchange 
Commission on July 29, 1998). 

Amendment to Bylaws dated as of April 8, 1999 (incorporated by reference to exhibit number 3.2(a) of 
the Registrant’s Form 10-K for the year ended December 31, 2005). 

Second Amendment to Bylaws dated as of December 18, 2007 (incorporated by reference to exhibit 
number 3.1 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on 
December 20, 2007). 

Form of Specimen Class A Common Stock Certificate (incorporated by  reference to exhibit number 4.1 
of the Registrant’s Registration Statement on Form S-1, as amended (File No. 333-60065), filed with the 
Securities and Exchange Commission on May 12, 1999). 

  10.1** 

Amended and Restated 1998 Stock Option, Deferred Stock and Restricted Stock Plan (incorporated by 
reference to exhibit number 10.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-
60065) filed with the Securities and Exchange Commission on July 29, 1998). 

  10.1(a)** 

Amendment No. 1 to Amended and Restated 1998 Stock Option, Deferred Stock and Restricted Stock 
Plan (incorporated by reference to exhibit number 4.4 of the Registrant’s Registration Statement on Form 
S-8 (File No. 333-71114), filed with the Securities and Exchange Commission on October 5, 2001). 

  10.1(b)** 

Amendment No. 2 to  Amended and Restated 1998 Stock Option, Deferred Stock and  Restricted Stock 
Plan (incorporated by reference to exhibit number 4.5 of the Registrant’s Registration Statement on Form 
S-8 (File No. 333-135049), filed with the Securities and Exchange Commission on June 15, 2006). 

  10.1(c)** 

Amendment No. 3 to Amended and Restated 1998 Stock Option, Deferred Stock and Restricted Stock 
Plan (incorporated by reference to exhibit number 10.1 of the Registrant’s Form 8-K filed with the 
Securities and Exchange Commission on February 23, 2007). 

  10.2** 

2006 Annual Incentive Compensation Plan (incorporated by reference to Appendix A of the Registrant’s 
Definitive Proxy Statement filed with the Securities and Exchange Commission on May 1, 2006). 

  10.3** 

2007 Incentive Award Plan (incorporated by reference to exhibit number 10.1 of the Registrant’s Form 
8-K filed with the Securities and Exchange Commission on May 24, 2007). 

  10.4** 

Form of Restricted Stock Agreement under 2007 Incentive Award Plan (incorporated by reference to 
exhibit number 10.3 of the Registrant’s Form 10-K for the year ended December 31, 2007). 

  10.5** 

2008 Employee Stock Purchase Plan (incorporated by reference to exhibit number 10.2 of the 
Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 24, 2007). 

  10.5(a)** 

Amendment No. 1 to 2008 Employee Stock Purchase Plan (incorporated by reference to exhibit number 
10.5 of the Registrant’s Form 10-Q for the quarter ended June 30, 2010). 

  10.6** 

Indemnification Agreement dated June 7, 1999 between the Registrant and its directors and executive 
officers (incorporated by reference to exhibit number 10.6 of the Registrant’s Form 10-K for the year 
ended December 31, 1999). 

  10.6(a)** 

List of Registrant’s directors and executive officers who entered into Indemnification Agreement 
referenced in Exhibit 10.6 with the Registrant (incorporated by reference to exhibit number 10.6(a) of the 
Registrant’s Form 10-K for the year ended December 31, 2005). 

10.7 

10.8 

10.9 + 

  10.9(a) 

  10.9(b) 

Registration Rights Agreement dated June 9, 1999, between the Registrant, the Greenberg Family Trust 
and Michael Greenberg (incorporated by reference to exhibit number 10.7 of the Registrant’s Form 10-Q 
for the quarter ended June 30, 1999). 

Tax Indemnification Agreement dated June 8, 1999, between the Registrant and certain shareholders 
(incorporated by reference to exhibit number 10.8 of the Registrant’s Form 10-Q for the quarter ended 
June 30, 1999). 

Credit Agreement dated June 30, 2009, by and among the Registrant, certain of its subsidiaries that are 
also borrowers under the Agreement, and certain lenders including Wells Fargo Foothill, LLC, as co-lead 
arranger and administrative agent, Bank of America, N.A., as syndication agent, and Banc of America 
Securities LLC, as the other co-lead arranger (incorporated by reference to exhibit number 10.1 of the 
Registrant’s Form 10-Q/A filed with the Securities and Exchange Commission on November 16, 2010). 

Amendment Number One to Credit Agreement dated November 5, 2009, by and among the Registrant, 
certain of its subsidiaries that are also borrowers under the Agreement, and certain lenders including 
Wells Fargo Foothill, LLC, as co-lead arranger and administrative agent, Bank of America, N.A., as 
syndication agent, and Banc of America Securities LLC, as the other co-lead arranger (incorporated by 
reference to exhibit number 10.2 of the Registrant’s Form 10-Q/A filed with the Securities and Exchange 
Commission on November 16, 2010). 

Amendment Number Two to Credit Agreement dated March 4, 2010, by and among the Registrant, 
certain of its subsidiaries that are also borrowers under the Agreement, and certain lenders including 
Wells Fargo Capital Finance, LLC (formerly known as Wells Fargo Foothill, LLC), as co-lead arranger 
and administrative agent, Bank of America, N.A., as syndication agent, and Banc of America Securities 
LLC, as the other co-lead arranger (incorporated by reference to exhibit number 10.3 of the Registrant’s 
Form 10-Q for the quarter ended March 31, 2010). 

  10.9(c) +  Amendment Number Three to Credit Agreement dated May 3, 2011, by and among the Registrant, 

certain of its subsidiaries that are also borrowers under the Agreement, and certain lenders including 
Wells Fargo Capital Finance, LLC (formerly known as Wells Fargo Foothill, LLC), as co-lead arranger 
and administrative agent, Bank of America, N.A., as syndication agent, and Banc of America Securities 
LLC, as the other co-lead arranger (incorporated by reference to exhibit number 10.1 of the Registrant’s 
Form 10-Q for the quarter ended March 31, 2011). 

  10.10 

  10.11 

  10.12 

Schedule 1.1 of Defined Terms to the Credit Agreement dated June 30, 2009, by and among the 
Registrant, certain of its subsidiaries that are also borrowers under the Agreement, and certain lenders 
including Wells Fargo Foothill, LLC, Bank of America, N.A., and Banc of America Securities LLC 
(incorporated by reference to exhibit number 10.2 of the Registrant’s Form 8-K filed with the Securities 
and Exchange Commission on July 7, 2009). 

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 (incorporated by reference to exhibit number 10.11 of the 
Registrant’s Form 10-K for the year ended December 31, 2011). 

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 (incorporated by reference to exhibit number 10.12 of 
the Registrant’s Form 10-K for the year ended December 31, 2011). 

  10.12(a) 

Modification to Construction Loan Agreement And Other Loan Documents dated November 16, 2012, 
by and among HF Logistics-SKX T1, LLC, which is a wholly owned subsidiary of a joint venture 

74 

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  10.13 

  10.14 

  10.15 

  10.16 

  10.17 

  10.17(a) 

  10.17(b) 

  10.17(c) 

  10.17(d) 

  10.18 

  10.19 

  10.20 

  10.21 

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, Raymond James Bank, N.A., as a lender, and 
Onewest Bank, FSB, as a lender (incorporated by reference to exhibit number 10.1 of the Registrant’s 
Form 8-K filed with the Securities and Exchange Commission on November 21, 2012). 

Master Loan and Security Agreement, dated December 29, 2010, by and between the Registrant and 
Banc of America Leasing & Capital, LLC (incorporated by reference to exhibit number 10.1 of the 
Registrant’s Form 8-K filed with the Securities and Exchange Commission on January 4, 2011). 

Equipment Security Note, dated December 29, 2010, by and among the Registrant, Banc of America 
Leasing & Capital, LLC, and Bank of Utah, as agent (incorporated by reference to exhibit number 10.2 
of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on January 4, 2011). 

Equipment Security Note, dated June 30, 2011, by and among the Registrant, Banc of America Leasing 
& Capital, LLC, and Bank of Utah, as agent (incorporated by reference to exhibit number 10.3 of the 
Registrant’s Form 8-K filed with the Securities and Exchange Commission on July 1, 2011). 

Lease Agreement, dated February 8, 2002, between Skechers International, a subsidiary of the 
Registrant, and ProLogis Belgium II SPRL, regarding ProLogis Park Liege Distribution Center I in 
Liege, Belgium (incorporated by reference to exhibit number 10.29 of the Registrant’s Form 10-K for the 
year ended December 31, 2002). 

Lease Agreement dated September 25, 2007 between the Registrant and HF Logistics I, LLC, regarding 
distribution facility in Rancho Belago, California (incorporated by reference to exhibit number 10.1 of 
the Registrant’s Form 8-K filed with the Securities and Exchange Commission on September 27, 2007). 

First Amendment to Lease Agreement, dated December 18, 2009, between the Registrant and HF 
Logistics I, LLC, regarding distribution facility in Rancho Belago, California (incorporated by reference 
to exhibit number 10.6 of the Registrant’s Form 10-Q for the quarter ended March 31, 2010). 

Second Amendment to Lease Agreement, dated April 12, 2010, between the Registrant and HF Logistics 
I, LLC, regarding distribution facility in Rancho Belago, California (incorporated by reference to exhibit 
number 10.4 of the Registrant’s Form 10-Q for the quarter ended September 30, 2010). 

Assignment of Lease Agreement, dated April 12, 2010, between HF Logistics I, LLC and HF Logistics-
SKX T1, LLC, regarding distribution facility in Rancho Belago, California (incorporated by reference to 
exhibit number 10.5 of the Registrant’s Form 10-Q for the quarter ended September 30, 2010). 

Third Amendment to Lease Agreement, dated August 18, 2010, between the Registrant and HF 
Logistics-SKX T1, LLC, regarding distribution facility in Rancho Belago, California (incorporated by 
reference to exhibit number 10.6 of the Registrant’s Form 10-Q for the quarter ended September 30, 
2010). 

Lease Agreement dated May 20, 2008 between Skechers EDC SPRL, a subsidiary of the Registrant, and 
ProLogis Belgium III SPRL, regarding ProLogis Park Liege Distribution Center II in Liege, Belgium 
(incorporated by reference to exhibit number 10.3 of the Registrant’s Form 10-Q for the quarter ended 
June 30, 2010). 

Addendum to Lease Agreement dated May 20, 2008 between Skechers EDC SPRL, a subsidiary of the 
Registrant, and ProLogis Belgium III SPRL, regarding ProLogis Park Liege Distribution Center I in 
Liege, Belgium (incorporated by reference to exhibit number 10.4 of the Registrant’s Form 10-Q for the 
quarter ended June 30, 2010). 

Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief dated July 12, 
2012, between the Registrant and the Federal Trade Commission (incorporated by reference to exhibit 
number 10.1 of the Registrant’s Form 10-Q for the quarter ended June 30, 2012). 

Agreed Final Consent Judgment dated May 16, 2012, between the Registrant and the State of Tennessee, 
with a schedule of the additional states, including the District of Columbia, in which such consent 
judgments have been approved that are substantially identical in all material respects, except as noted on 

76 

the schedule (incorporated by reference to exhibit number 10.2 of the Registrant’s Form 10-Q for the 
quarter ended June 30, 2012). 

21.1 

23.1 

31.1 

31.2 

Subsidiaries of the Registrant. 

Consent of Independent Registered Public Accounting Firm. 

Certification of the Chief Executive Officer pursuant Securities Exchange Act Rule 13a-14(a). 

Certification of the Chief Financial Officer pursuant Securities Exchange Act Rule 13a-14(a). 

32.1*** 

Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 
of 2002. 

101.INS****  XBRL Instance Document. 

101.SCH****  XBRL Taxonomy Extension Schema Document. 

101.CAL****  XBRL Taxonomy Extension Calculation Linkbase Document. 

101.LAB****  Taxonomy Extension Label Linkbase Document. 

101.PRE****  XBRL Taxonomy Extension Presentation Linkbase Document. 

101.DEF****  XBRL Taxonomy Extension Definition Linkbase Document. 

+ 

** 

*** 

Confidential treatment has been granted by the SEC with respect to certain information in the exhibit pursuant to 
Rule 24b-2 of the Exchange Act. Such information was omitted from the filing and filed separately with the 
Secretary of the SEC. 

Management contract or compensatory plan or arrangement required to be filed as an exhibit. 

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. 

**** 

Furnished, not filed, herewith. 

77 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Executive Officers 
And Board Of Directors

Robert Greenberg
Chief Executive Officer  
and Chairman of the Board

Michael Greenberg
President and Director

David Weinberg
Chief Operating Officer,  
Chief Financial Officer,  
Executive Vice President  
and Director

Philip G. Paccione
General Counsel,  
Executive Vice President,  
Business Affairs and  
Corporate Secretary

Mark Nason
Executive Vice President, 
Product Development

Jeffrey Greenberg
Senior Vice President, 
Active Electronic Media  
and Director

Morton D. Erlich
Director

Geyer Kosinski
Director
Chief Executive Officer 
of Media Talent Group

Richard Rappaport
Director
Chief Executive Officer
of Westpark Capital, Inc.

Richard Siskind
Director
Chief Executive Officer, 
President and Director  
of R. Siskind & Company

Thomas Walsh 
Director

Executive 
Management 

Marvin Bernstein
Managing Partner, 
Skechers S.à.r.l.

Mark Bravo
Senior Vice President,  
Finance / Controller

Larry Clark
Senior Vice President,  
Production and Sourcing

Lynda Cumming
Senior Vice President,  
Supply Chain Operations

Paul Galliher
Senior Vice President, 
Distribution

Rick Graham
Senior Vice President, 
Domestic Sales

Jason Greenberg
Senior Vice President,
Visual Imaging

Josh Greenberg
Senior Vice President, 
Design

Clay Irving
Senior Vice President,  
Information Technology

Kathy Garber Kartalis
Senior Vice President,  
Global Product

Peter Mow
Senior Vice President,  
Real Estate and Construction

George Zelinsky
President, Retail

Stockholder Information 

Corporate Headquarters
Skechers USA, Inc. 
228 Manhattan Beach Boulevard 
Manhattan Beach, CA 90266 
1.310.318.3100

Web Site
Information regarding Skechers
is available at www.skechers.com. 

Stock Exchange Listing
Shares of Skechers Class A common 
stock are traded on the New York Stock 
Exchange (NYSE) under the symbol SKx.

Independent Registered  
Public Accounting Firm
KPMG LLP 
355 S. Grand Ave. Suite 2000
Los Angeles, CA 90071

Transfer Agent & Registrar
American Stock Transfer 
& Trust Company 
6201 15th Avenue
Brooklyn, NY 11219
1.212.936.5100

Investor Relations
For general information on Skechers USA, Inc.
as a publicly traded company, please call 
1.877.infoSKx or contact Andrew Greenebaum 
of Addo Communications at 1.310.829.5400.

Form 10-K & Certifications
Shareholders may obtain from Skechers, 
without charge, a copy of its 2012 Annual 
Report on Form 10-K as filed with the U.S. 
Securities and Exchange Commission by 
calling 1.877.infoSKx.

Skechers filed the required certifications of 
its Chief Executive Officer (CEO) and Chief 
Financial Officer under Section 302 of the 
Sarbanes Oxley Act of 2002 as Exhibits 
31.1 and 31.2, respectively, to its 2012 Annual 
Report on Form 10-K. In addition, Skechers 
submitted to the NYSE on June 20, 2012, a 
certificate of its CEO regarding compliance 
by Skechers with the NYSE’s corporate 
governance listing standards as required by 
NYSE Listed Company Manual Section 303a.12.

FORWARD-LOOKING STATEMENT
This annual report contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation 
Reform Act of 1995, including statements with regards to future revenue, projected 2013 results, earnings, spending, margins, cash flow, orders, 
expected timing of shipment of products, inventory levels, future growth or success in specific countries, categories or market sectors, continued or 
expected distribution to specific retailers, liquidity, capital resources and market risk, strategies and objectives. Forward-looking statements include, 
without limitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements of our company, 
and can be identified by the use of forward-looking language such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “plan,” “project,” “will be,” 
“will continue,” “will result,” “could,” “may,” “might,” or any variations of such words with similar meanings. Any such statements are subject to risks 
and uncertainties that could cause our actual results to differ materially from those which are management’s current expectations or forecasts. 
Such information is subject to the risk that such expectations or forecasts, or the assumptions underlying such expectations or forecasts, become 
inaccurate. Please see “Special Note on Forward-Looking Statements” on page one of our 2012 annual report on Form 10-K for a discussion of some 
of the risk factors that could cause actual results to materially differ. The risks included there are not exhaustive. We operate in a very competitive and 
rapidly changing environment. New risks 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 the 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, you should not place undue reliance on forward-looking statements 
as a prediction of actual results. Moreover, reported results should not be considered an indication of our future performance.