Skechers U.S.A. Annual Report 2014

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FY2014 Annual Report · Skechers U.S.A.

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SKECHERS 2014 YEAR IN REVIEW

ANNUAL REVENUE PERFORMANCE ($ in millions)

2500

2000

1500

1000

500

$2,378

$2,007

$1,846

$1,606

$1,560

2010

2011

2012

2013

2014

DILUTED EPS

$2.78

$2.72

$1.08

$0.19

2010

2012

2013

2014

($1.39)

GLOBAL REVENUE BY CHANNEL

42%
DOMESTIC
WHOLESALE

29%
INTERNATIONAL
WHOLESALE

29%

RETAIL /
E-COMMERCE

GLOBAL PRODUCT BREAKDOWN

56%
WOMEN

16%
KIDS

28%
MEN

Manhattan Beach, CA

2011To Our Shareholders and Customers,

We just wrapped up the biggest year in our Company’s

history—a level of success reached because of our

product innovation, management execution, and the

support of our entire organization. The facts and

numbers of 2014 speak for themselves.

Achieved record annual net sales of $2.378 billion, a
net sales increase of over half a billion dollars when
compared to 2013;

Four quarters of record sales, including the third
quarter, which marked our highest quarterly sales in
our 22-year history;

Increased our combined international retail and
wholesale business by 47 percent to approximately
34 percent of our Company’s total business;

Opened our 1,000th Skechers-branded retail store in
the fourth quarter;

Signed global recording artists Demi Lovato and
Ringo Starr to represent Skechers;

Olympian Meb Keflezighi won the Boston Marathon
running in Skechers GO;

Attained the position of Number 1 walking footwear
brand in the United States; and

Received two Company of the Year awards from
leading industry publications Footwear News and
Footwear Plus.

In 2014, we worked to develop footwear that would be embraced
by consumers around the world, and to deliver our diverse product
to these same consumers where they love to shop—be it a
Skechers store, their favorite e-tailer, or a nationally recognized
retailer. We became the source of stylish comfort footwear for
millions of people, and thanks to our vast offering, we saw many of
these people purchasing multiple pairs of our colorful Skechers
Memory Foam and Skechers GOwalk footwear, and enjoying the
feeling of our Relaxed Fit collection.

And we focused on supporting our brands with marketing that
resonated across our wide demographic—from an animated
Skechers Kids Twinkle Toes commercial and a humorous spot
starring Joe Montana, to a Skechers Performance booth at the
New York Marathon and a Demi Lovato social media post that
draws engagement from millions of teens.

Consumers experienced our marketing message online with our
images as banners and brand shops, and with Skechers-branded
windows, end caps, table tops, and more at their favorite shopping
destinations worldwide—creating a consistent visual approach.

Our efforts resulted in a record sales year with double-digit
increases coming from our domestic and international wholesale
and Company-owned retail businesses, which benefitted from the
broad appeal of our diverse men’s, women’s and kids’ footwear
collections.

2 | SKECHERS USA INC.

A testament to the increasing strength of the Skechers brand
was the continued growth we achieved in our well-established
domestic wholesale business. For the year, sales increased 24
percent, which included a 19 percent increase in pairs shipped
and a 4 percent increase in average price per pair when
compared to the prior year period.

While comfort has always been important in our design, we
elevated several lines by enhancing the comfort features and
creating even lighter weight footwear. This is especially clear in
kids, which now includes an expanding collection of lifestyle
athletic options inspired by our colorful adult Skechers Sport
line.

We believe we are bridging the gap between kids and adults by
targeting teens with multi-platinum recording artist Demi Lovato
in her Skechers Colorful Comfort print, television and YouTube
campaign. Additionally, Demi’s fresh style relates to her tens of
millions of social media followers as she posts images of herself
wearing Skechers Sport that result in hundreds of thousands of
likes.

We expanded our Relaxed Fit line for men and women, and
supported the product with a host of TV campaigns in
2014—including spots featuring Pete Rose, Joe Namath, Joe
Montana and Brooke Burke-Charvet.

Brooke also appeared in our BOBS from Skechers campaign. The
charitable footwear line reached the 10 million pair donation
mark in 2014 as we criss-crossed the United States to donate
shoes to children in need with some of our key account partners.
We also hosted our first account-related donation events in
Canada and Puerto Rico, and distributed shoes to kids around
the world.

COMPANY
OF THE YEAR
FOOTWEAR NEWS

COMPANY
OF THE YEAR
FOOTWEAR PLUS

2014 AWARDS

FASHION FOOTWEAR
BRAND OF THE YEAR
FOOTWEAR INDUSTRY AWARDS UK

BEST LIFESTYLE
BRAND OF THE YEAR
THE SPORTS TRADE AWARDS UK

Key drivers in our performance lines were the updates to our
Skechers GO range, specifically the Skechers GOwalk platform,
including the successful Super Sock and the introduction of
Skechers GOwalk 3. 2014 also saw the launch of Skechers
GOrun 4 at the New York Marathon with an accompanying
marketing campaign featuring elite runners Meb and Kara
Goucher. Both athletes competed at the celebrated event and
Meb was the first American to cross the finish line.

During the year, Skechers GO GOLF was also introduced with
PGA champ Matt Kuchar wearing the product on the course
and in a new marketing campaign.

Our kids’ and men’s collections are growing worldwide, mirroring
the product mix in the United States as more people in more
places are wearing similar footwear and dressing for comfort.
From Australia to the United Kingdom, runway trends are hitting
the streets—resulting in similar success in nearly every market
that Skechers is available. Driven by our compelling men’s,
international wholesale
women’s, and kids’ products, our
business experienced 44 percent annual sales growth over 2013.

issues within our
In Europe, where we faced currency
international subsidiary business due to the strength of the U.S.
dollar, we achieved sales increases of 50 percent over the prior
year with the highest sales
from the United
Kingdom—our largest subsidiary—which shipped more than 2.7
million pairs during the year. With our wholesale accounts and
Company-owned retail stores combined, the UK surpassed $100
million dollars in sales for the year, a significant achievement.

increase

In our Southeast Asia joint ventures, we experienced sales
growth of 42 percent over the prior year, which included an
increase of 88 percent in China. The growth in China was
primarily due to Skechers GOwalk and our lightweight sport
footwear for men and women, as well as the addition of a strong
kids’ business, which launched with shop-in-shops throughout
China. We believe that sales in this country will continue to grow
at an accelerated pace exceeding $100 million dollars in sales for
2015.

In an effort to capitalize on our success and further promote
growth, we announced earlier this year that several distributors
in 2015 to a
in Central Eastern Europe will transition
wholly-owned subsidiary that will oversee 14 countries—
including Croatia, the Czech Republic, Hungary, Romania, and
Serbia.

With Skechers retail stores in more than 80 countries around the
world, we hit the 1,000-Skechers-store mark with a new store in
Mexico during the fourth quarter. At year-end, we had 536
Skechers-branded stores owned and operated by our joint
ventures, licensees and distributors outside the United States,
and 449 Company-owned Skechers retail stores around the
world, 87 of which were outside the United States. We believe
there are additional countries that will benefit from our retail
stores and see further opportunities to grow our presence in
existing markets where we already have stores. We expect there
will be 1,250 Skechers retail stores by the end of 2015.

Skechers USA Inc. (SKX) 5yr change

55.25

70.00

Demi Lovato generates buzz for Skechers with millions
of fans on Social Media.

memory game, we believe this is the perfect shoe to keep kids
busy on long car rides, while waiting in line or at the doctor’s
office. To support our product lines, we will launch more
marketing campaigns, including ones with recently retired New
York Yankees closer Mariano Rivera, Olympic boxing champ Sugar
Ray Leonard, and English celebrity Kelly Brook. Combined with
the influence of Ringo Starr and Demi Lovato—both releasing
albums globally in 2015—we expect to create a memorable impact
on consumers.

20.00

18.50

12.12

33.13

60.00

50.00

40.00

30.00

20.00

10.00

As we continue to innovate our product lines and build our
infrastructure, we expect the sales momentum to continue in 2015
based on our retail growth trajectory and accelerating worldwide
backlogs, up more than 60 percent at December 31, 2014
compared to the prior year-end. We are continuing to seek out
opportunities to grow our business in the United States, as well as
worldwide, with the belief that international sales will become 50
percent of our total business in the next three to four years.

Dec 31, 2010

Dec 30, 2011

Dec 31, 2012

Dec 31, 2013

Dec 31, 2014

We believe all we have achieved in 2014—from record-breaking
quarterly and annual sales to being named Company of the Year
twice and the No. 1 walking brand in the United States, to
tremendous growth in countries overseas—stems from the
proven and enthusiastic demand for our brand around the world.

We are building upon this momentum with the opening of more
Skechers stores, the development of new markets like the Czech
Republic and across Eastern Europe, and the further expansion
of our European Distribution Center, which is expected to
increase efficiencies with an equipment automation upgrade
whose first phase was completed in the fourth quarter of 2014.

Additionally, we are introducing more men’s and women’s
product, as well as a co-branded line of Star Wars* footwear for
boys in 2015, and are building on the innovative new Game Kicks
line for boys and girls introduced in Holiday 2014. With a built-in

STAR WARS and related properties are trademarks and/or copyrights, in the United States and other
countries, of Lucasfilm Ltd. and/or its affiliates. © & TM Lucasfilm Ltd.

Entering our 23rd year of business, we remain as passionate and
driven as we were in our first year. With steadfast commitment, we
will elevate the Skechers brand at every opportunity as we grow
profitably. We truly believe the best is yet to come, and look
forward to what we believe will be another year of record annual
sales for 2015.

Robert Greenberg
Chairman & CEO

Michael Greenberg
President

2014 ANNUAL REPORT | 3

Skechers
LIFESTYLE. CASUAL. FASHION.

Skechers Performance Division

WE LEAD

the kids’ footwear market with colors, creativity, light-up features, lightweight athletic styles, and a
cast of globally recognizable characters. Boys and girls of all ages love wearing our shoes.

WE WON

the Boston Marathon with elite runner Meb—the first American to win the race in 31 years.
Meb and top runners like Kara Goucher give us expert insight that guides product development.

WE FOCUS

on comfort through men’s and women’s
Relaxed Fit® footwear and Skechers
Memory Foam™ technology.

WE GIVE

back through the BOBS charity line—with
over 10 million pairs of new shoes
donated to kids in need.

WE EVOLVE

with lines like Skechers GO GOLF
built on the award-winning Skechers
GOrun platform.

WE DEVELOP

innovative materials like Resalyte® and Goga Mat®
technology to ensure that comfort and performance
go hand-in-hand.

WE MEET

the needs of consumers everywhere with
more than 3,000 styles that span boots,
casuals, sneakers and sandals.

4 | SKECHERS USA INC.

WE DOMINATE

the casual performance walking
category established by Skechers GOwalk®.

2014 ANNUAL REPORT | 5

Domestic Distribution
COAST-TO-COAST RETAIL, WHOLESALE AND E-COMMERCE.

WE GROW

our vast domestic footprint— 362 company-owned
retail stores at the end of 2014.

WE PARTNER

with a vast network of department, specialty, athletic and
independent stores across the United States.

WE OFFER

a diverse product range that meets the needs of various consumer
demographics in retailers throughout all 50 states and Puerto Rico.

Massachusetts

California

Texas

New York

WE CONNECT

with our skechers.com e-commerce website as well as through
wholesale accounts via major online retailers.

Florida

6 | SKECHERS USA INC.

California

North Carolina

2014 ANNUAL REPORT | 7

Global Reach
A WORLDWIDE DISTRIBUTION STRATEGY.

WE INCREASE

shelf space by leveraging new product
lines with innovative features and
technologies.

Hong Kong

WE EXPAND

our retail presence with more than 660 Skechers
retail stores outside the US at year-end—87 of
those Skechers-owned.

WE ESTABLISH

partnerships to open franchised stores and shop-in-shops that
improve the reach and perception of our brand.

Saudi Arabia

Mexico

Netherlands

France

WE COVER

the globe with Skechers in thousands of wholesale
accounts spanning more than 160 countries on six
continents.

Serbia

Turkey

8 | SKECHERS USA INC.

2014 ANNUAL REPORT | 9

England

Spain

China

A Marketing Powerhouse
IMPACTING CONSUMERS EVERYWHERE.

WE BUILD brand awareness globally through multi-platform

targeted marketing campaigns seen in stores, outdoors,
online, on TV, and in print.

WE INFLUENCE new demographics and reach new consumers by sponsoring the Houston Marathon and

other major respected events, from New York to Paris and beyond.

Demi Lovato

Brooke Burke-Charvet

Ringo Starr

Singapore

Pete Rose

WE GENERATE

buzz with celebrities like Demi Lovato,
Brooke Burke-Charvet and sports icons
Meb and Pete Rose.

10 | SKECHERS USA INC.

UAE

Florida

WE ENGAGE

directly with fans around the world through
initiatives on the major social media sites.

Texas

Australia

2014 ANNUAL REPORT | 11

Operations
GIVING ACCOUNTS THE SUPPORT THEY NEED.

WE DESIGN and develop an extensive assortment of ongoing new product lines at

our dynamic corporate headquarters in Manhattan Beach, California.

WE SUPPORT

accounts and partners with more than
60 offices and showrooms around the
globe.

Manhattan Beach, CA

WE MAXIMIZE

efficiency at our 1.82 million-square-
foot fully-automated, LEED-Gold
certified DC in California and our
490,000 square-foot facility in
Belgium.

(START FORM 10K)

Mexico

Manhattan Beach

European Distribution Center

Select Showrooms Worldwide:
Australia • Austria • Belgium • Brazil • Canada • Chile • China • France • Germany • Hong Kong • Iberia • India • Italy
Japan • Malaysia • Mexico • Netherlands • Singapore • Switzerland • UAE • United Kingdom • United States

12 | SKECHERS USA INC.

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, 2014

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

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

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

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

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

As of June 30, 2014, 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 $1.831 billion based upon the closing price of $45.70 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 17, 2015: 41,551,376.
The number of shares of Class B Common Stock outstanding as of February 17, 2015: 10,469,918.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s Definitive Proxy Statement issued in connection with the 2015 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, 2014

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.................................................................................................................................................... 17
UNRESOLVED STAFF COMMENTS ................................................................................................................ 24
PROPERTIES ........................................................................................................................................................ 24
LEGAL PROCEEDINGS ...................................................................................................................................... 25

MINE SAFETY DISCLOSURES ......................................................................................................................... 29

PART II

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ............................................................... 30
SELECTED FINANCIAL DATA ......................................................................................................................... 32

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS .............................................................................................................................. 33
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ...................................... 46
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ...................................................................... 48

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ................................................................................................................................. 73
CONTROLS AND PROCEDURES ...................................................................................................................... 73

OTHER INFORMATION ..................................................................................................................................... 76

PART III

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE ............................................... 76
EXECUTIVE COMPENSATION ......................................................................................................................... 76

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS .................................................................................................. 76

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE ................................................................................................................................................. 76

PRINCIPAL ACCOUNTING FEES AND SERVICES ........................................................................................ 76

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES ..................................................................................... 76

PART IV

____________

This annual report includes our trademarks, including Skechers®, Skechers Performance™, Skechers GOrun®, Skechers
GOwalk®,
®, Skechers Cali™, Relaxed Fit®, Skechers Memory Foam™, Skech-Air®, BOBS®, Hot Lights®,
Twinkle Toes®, 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 2015 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 economic, political and market conditions including the uncertainty of sustained recovery in our European
markets;
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 and new risk factors emerge from time to time. We cannot predict all such risk factors, nor can we assess the impact of
all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ
materially from those contained in any forward-looking statements. Given these inherent and changing risks and uncertainties,
investors should not place undue reliance on forward-looking statements, which reflect our opinions only as of the date of this 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.

PART I

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 (“VIE’s”) 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 the Skechers GO brand name. Our footwear reflects a combination of style, quality and value that appeals to a broad
range of consumers. Our brands are sold through department and specialty stores, athletic and independent retailers, boutiques and
internet retailers. In addition to wholesale distribution, our footwear is available at our e-commerce websites and our own retail stores.
As of February 15, 2015, we owned and operated 119 concept stores, 146 factory outlet stores and 98 warehouse outlet stores in the
United States, and 51 concept stores, 33 factory outlet stores, and three warehouse outlet stores 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, as well as athletes and fitness enthusiasts attracted to our performance footwear. 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 marketed
our brands through comprehensive marketing campaigns for men, women and children. During 2014, 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 Skechers Performance Division; donation events surrounding our
BOBS from Skechers charitable footwear program; and print, television, online and outdoor campaigns featuring our Skechers
Performance and Skechers lifestyle endorsees. These endorsees included television personality multi-platinum recording artist Demi
Lovato, baseball legend Pete Rose, Brooke Burke-Charvet, Hall of Fame quarterbacks Joe Montana and Joe Namath, Dallas
Mavericks owner Mark Cuban, Dodgers baseball legend Tommy Lasorda, Olympians Kara Goucher and Meb Keflezighi, and
legendary drummer and recording artist Ringo Starr.

Since 1992, when we introduced our first line, Skechers USA Sport Utility Footwear, 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 Performance lines benefit from our marketing, product development and manufacturing support, and
management 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.

SKECHERS LINES

We offer a wide array of Skechers-branded product lines for men, women, and children. Within these product lines, we also have
numerous categories, many 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 from
Skechers, (iv) Casual Fusion, and (v) seasonal sandals and boots. 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.

• Relaxed Fit from Skechers is a line of trend-right casuals with a wider toe box for men and women who want all-day comfort
without compromising style. Characteristics of the product line include comfortable outsoles, Skechers Memory Foam insoles
and quality leather uppers. We market and package Relaxed Fit from Skechers styles in a unique shoe box that is distinct from
other categories in the Skechers USA line of footwear.

• 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.

• Our seasonal sandals and boots for men and women are 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
faux fur and Sherpa linings for boots.

Skechers Sport. Our Skechers Sport footwear collection for men and women includes: (i) Skechers Memory Foam styles, (ii)
lightweight performance-inspired athletics, (iii) classic athletic-inspired styles and (iv) 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.

•

Skechers Memory Foam styles are designed with a high-volume memory foam insole that will contour to your foot and
provide greater comfort. The lightweight and ultra-soft looks also feature a flexible outsole and soft uppers, some of which
feature bio-engineered mesh, soft knit fabrics, and stretchable woven materials. This category features bright, multi-colored
and solid basic-colored uppers.

• Our lightweight performance-inspired athletics are designed with comfort and flexibility in mind. Careful attention is devoted
to the cushioning, weight, materials, design and construction of the outsoles. Designed as a versatile, trend-right athletic shoe
suitable for all-day wear, the product line features leather and trubuck uppers in both bright and classic athletic colors.

• Classic athletic-inspired styles are core proven looks that continue to be strong performers. With all-day comfort and durable
rubber tread, these shoes are intended to be a mainstay of any footwear collection. Many of the designs are in white, black and
natural shades, with some athletic accents. The uppers are designed in leather, suede and nubuck.

• 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 and Skechers Sport Active. A natural companion to Skechers Sport, Skechers Active and Skechers Sport Active
have grown from a casual everyday line into two complete lines of sneakers and casual sneakers for active females of all ages. The
Skechers Active 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 Skechers Sport Active line includes low-profile, lightweight, flexible and sporty styles, many of which have Skechers Memory
Foam. Skechers Active and Skechers Sport Active shoes are typically available through specialty casual shoe stores and department
stores.

BOBS from Skechers. The BOBS from Skechers line has grown into a year-round product offering with the addition of vulcanized
looks and an “at Home” line. Primarily marketed to young women, the BOBS collection also includes footwear for kids, and men to a
smaller degree. BOBS are available at department stores, specialty shoe stores and online retailers.

• The BOBS classic espadrille collection is designed in basic colors with canvas, tweed, crochet and boiled wool uppers, suede,

and patterned fabrics. Many styles now include Skechers Memory Foam.

• BOBS vulcanized looks have a very youthful and California lifestyle appeal. Primarily designed with canvas uppers but also
jersey fabrics, the line features both classic retro looks and fresh colors and materials for a relevant style. Many styles now
include Skechers Memory Foam.

• The BOBS at Home collection for women is designed with our flexible rubber Keepsakes outsole, and features faux fur linings

for the ultimate dorm or winter shoe. The uppers are primarily designed with tweeds, knits or suede.

• The BOBS for Kids line is inspired by the successful women’s styles, designed with bright and patterned fabrics and

embellished uppers for girls.

• BOBS for men features basic slip-on and lace-up canvas styles as well as vulcanized designs. Some styles include Skechers

Memory Foam.

Skechers donates new shoes to children in need when consumers purchase BOBS. By the end of 2014, we had donated over 10
million pairs primarily to SolesforSouls and Fashion Delivers, our charity donation partners, who in turn donate the shoes to various
reputable charity organizations in the United States and around the world.

Performance Brands

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. Limited edition packs with Skechers GOdri all-weather protection or Skechers Nite Owl
glow-in-the-dark technology are featured across multiple product lines. The footwear is available at athletic footwear retailers,
department stores and specialty running stores.

•

Skechers GOrun. Skechers GOrun 4 and Skechers GOrun 3 are the latest in a collection of lightweight, flexible running shoes
that features a midfoot strike design for efficient running. Skechers GOrun Ride 4 and Skechers GOrun Ride 3 feature similar
designs as its GOrun counterpart with enhanced cushioning for elevated comfort and support. Skechers GOrun Ultra offers
maximum cushioning with the most support making it perfect for distance or recovery runs. Skechers GOmeb Speed 3 is the
high-performance racing shoe worn by elite marathon runner Meb. These flagship lines as well as other Skechers GOrun
products 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 product line features a lightweight and flexible design to promote natural foot movement
when walking. Skechers GOwalk 3 incorporates more advanced performance technologies including a high-rebound GOga
Mat insole, adaptive GO Pillars on the outsole and Memory Form Fit for a custom-fit experience. Skechers GOwalk 2
incorporates more performance technologies with a unique V-Stride outsole designed 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.

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Skechers GObionic. Designed for trail running, Skechers GObionic is engineered with 18 fully articulated bio-responsive
zones that offer flexibility, feel and ground conformity. A proprietary Resagrip outsole increases the durability to handle wear-
and-tear from tougher terrain.

Skechers GOtrain. Skechers GOtrain is designed for the gym and features a wider forefoot and extended outriggers for
maximum stability and control at lateral and medial strike points. This shoe is an all-encompassing trainer that meets the need
of intense and rigorous workouts.

Skechers GOgolf. Skechers GOgolf is designed for the golf course and offers a zero heel drop design, which keeps feet in a
neutral position that is low to the ground to promote a solid foundation while playing golf. A Resagrip outsole helps with
traction control and a soft Resamax cushioned insole delivers comfort.

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) Skechers Lightweight Sport, (iii) Skechers GOrun and Skechers GOwalk, (iv) S-Lights, Hot Lights by Skechers and
Luminators by Skechers, (v) Skechers Cali for Girls, (vi) Airators by Skechers, (vii) Skechers Super Z-Strap, (viii) Elastika by
Skechers, (ix) Bella Ballerina by Skechers, (x) Twinkle Toes by Skechers, (xi) Air-Mazing by Skechers, and (xii) Foamies 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.

•

Skechers Lightweight Sport styles with Skechers Memory Foam are sneakers designed with many of the same meshes, knits
and weaves as the adult Skechers Sport styles in bright colors and patterns. The collection is designed to appeal both to
younger kids as well as tweens transitioning to adult shoes.

Skechers GOrun and Skechers GOwalk for boys and girls are casual adaptations of our popular Skechers Performance styles
for the kids’ market, designed in bright and bold colors for daily play. The collection is designed to appeal both to younger
kids as well as tweens transitioning to adult shoes.

S-Lights, Hot Lights by Skechers 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 character.

Skechers Cali for Girls is a line of sandals inspired by our women’s line of the same name with bright colors, textiles and
adornments.

• 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 product line is marketed with the character, Kewl Breeze.

•

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

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

Elastika.

• Bella Ballerina by Skechers is a line of girls’ 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 styles also include lights. The product line is marketed with the character, Twinkle Toes.

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

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

•

Foamies by Skechers is a colorful line of lightweight, flexible boys’ and girls’ sneakers constructed with Skechers Memory
Foam that can easily be washed in a washing machine.

Skechers Kids, Skechers Kids Memory Foam, Skechers GO for 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 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

Skechers Work offers a complete line of men’s and women’s casuals such as field boots, hikers and athletic shoes, many of which
may also include Skechers Memory Foam. 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 working in jobs with 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 other Skechers men’s and
women’s lines. 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.

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 50-year olds, 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, 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’ images.

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 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 - The Company and Summary

of Significant Accounting Policies in the consolidated financial statements included in this annual report.

SOURCING

Factories. Our products are produced by independent contract manufacturers located primarily in China and Vietnam. 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 source product for styles that account for a significant percentage of our net sales
from at least five different manufacturers. During 2014, five of our contract manufacturers accounted for approximately 58.9% of total
purchases. One manufacturer accounted for 37.5%, and another accounted for 6.1% 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 0.5% 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 230-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, 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.

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 online, outdoor, trend-influenced marketing, public relations, social
media, promotions, events and in-store support. In addition, we utilize celebrity endorsers in some of 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 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 believe will reach new markets. Our Skechers lifestyle endorsees Demi Lovato, Brooke Burke-Charvet, Mark
Cuban, Joe Montana, Joe Namath, Pete Rose and Tommy Lasorda all appeared in advertising campaigns in 2014. Additionally, we
signed Mariano Riviera and Ringo Starr, who are set to appear in campaigns in 2015. Our Skechers Performance Division endorsees
are elite runner and Olympic medalist Meb and elite runner Kara Goucher, who both appeared in marketing campaigns during 2014.
Competing in Skechers GO speed footwear, Meb won the Boston Marathon in 2014. To launch our Skechers GO golf line, we signed
leading golfer Matt Kuchar, who has and will continue to appear in marketing campaigns in 2015. 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, lifestyle and pop culture publications, including
Runner's World, Shape, Seventeen, Men's Fitness, Women’s Fitness, Women’s Health, People, Us Weekly, and OK!, 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 2014, we developed commercials for men, women and children for our Skechers brands, including our animated
spots for kids featuring our own action heroes. We also have many commercials for our performance lines that feature elite athletes
and for our lifestyle lines that feature retired athletes, musicians, and actors. We have found these to be a cost-effective way to
advertise on key national and cable programming during high selling seasons. In 2014, 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, Switzerland, China and Mexico, among other countries.

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 outdoor campaign that included mall and telephone kiosks, billboards, and transportation systems in the Americas, Asia, the
Middle East and across 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 and
lifestyle magazines and television shows, place our footwear on the feet of trend-setting celebrities and their children, and gain
positive and accurate press about our brands, our Company and our products. We have amassed an array of prominent product
placements in magazines including OK!, Us Weekly, Runner’s World and Competitor, and have been featured on leading business
shows with interviews of our executives providing exposure of our brand to consumers who might not be familiar with our products.
In addition, our brands have been associated with cutting edge events and various celebrities.

Social Media. With the goal of engaging with consumers, showcasing our product in relatable settings, and relaying the latest
news, we have built communities on Facebook, Twitter, and Instagram in the United States and in many countries around the world.
The social platforms are divided into Skechers and Skechers Performance sites as well as a BOBS page to feature our charitable
footwear line. The online communities also connect consumers around the world, allowing an easy glimpse into trends and events in
other countries.

Promotions and Events. 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 2014, we appeared at walks and at numerous marathons in Boston, New York, London, Paris, Santiago and other
cities with Skechers Performance branded booths to allow runners the ability to try on and often buy our products. In 2014, the
Skechers Performance Division became the footwear and apparel sponsor for the Houston Marathon. Our products were made
available to consumers directly or through key accounts at many of these events. In addition, we partnered with many key accounts for
BOBS donation events in cities throughout the United States, Puerto Rico and Spain, building both our relationships with these
accounts, as well as with the community as we donated footwear to children in need.

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 showcase our latest product offerings
in a 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 domestic website, www.skechers.com, as well as our foreign e-commerce
sites, 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.

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 and online retailers. Internationally, our products are available through wholesale customers in more than 160
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. Twenty-three distributors and 15 licensees have opened 374 distributor-owned or -licensed Skechers retail stores and 118
licensee-owned Skechers retail stores, respectively, in over 60 countries as of December 31, 2014.

Domestic Wholesale. We distribute our footwear through the following domestic wholesale distribution channels: department
stores, specialty stores, athletic specialty shoe stores and independent retailers, 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 marketing teams work with our wholesale
customers to ensure that our merchandise and 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. In 2014, we upgraded the technologies in many of our stores, which provides visibility to our merchandise in
other stores and at our distribution center in order to better serve our customers with an omnichannel approach to sales. 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, 2015, we owned and operated 119 concept stores, 146 factory outlet stores and 98 warehouse outlet
stores in the United States, and 51 concept stores, 33 factory outlet stores, and three warehouse outlet stores internationally. During
2015, we plan to open 50 to 60 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, Ala Moana
Center in Hawaii and Las Vegas’ Fashion Show Mall. International locations include Westfield London and Westfield
Stratford in London, Buchanan Street in Glasgow, 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.

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 800 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 33 international factory outlet stores – seven each in England and Canada, four in Spain, three each in
Chile and Japan, two each in Germany and Italy, and one each in Austria, 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.

• 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 5,000 to 24,000
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.

Store count, openings and closings for our domestic, international and joint venture stores are as follows:

December 31, 2013

December 31, 2014

Number of Store
Locations

Opened during
2014

Closed during
2014

Number of Store
Locations

Domestic stores

Concept .............................................................
Factory Outlet ...................................................
Warehouse Outlet .............................................
Domestic stores total ..................................

International stores

Concept .............................................................
Factory Outlet ...................................................
Warehouse Outlet .............................................
International stores total .............................

Joint venture stores

China Concept ..................................................
China Factory Outlet ........................................

Hong Kong Concept .........................................

South East Asia Concept ..................................

Joint venture stores total ............................

Joint venture shop-in-shops

China ................................................................
Hong Kong .......................................................
South East Asia .................................................
Joint venture shop-in-shops total ...............

Total domestic, international and joint venture stores

and shop-in-shops

123
130
68
321

43
26
-
69

18
17

135
12
72
219

683

2
17
29
48

9
7
3
19

9
7

80
-
15
95

(5)
(1)
(1)
(7)

(1)
-
-
(1)

(3)
(3)

(6)

-
(1)
(6)
(7)

181

(21)

120
146
96
362

51
33
3
87

24
21

215
11
81
307

843

International Wholesale. Our products are sold in more than 160 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 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 through our subsidiaries and joint ventures; (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; 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 net 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 12 concept stores and 20 factory outlet
stores located in 10 countries.

To accommodate our European subsidiaries’ operations, we operate an approximately 490,000 square-foot distribution
center in Liege, Belgium. During 2014, we completed the initial phase of automation upgrades of our European Distribution
Center equipment, allowing us to more efficiently receive and ship product to our subsidiaries and retail stores throughout
Europe. Also in 2014, we agreed to lease an additional 290,000 square foot adjoining facility which we expect to occupy by
the end of 2015. This additional space will consolidate off-site storage facilities into a single on-site location that will further
increase efficiencies and offer storage capacity of up to four million pairs of shoes.

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. In 2014, we transitioned three licensed stores to
company-owned locations. We have 12 concept stores, seven factory outlet stores, and three warehouse outlet stores.

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 Vietnam and occasionally from China.

Chile

Our wholly-owned subsidiary, Comercializadora Skechers Chile Limitada, with its offices and showrooms located in
Santiago, Chile supports our 29 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 Vietnam.

Japan

Merchandising and marketing of our product in Japan is managed by our wholly-owned subsidiary, Skechers Japan GK,
with its offices and showrooms 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 three factory outlet stores, one each in Osaka,
Narita and Toki.

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. Our retail stores are in key locations in Shanghai, Beijing, Guangzhou, Xiamen, Hong
Kong, Macau, and other cities. These joint ventures are included in our consolidated financial statements.

Malaysia and Singapore

We have a 50% interest in a joint venture in Malaysia and Singapore that generate net sales in those countries. Under the
joint venture agreement, the joint venture partners contribute capital in proportion to their respective ownership interests. Our
retail stores are in key locations in Singapore, Kuala Lumpur, Penang and other cities. These joint ventures are included in
our consolidated financial statements.

India

We have a 51% interest in Skechers South Asia Private Limited and a 49% interest in Skechers Retail India Private
Limited, which are both joint ventures, that generate net sales in India. Under the joint venture agreements, the joint venture
partners contribute capital in proportion to their respective ownership interests. Our retail stores are in key locations in
Mumbai, New Delhi, and Pune. These joint ventures are included in our consolidated financial statements.

•

Distributors and Licensees

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 160 countries around the world. As of December 31, 2014, we also had agreements with 23 of these distributors
and 15 licensees regarding 374 distributor-owned or -licensed Skechers retail stores and 118 licensee-owned Skechers retail
stores, respectively, that are open in over 60 countries. Our distributors and licensees own and operate the following retail
stores:

December 31, 2013

December 31, 2014

Number of Store
Locations

Opened during
2014

Closed during
2014

Number of Store
Locations

Distributor and licensee stores

North America Concept ....................................
North America Factory Outlet ..........................

Central America Concept .................................
Central America Factory Outlet .......................

South America Concept ....................................
South America Factory Outlet ..........................

Africa Concept .................................................

Asia Concept ....................................................
Asia Factory Outlet ..........................................

Australia/New Zealand Concept .......................
Australia/New Zealand Factory Outlet .............

Europe Concept ................................................
Europe Factory Outlet ......................................

Middle East Concept ........................................
Middle East Factory Outlet ..............................

36
8

8
1

39
1

169
16

11
11

33
3

36
1

Total distributor and licensee stores ...............

388

Distributor and licensee shop-in-shops

International shop-in-shops ..............................

2,258

Total Distributor and licensee stores
and shop-in-shops

2,646

12
5

2
-

50
4

10
1

28
2

11
1

139

(4)
(2)

-
-

(15)
-

(5)
(2)

-
(1)

(1)
(1)

(4)
-

44
11

10
1

26
1

214
18

21
11

60
4

43
2

(35)

492

(366)

(401)

1,892

2,384

Distributors and licensees 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 domestic website, www.skechers.com, as well as our foreign e-commerce sites, are virtual storefronts
that promote the Skechers brands. Our websites are 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. These virtual stores
provide a convenient, alternative shopping environment and brand experience. These websites are an additional efficient and effective
retail distribution channel, and has improved our customer service.

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 13 – Segment Information in the
consolidated financial statements included in this annual report.

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, 2015, we had 25 active domestic and international licensing agreements in which we are the licensor. These
include Skechers branded bags, backpacks and lunch boxes, belts, wallets and headwear, socks, eyewear and watches, Skechers
Performance sport apparel, socks and wearable technology, BOBS from Skechers apparel, and Twinkle Toes apparel, dolls, toys, and
fashion accessories. We have international licensing agreements for the design and distribution of men’s and women’s apparel in
Chile, Israel, the Philippines, the United Kingdom, and South Korea; bags, backpacks and luggage in Mexico; 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 European Distribution Center (“EDC”) located in Liege,
Belgium, (iii) our company operated distribution centers or third-party distribution centers in South America and Asia or (vi) 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, 2014, our backlog was $988.7 million, compared to $616.1 million as of December 31, 2013. 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, our 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 124 foreign countries. We also have design patents and pending design and utility patent applications in
both the United States and approximately 21 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

The footwear industry is a competitive business. 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., 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, 2015, we employed 7,772 persons, 2,944 of whom were employed on a full-time basis and 4,828 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.

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.

Our Future Success Depends On Our Ability To Maintain Our Brand Name And Image With Consumers.

Our success to date has in large part been due to the strength of the Skechers brand. Maintaining, promoting and growing our
brand name and image depends on sustained effort and commitment to, and significant investment in, both the successful development
of high-quality, innovative, fashion forward products, and fresh and relevant marketing and advertising campaigns. Even if we are
able to timely and appropriately respond to changing consumer preferences and trends with new high-quality products, our marketing
and advertising campaigns may not resonate with consumers, or consumers may consider our brand to be outdated or associated with
footwear styles that are no longer popular or relevant. Our brand name and image with consumers could also be negatively impacted if
we or any of our products were to receive negative publicity, whether related to our products or otherwise. If we are unable to
maintain, promote and grow our brand image, then our business, financial condition and results of operations could be materially and
adversely affected.

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

The footwear industry is subject to rapidly changing consumer preferences. The continued popularity of our footwear and the
development of new lines and styles of footwear with widespread consumer appeal, including consumer acceptance of our
performance footwear, requires us to accurately identify and interpret changing consumer trends and preferences, and to correctly
respond in a timely manner. Continuing demand and market acceptance for both existing and new products are uncertain and depend
on the following factors:

•

substantial investment in product innovation, design and development;

commitment to product quality; and

significant and sustained marketing efforts and expenditures, including with respect to the monitoring of consumer
trends in footwear specifically, and in fashion and lifestyle categories generally.

In assessing our response to anticipated changing consumer preferences and trends, we frequently must make decisions about
product designs and marketing expenditures several months in advance of the time when actual consumer acceptance can be
determined. As a result, we may not be successful in responding to shifting consumer preferences and trends with new products that
achieve market acceptance. Because of the ever changing nature of consumer preferences and market trends, a number of companies
in the footwear industry, including ours, experience periods of both rapid growth, followed by declines, in revenue and earnings. If we
fail to identify and interpret changing consumer preferences and trends, or are not successful in responding to these changes with the
timely development of products that achieve market acceptance, we could experience excess inventories, higher than normal
markdowns, returns, order cancellations or an inability to profitably sell our products, and our business, financial condition and results
of operations could be materially and adversely affected.

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. Any 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.

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. Our competitors’ product offerings,
pricing, costs of production, and advertising and marketing expenditures are highly competitive areas in our business. If we do not
adequately and timely anticipate and respond to our competitors, consumer demand for our products may decline significantly. In
addition, 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. New
companies may also enter the markets in which we compete, further increasing competition in the footwear industry. We may not be
able to compete successfully in the future, and increased competition may result in price reductions, cost increases, 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 materially adversely impact our business, results of operations and financial condition.

We Continue To Face Many New Challenges In The Highly Competitive Performance Footwear Market.

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 since then have
continued to develop and introduce new performance footwear. 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 2014 or 2013.
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.

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

While global economic conditions have recently improved slightly, its uncertain state continues to negatively impact our business,
which depends on the general economic environment and levels of consumers’ discretionary spending that affect not only the ultimate
consumer, but also retailers, who are our primary direct customers. If the current economic situation does not improve or if it weakens,
we may not be able to maintain or increase our sales to existing customers, make sales to new customers, open and operate new retail
stores, maintain sales levels at our existing stores, maintain or increase our international operations on a profitable basis, or maintain
or improve our earnings from operations as a percentage of net sales. Additionally, if there is an unexpected decline in sales, our
results of operations will depend on our ability to implement a corresponding and timely reduction in our costs and manage other
aspects of our operations. These challenges include (i) managing our infrastructure, (ii) hiring and maintaining, as required, the
appropriate number of qualified employees, (iii) managing inventory levels and (iv) controlling other expenses. If the uncertain global
market conditions continue for a significant period of time or worsen, our results of operations, financial condition, and cash flows
could be materially adversely affected.

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

During 2014, 2013 and 2012, our net sales to our five largest customers accounted for approximately 15.7%, 18.1% and 18.1% of
total net sales, respectively. No customer accounted for more than 10.0% of our net sales during 2014, 2013 and 2012. No customer
accounted for more than 10.0% of net trade receivables at December 31, 2014 and 2013. 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.

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 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.

Our Business Could Be Adversely Affected By A Labor Dispute At Ports In Los Angeles And Long Beach.

The International Longshoremen and Warehouse Union’s labor agreement with the Pacific Maritime Association regarding the
dockworkers at 29 West Coast ports, including Los Angeles and Long Beach, expired on June 30, 2014. The parties were engaged in
a long-running dispute while the dockworkers were working without an agreement until a tentative agreement following mediation
was reached on February 20, 2015. However, as of February 27, 2015, the new five-year agreement had not been officially ratified by
both parties. All product that is sent from third-party manufacturers to our domestic distribution center in Rancho Belago, California
arrives via cargo ship at the ports in Los Angeles and Long Beach. If the new agreement is not officially ratified by the parties and a
slow-down, strike or other disruption occurs that interrupts operations at the ports in Los Angeles and Long Beach, shipping container
charges on cargo shipped from Asia to these ports can be expected to increase. If operations at the ports are interrupted for an
extended period of time, we would also be forced to consider more costly shipping alternatives such as air transportation or shipping
to ports located outside of the Los Angeles area, in which case we would have to incur additional trucking charges to transport product
over longer distances from those ports to our domestic distribution center. Extended delays at the Los Angeles and Long Beach ports
could also lead to backlogs at other ports, which could slow the delivery of our product. While we are currently only 7-10 days behind
in the receipt of incoming product from overseas, any extended delays could result in missed sales due to a potential backlog of
product for the back-to-school selling season that typically starts in June. If the parties fail to officially ratify the new agreement, any

subsequent slow-downs, strikes or other disruptions at these ports, especially for an extended period of time, may have a material
adverse effect on our business, relationships with our customers and results of operations.

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, 2014 were derived from sales of footwear manufactured in
foreign countries, with most manufactured in China 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 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 manufacturing 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.

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

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.

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 an 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.

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

Our footwear products are currently manufactured by independent contract manufacturers. During 2014 and 2013, the top five
manufacturers of our products produced approximately 58.9% and 59.9% of our total purchases, respectively. One manufacturer
accounted for 37.5% and 37.8% of total purchases during 2014 and 2013, respectively. One other manufacturer accounted for 6.1%
and 7.1% of our total purchases during 2014 and 2013, 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 Business Could Be Harmed If Our Contract Manufacturers, Suppliers Or Licensees Violate Labor, Trade Or Other
Laws.

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.

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.

Since 2010, 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 negative 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 $50 million 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 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 Strategies Involve A Number Of Risks That Could Prevent Or Delay The Successful Opening Of New Stores As Well As
Negatively 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 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 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
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 21 under “It Is Difficult To Predict The

Effect Of Regulatory Inquiries About Advertising And Promotional Claims Related To Our Toning Shoe Products.”

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.

Breaches Or Compromises Of Our Information Security Systems, Information Technology Systems And Our Infrastructure
To Support Our Business Could Result In Exposure Of Private Information, Disruption Of Our Business And Damage To
Our Reputation, Which Could Harm Our Business, Results Of Operation And Financial Condition.

We utilize information security and information technology systems and websites that allow for the secure storage and
transmission of proprietary or private information regarding our customers, employees, and others, including credit card information
and personal identification information. A security breach may expose us to a risk of loss or misuse of this information, litigation, and
potential liability. We may not have the resources or technical sophistication to anticipate or prevent rapidly-evolving types of cyber-
attacks. Attacks may be targeted at us, our customers, or others who have entrusted us with information. Actual or anticipated attacks
may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees, and engage
third-party experts and consultants. Advances in computer capabilities, new technological discoveries, or other developments may
result in the technology used by us to protect transaction or other data being breached or compromised. In addition, data and security
breaches can also occur as a result of non-technical issues, including breach by us or by persons with whom we have commercial
relationships that result in the unauthorized release of personal or confidential information. Any compromise or breach of our cyber
security systems could result in private information exposure and a violation of applicable privacy and other laws, significant potential
liability including legal and financial costs, and loss of confidence in our security measures by customers, which could have an
adverse effect on our business, financial condition and reputation.

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, 2014, a substantial portion of our operations are located in California, including 82 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.

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, 2014, our Chairman of the Board and Chief Executive Officer, Robert Greenberg, beneficially owned 38.8%
of our outstanding Class B common shares, members of Mr. Greenberg’s immediate family beneficially owned an additional 14.6% 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 45.9% 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, 2014, Mr. Greenberg beneficially owned 27.8% 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 39.1% of the aggregate number of votes eligible to be cast by our stockholders, and Mr.
Schwartzberg beneficially owned 32.9% of the aggregate number of votes eligible to be cast by our stockholders. Therefore, Mr.
Greenberg and Mr. Schwartzberg are each 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

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 a 1.8 million square-foot facility located on approximately 110 acres in Rancho Belago, California.
We are leasing the distribution center from a joint venture, HF Logistics-SKX (the “JV”), that we formed with HF Logistics I, LLC
(“HF”) in January 2010 for the purpose of building and operating the facility. The lease for this facility expires in 2031, with a base
rent of $940,695 per month, or approximately $11.3 million per year. The JV is included in our consolidated financial statements.

Our European Distribution Center consists of 483,000 square-foot facilities in Liege, Belgium currently under two concurrent
operating leases that expire in 2029, with base rent of approximately $2.5 million per year. The lease agreements also provide for early

termination rights at five-year intervals upon 12-month advance notice in writing to terminate the lease. We did not exercise the first
such early termination right prior to April 1, 2013.

All of our domestic retail stores and showrooms are leased with terms expiring between March 2015 and July 2026. 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 $52.9 million for the year ended December 31, 2014.

We also lease all of our international administrative offices, retail stores, showrooms and distribution facilities located in Canada,
Switzerland, the United Kingdom, Germany, France, Spain, Italy, the Netherlands, Brazil, Malaysia, China, Hong Kong, Japan, Chile,
Singapore, India and Portugal. The property leases expire at various dates between March 2015 and March 2030. Total base rent for
the leased administrative properties aggregated approximately $36.0 million for the year ended December 31, 2014.

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 have responded to requests for information regarding our claims and
advertising from regulatory and quasi-regulatory agencies in several countries and are fully cooperating with such 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
had been named as a defendant in multiple consumer class actions challenging our claims and advertising for our toning shoe
products, including Shape-ups. 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 $50 million to settle and finally resolve the domestic
advertising class action 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 were approved and entered by courts in those jurisdictions. On May 13, 2013, the United States District Court for the Western
District of Kentucky entered an order finally approving the nationwide consumer class action settlement, and the time for any appeals
from that final approval order has expired.

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 our 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, SAGs and consumer
class as part of a global settlement, as set forth above. We are fully cooperating and are in the process of producing documents and
other information requested in the Subpoena. The Assistant United States Attorney has informed us that neither our company nor our
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, financial position, or result in a material loss in excess of a recorded accrual and whether
insurance coverage will be adequate to cover any losses.

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. On August 13, 2012, the United States District Court for the Western
District of Kentucky granted preliminary approval of the nationwide consumer class action settlement in Grabowski v. Skechers
U.S.A., Inc. Case No. 3:12-CV-00204, and Morga v. Skechers U.S.A., Inc., Case No. 3:12-CV-00205 (the “Grabowski/Morga class
actions”), and issued a preliminary injunction enjoining the continued prosecution of the Tomlinson action, among other cases. On
May 13, 2013, the Court in the Grabowski/Morga class actions entered an order finally approving the nationwide consumer class
action settlement, and the time for any appeals therefrom has expired. The settlement in the Grabowski/Morga class actions is
expected entirely to resolve the class claims brought by the plaintiff in Tomlinson.

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 class actions (described above), and issued a preliminary injunction enjoining the continued prosecution of this
action. On May 13, 2013, the Court in the Grabowski/Morga class actions entered an order finally approving the nationwide consumer
class action settlement, and the time for any appeals therefrom has expired. The settlement in the Grabowski/Morga class actions is
expected entirely to resolve the class claims brought by the plaintiff in Boatright.

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. At a mediation held on February 28, 2013, the parties
reached an agreement in principle to settle the Angell action (as well as the Niras and Dedato actions described below) through
authorization by the Québec Superior Court of a nationwide settlement class. That agreement was finalized by the parties in
December 2013 and thereafter presented to the Québec Superior Court for approval. On November 5, 2014, the Court issued its
formal judgment approving the settlement. Notwithstanding, if approval of the class action settlement is reversed on appeal, we
cannot predict the outcome of the Angell action or a reasonable range of potential losses or whether the outcome of the Angell action
would have a material adverse impact on our results of operations, financial position or result in a material loss in excess of the
settlement or a recorded accrual.

Brenda Davies/Kourtney Smith 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. On or about November 21, 2013, an Amended Statement of Claim was filed to substitute a new representative plaintiff,
Kourtney Smith, in place of Ms. Davies and to allege substantially the same claims as in the original Statement of Claim with respect
to all Skechers toning footwear sold to residents of Canada. On or about February 28, 2014, representative plaintiff Smith agreed to
the terms and conditions of the settlement reached in the Angell, Niras, and Dedato class actions (described above and below), and

agreed to discontinue the Davies/Smith action once the settlement in the Angell, Niras, and Dedato class actions is finally approved by
the Court and affirmed on appeal in the event an appeal is taken. On November 5, 2014, the Québec Superior Court issued its formal
judgment approving the settlement in the Angell class action. On January 16, 2015, the Court in the Davies/Smith action issued an
order effectively dismissing that action. Notwithstanding, if approval of the class action settlement is reversed on appeal, we cannot
predict the outcome of the Davies/Smith action or a reasonable range of potential losses or whether the outcome of the Davies/Smith
action would have a material adverse impact on our results of operations, financial position or result in a material loss in excess of the
settlement or a recorded accrual.

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. At a mediation held on February 28, 2013, the parties reached an agreement in principle to settle the Niras action (as
well as the Angell action described above and the Dedato action described below) through authorization by the Québec Superior Court
of a nationwide settlement class. That agreement was finalized by the parties in December 2013 and thereafter presented to the
Québec Superior Court for approval. On November 5, 2014, the Québec Superior Court issued its formal judgment approving the
settlement. On November 20, 2014, the Ontario Superior Court issued an order effectively dismissing the Niras action.
Notwithstanding, if approval of the class action settlement is reversed on appeal, we cannot predict the outcome of the Niras action or
a reasonable range of potential losses or whether the outcome of the Niras action would have a material adverse impact on our results
of operations, financial position or result in a material loss in excess of the settlement or a recorded accrual.

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. At a mediation held on February 28, 2013, the parties
reached an agreement in principle to settle the Dedato action (as well as the Angell and Niras actions described above) through
authorization by the Québec Superior Court of a nationwide settlement class. That agreement was finalized by the parties in
December 2013 and thereafter presented to the Québec Superior Court for approval. On November 5, 2014, the Québec Superior
Court issued its formal judgment approving the settlement. On November 19, 2014, the Ontario Superior Court in issued an order
effectively dismissing the Dedato action. Notwithstanding, if approval of the class action settlement is reversed on appeal, we cannot
predict the outcome of the Dedato action or a reasonable range of potential losses or whether the outcome of the Dedato action would
have a material adverse impact on our results of operations, financial position or result in a material loss in excess of the settlement or
a recorded accrual.

Susan Cooper et al. v. Ontrea Inc. et al. — On October 22, 2014, the Company was named as a third-party defendant in a lawsuit
pending in the Court of Queen’s Bench in Calgary, Alberta, Case No. 1301 10673. The third party notice asserts claims for
indemnification and contribution arising from injuries plaintiff allegedly sustained as a result of wearing Shape-ups shoes. The class
action settlement in the Angell action, described above, is expected to resolve the Cooper action. However, if approval of the class
action settlement is reversed on appeal, we cannot predict the outcome of the Cooper action or a reasonable range of potential losses
or whether the outcome of the Cooper action would have a material adverse impact on our results of operations, financial position or
result in a material loss in excess of the settlement or a recorded accrual.

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 are named as a
defendant in 1,171 currently pending cases (some on behalf of multiple plaintiffs) filed in various courts 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. Since 2011, a total of 1,081 personal injury cases have been filed in or transferred to

the MDL proceeding and 414 individuals have submitted claims by plaintiff fact sheets. The Company has resolved 432 personal
injury claims in the MDL proceedings, comprised of 62 that were filed as formal actions and 370 that were submitted by plaintiff fact
sheets. Skechers has also settled 8 claims in principle—6 filed cases and 2 claims submitted by plaintiff fact sheets—and anticipates
that those settlements will be finalized in the near term. Thirty-four cases in the MDL proceeding have been dismissed either
voluntarily or on motions by Skechers and 38 unfiled claims submitted by plaintiff fact sheet have been abandoned. The MDL
currently encompasses 979 personal injury cases (which include the claims of 939 individuals who filed court approved
questionnaires) and 4 claims submitted by plaintiff fact sheets. Under a mediation procedure authorized by the District Court, a total
of 2,353 settlement questionnaires were submitted by persons who had yet to file a lawsuit or who were already participants in the
MDL or related coordinated proceedings pending in California state court (described in greater detail below). Mediations were held
on October 4, 2014 and December 16, 2014, but no settlements were reached. On December 29, 2014, the District Court ordered that
a total of sixty cases be selected by the parties for staggered, accelerated discovery and then either be remanded to their originating
districts or set for trial. The sixty cases were selected in January 2015 and both written and deposition discovery is proceeding. To
the extent that the sixty selected cases are not resolved by dispositive motions or otherwise, trials are expected to be set for dates in
early to mid-2016.

Skechers U.S.A., Inc., Skechers U.S.A., Inc. II and Skechers Fitness Group also have been named as defendants in a total of 70
personal injury actions filed in various Superior Courts of the State of California that were brought on behalf of 913 individual
plaintiffs (360 of whom also submitted MDL court-approved questionnaires for mediation purposes in the MDL proceeding). Of
those cases, 67 were originally filed in the Superior Court for the County of Los Angeles (the “LASC cases”). On August 20, 2014,
the Judicial Council of California granted a petition by the Company to coordinate all personal injury actions filed in California that
relate to Shape-ups with the LASC cases (collectively, the “LASC Coordinated Cases”). On October 6, 2014, three cases that had
been pending in other counties were transferred to and coordinated with the LASC Coordinated Cases. Four of the actions originally
filed as LASC cases, brought on behalf of a total of 6 plaintiffs, have been dismissed. The claims of 44 additional plaintiffs have been
dismissed entirely from certain of the lawsuits, either voluntarily, on motion by Skechers, or as pursuant to settlement agreement. The
claims of 21 persons have been dismissed in part, either voluntarily or on motions by Skechers. Thus, the LASC Coordinated Cases
currently involve 66 pending personal injury lawsuits brought on behalf of a total of 863 plaintiffs. On March 12, 2014, the Superior
Court selected twelve plaintiffs as bellwether cases to be set for one or more trials starting in March 2015. To date, extensive written
discovery and document productions have taken place in the LASC cases. Over twenty fact witness depositions have been taken (all
of which were cross-noticed in the MDL), as have eight expert depositions. Two of the bellwether cases have settled and one
bellwether plaintiff dismissed her action after Skechers filed a motion for summary judgment. On January 7, 2015, the Court vacated
the March 2015 initial bellwether trial date and granted Skechers’ motions for summary adjudication in five bellwether cases with
respect to those plaintiffs’ advertising-related claims, including their claims for breach of warranty, fraud, and violations of consumer
protection laws. On February 25, 2015, the Court granted Skechers’ motions for summary adjudication in the four remaining
bellwether cases with respect to those plaintiffs’ advertising-related claims, including their claims for breach of warranty, fraud, and
violations of consumer protection laws; the Court also granted Skechers’ summary adjudication motions as to two of the four
plaintiffs’ products liability claims for an alleged failure to warn, and took under submission the portion of Skechers’ motions seeking
summary adjudication of all four plaintiffs’ products liability claims for alleged design defects. The Court also set trial dates of
October 26, 2015 and January 25, 2016 for the first two bellwether cases, but deferred selection of the specific individual bellwether
plaintiff to go forward on those two dates to a later time.

In other state courts, a total of 136 personal injury actions (some on behalf of numerous plaintiffs) have been filed that were not
removed to federal court and transferred to the MDL. Ten of those actions have been resolved and dismissed. The remaining 126
actions include the claims of 539 plaintiffs, 533 of whom had submitted court-approved settlement questionnaires in the MDL.
Sixteen of those personal injury actions have been removed to various federal courts and are expected to be transferred to the MDL in
the near term. It is further expected that removal petitions and requests for transfer to the MDL will be filed for the other 110 state
court personal injury actions. No discovery has taken place in these actions and no trial dates have been set.

The personal injury cases in the MDL and LASC Coordinated Cases and in other state courts are in many instances solicited and
handled by the same plaintiffs 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.

Gloria Basaraba v. Robert Greenberg, et al. — On July 15, 2013, plaintiff Gloria Basaraba moved to file under seal a shareholder
derivative complaint against Skechers, nine individual members of its Board of Directors and a former employee in the United States
District Court for the Central District of California, Case No. CV13-5061. The complaint included allegations of breach of fiduciary

duties, gross mismanagement, waste of corporate assets and unjust enrichment based on the development of Skechers’ toning footwear
products, advertising and marketing activities relating thereto, and subsequent litigation involving those issues. The complaint sought
compensatory damages, a court order directing Skechers to reform and improve their corporate governance and internal procedures,
and attorneys’ fees, costs and expenses. On August 26, 2013, the Court denied plaintiff’s motion to seal and ordered that she file an
operative complaint. On September 5, 2013, plaintiff filed the operative complaint against the same defendants, except for the former
employee. The operative complaint seeks to recover under the same causes of action as in the prior complaint on the basis of many of
the same allegations. On November 12, 2013 and November 15, 2013, the individual defendants and Skechers respectively moved to
dismiss the complaint. The motions to dismiss were subsequently taken off calendar in light of the parties’ settlement discussions. A
settlement eventually was reached and, on September 16, 2014, the Court granted preliminary approval thereof. On October 10, 2014,
plaintiff moved for final approval of the settlement. On that same day, plaintiff also moved for approval of attorneys’ fees and
expenses and an incentive award pursuant to the settlement agreement. On November 10, 2014, the Court granted plaintiff’s motion
for final settlement approval, finding the settlement fair, reasonable, and adequate. On November 12, 2014, the Court granted
plaintiff’s motion for attorneys’ fees and expenses and an incentive award. This settlement is now final and it did not have a material
adverse impact on our operations, financial position or result in a material loss in excess of a recorded accrual.

Converse, Inc. v. Skechers U.S.A., Inc. — On October 14, 2014, Converse filed an action against our company in the United States
District Court for the Eastern District of New York, Brooklyn Division, Case 1:14-cv-05977-DLI-MDG, alleging trademark
infringement, false designation of origin, unfair competition, trademark dilution and deceptive practices arising out of our alleged use
of certain design elements on footwear. The complaint seeks, among other things, injunctive relief, profits, actual damages, enhanced
damages, punitive damages, costs and attorneys’ fees. On October 14, 2014, Converse also filed a complaint naming 27 respondents
including our company with the U.S. International Trade Commission, Federal Register Doc. 2014-24890, alleging violations of
federal law in the importation into and the sale within the United States of certain footwear. Converse has requested that the
Commission issue a general exclusion order, or in the alternative a limited exclusion order, and cease and desist orders. While it is too
early to predict the outcome of these legal proceedings or whether an adverse result in either or both of them would have a material
adverse impact on our operations or financial position, we believe we have meritorious defenses and intend to defend these legal
matters vigorously.

Deckers Outdoor Corporation v. Skechers U.S.A., Inc. — On November 20, 2014, Deckers filed an action against our company in
the United States District Court for the Central District of California, Case 2:14-cv-08988-SJO-FFM, alleging trademark infringement,
patent infringement, trade dress infringement, and unfair competition arising out of our alleged use of certain names and design
elements. The complaint seeks, among other things, injunctive relief, an accounting of profits, compensatory damages, statutory,
treble and punitive damages, costs and attorneys’ fees. While it is too early to predict the outcome of these legal proceedings or
whether an adverse result in either or both of them would have a material adverse impact on our operations or financial position, we
believe we have meritorious defenses and intend to defend these legal matters vigorously.

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 condensed 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.

YEAR ENDED DECEMBER 31, 2014
First Quarter ....................................................
$ 26.46
Second Quarter ................................................ 33.14
Third Quarter ................................................... 44.46
Fourth Quarter ................................................. 47.76

$ 36.78
47.53
64.69
62.34

LOW

HIGH

YEAR ENDED DECEMBER 31, 2013
First Quarter ....................................................
$ 17.02
Second Quarter ................................................ 19.99
Third Quarter ................................................... 23.93
Fourth Quarter ................................................. 26.62

$ 22.61
24.50
31.56
34.95

HOLDERS

As of February 17, 2015, there were 101 holders of record of our Class A Common Stock (including holders who are nominees for
an undetermined number of beneficial owners) and 29 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.

PERFORMANCE GRAPH

The following graph demonstrates the total return to stockholders of our company’s Class A Common Stock from December 31,
2009 to December 31, 2014, relative to the performance of the Russell 2000 Index, which includes our Class A Common Stock, and
the peer group index, which is believed to include companies engaged in businesses similar to ours. The peer group index consists of
six companies: Nike, Inc., adidas AG, Steven Madden, Ltd., Wolverine World Wide, Inc., Crocs, Inc., and Deckers Outdoor
Corporation.

The graph assumes an investment of $100 on December 31, 2009 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.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN

$300

$250

$200

$150

$100

$50

12/09

12/10

12/11

12/12

12/13

12/14

Skechers U.S.A., Inc.

Russell 2000

Peer Group

12/09

12/10

12/11

12/12

12/13

12/14

Skechers U.S.A., Inc.

100.00

68.00

41.21

62.90

112.65

187.86

Russell 2000

Peer Group

100.00

126.86

121.56

141.43

196.34

205.95

100.00

133.14

145.52

165.04

251.16

252.38

ITEM 6.

SELECTED FINANCIAL DATA

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, 2014 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:

2014

YEARS ENDED DECEMBER 31,
2011

2012

2013

2010

Net sales ............................................................................. $ 2,377,561 $ 1,846,361 $ 1,560,321
683,326
Gross profit ........................................................................ 1,071,905
22,319
209,071
Earnings (loss) from operations .........................................
10,473
191,380
Earnings (loss) before income taxes (benefit) ....................
Net earnings (loss) attributable to Skechers U.S.A., Inc. ...
9,512
138,811
Net earnings (loss) per share:(1)

818,792
93,609
82,215
54,788

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

2.74
2.72

1.09
1.08

0.19
0.19

Weighted average shares:(1)

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

50,613
51,026

50,363
50,563

49,495
49,942

$ 1,606,016
623,748
(133,793)
(131,047)
(67,484)

$ 2,006,868
911,906
195,568
196,603
136,148

(1.39)
(1.39)

48,491
48,491

2.87
2.78

47,433
49,050

BALANCE SHEET DATA:

2014

2013

2012

2011

2010

AS OF DECEMBER 31,

Working capital ............................................................. $
647,771
Total assets .................................................................... 1,674,918 1,408,570 1,340,220
128,517
Long-term borrowings, excluding current installments .
15,081
875,969
Skechers U.S.A., Inc. equity .......................................... 1,075,249

116,488
930,322

779,277 $

704,506 $

$
578,885
1,281,888
76,531
852,561

$
666,054
1,304,794
51,650
908,203

(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.

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

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, which include international direct subsidiary sales and international distributor 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 13 – Segment Information in our consolidated financial statements included under Part II, Item 8 of this
annual report.

FINANCIAL OVERVIEW

Our net sales for 2014 increased $531.2 million, or 28.8%, to $2.378 billion, compared to net sales of $1.846 billion in 2013. The
increase in net sales was broad based across our domestic wholesale, international wholesale and retail segments, with the largest
increases across our Women’s Go, Women’s Active, Men’s and Women’s Sport, and Men’s USA divisions, which was partially offset
by reduced sales of our BOB’s products during 2014. Net earnings attributable to Skechers U.S.A., Inc. were $138.8 million for 2014,
an increase of $84.0 million, or 153.4%, compared to net earnings of $54.8 million in 2013. Diluted income per share for 2014 was
$2.72, which reflected a 151.1% increase from the $1.08 diluted income per share reported in the prior year. The increase in net
earnings attributable to Skechers U.S.A., Inc. for 2014 was primarily the result of increased sales in our domestic wholesale and
international direct subsidiary sales segments following the introduction of new products and increased margins in our retail and
international direct subsidiary sales segments attributable to sales of product mix with higher margins. Our working capital was $779.3
million at December 31, 2014, which was an increase of $74.8 million from working capital of $704.5 million at December 31, 2013.
Our cash increased $94.7 million to $466.7 million at December 31, 2014 from $372.0 million at December 31, 2013. This increase in
cash of $94.7 million was primarily the result of our increased net earnings and increased payables, which were partially offset by
increased inventories and increased accounts receivables.

2014 OVERVIEW

In 2014, we focused on product development, domestic and international growth, development of our global infrastructure, 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 to
consumers across a broad range of demographics. In 2014, we focused on continuously updating our core styles, by adding fresh looks
to our existing lines, and developing new lines that included lifestyle and performance footwear, such as Skechers GOrun 4, which has
broadened and diversified our collection of product offerings.

Grow our domestic business. In 2014, 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 48 additional domestic stores.

Further develop our international businesses. In 2014, we continued to focus on improving our international operations by
increasing our customer base within our existing subsidiary business and increasing our product offering to accounts within each
country. We also focused on expanding our international retail distribution channel by opening 19 additional international stores.

Develop our global infrastructure. In 2014, we completed the first phase of the automation upgrade of our European Distribution
Center equipment as well as the transition in Chile from a third-party warehouse to a distribution center operated by us. We continue
to upgrade our distribution facilities to increase our capacity and efficiency and to better manage our growth worldwide.

Balance sheet and expense management. During 2014, we continued to focus on managing our inventory levels and bringing our

marketing expenses and general and administrative expenses in line with expected sales.

OUTLOOK FOR 2015

During 2015, we will continue to develop new lifestyle and performance product at affordable prices. 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
continue to broaden the targeted demographic profile of our consumer base, increase our shelf space and open 50 to 60 new retail
locations, predominantly in the United States, without detracting from existing business. In addition, we will continue to develop our
product distribution infrastructure by completing additional phases of equipment upgrades at our European Distribution Center and
Rancho Belago distribution center. These upgrades will allow us to be more efficient and to support expected future growth. We
expect these equipment upgrades to be substantially complete by the end of 2015.

DEFINITIONS

Comparable Sales

As part of our discussion of our results of operations, we disclose comparable store sales, which exclude the impact of e-commerce
sales. With respect to any reporting period, we define comparable store sales as sales for stores that are owned and operated for at least
thirteen full calendar months as of the last day of any calendar month within the current reporting period, and include only those sales
for each of the comparable full calendar months that the store is open within each period. When a store closes at the end of a lease
during a reporting period, we include in comparable store sales the sales for the number of comparable full calendar months that the
store was open within the reporting period. We include new stores in comparable store sales commencing with the fourteenth month
of operations because we believe it provides a more meaningful comparison of operating results of months with stabilized operations,
and excludes a new store’s first full calendar month of operations when operating results may not be representative for a variety of
reasons.

Definitions and calculations of comparable store sales differ among companies in the retail industry, and therefore comparable

store sales disclosed by us may not be comparable to the metrics disclosed by other companies.

Cost of Sales or Gross Margins

Our cost of sales includes the cost of footwear purchased from our manufacturers, 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 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 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 Rancho Belago, European and other foreign distribution centers, professional
fees related to both legal and accounting, insurance, depreciation and amortization, and asset impairment, legal settlements, amongst
other expenses. Our distribution network related costs are included in general and administrative expenses and are not allocated to
specific segments.

YEAR ENDED DECEMBER 31, 2014 COMPARED TO THE YEAR ENDED DECEMBER 31, 2013

Net sales

Net sales for 2014 were $2.378 billion, which was an increase of $531.2 million, or 28.8%, compared to net sales of $1.846 billion
for 2013. The increase in net sales broad based and was attributable to higher sales in our domestic wholesale segment, international
wholesale segment and our retail segment primarily due to the introduction of new styles and lines of footwear.

Our domestic wholesale net sales increased $195.8 million, or 24.4%, to $998.0 million for 2014 compared to $802.2 million for
2013. The increase in our domestic wholesale segment was attributable to strong sales and significant growth in several key divisions
including our Women’s Go, Women’s Active, Men’s and Women’s Sport, and Men’s USA divisions, which was partially offset by
reduced sales of our BOB’s products during 2014. The increase in the domestic wholesale segment’s net sales also resulted from a
19.1% unit sales volume increase to 44.9 million pairs in 2014 from 37.7 million pairs in 2013. The average selling price per pair
within the domestic wholesale segment increased 4.4%, to $22.20 per pair for 2014 from $21.26 for 2013, which was primarily the
result of increased selling prices for our Women’s Sport, Women’s Active and Men’s USA divisions.

Our international wholesale segment net sales increased $210.4 million, or 43.9%, to $689.2 million for 2014 compared to sales of
$478.8 million for 2013. Our international wholesale sales consist of direct sales by our foreign subsidiaries – those sales we make to
department stores and specialty retailers – and sales to our distributors, who in turn sell to retailers in various international regions
where we do not sell directly. Direct sales by our foreign subsidiaries increased $143.0 million, or 40.4%, to $497.1 million for 2014
compared to sales of $354.1 million for 2013. The largest sales increases during the year came from our subsidiaries in the United
Kingdom, Germany, and Canada and our joint ventures in China and Hong Kong. The increases are primarily attributable to sales of
our Women’s and Men’s Go, Women’s Active and Men’s and Women’s Sport lines. Our distributor sales increased $67.3 million, or
54.1%, to $192.0 million for 2014, compared to sales of $124.7 million for 2013. This was primarily attributable to increased sales to
our distributors in Australia and New Zealand, South Korea, Taiwan, and the United Arab Emirates (“UAE”).

Our retail segment sales increased $125.3 million to $663.5 million for the year ended December 31, 2014, a 23.3% increase over
sales of $538.2 million for 2013. The increase in retail sales was primarily attributable to increased comparable sales of 10.6%, which
included increased sales of our Women’s Go, Women’s Active, Men’s and Women’s Sport, and Men’s USA divisions and a net
increase of 41 domestic and 18 international stores compared to 2013. For the year ended December 31, 2014, our domestic retail
sales increased 16.2% compared to 2013, which was attributable to positive comparable domestic store sales of 8.9% and increased
domestic store count, and our international retail store sales increased 64.2% compared to 2013, which was attributable to increased
international store count and positive comparable international store sales of 20.8%. During 2014, we opened two new domestic
concept stores, 17 domestic factory outlet stores, 29 domestic warehouse outlet stores, nine international concept stores, seven
international factory outlet stores and three international warehouse outlet stores.

We believe that we have established our presence in most major domestic retail markets. We had 363 domestic stores and 84
international retail stores as of February 15, 2015, and we currently plan to open approximately 50 to 60 stores in 2015. We opened 48
domestic retail stores and 19 international retail stores in 2014, while closing seven underperforming domestic stores and one
international concept store. We opened 31 domestic retail stores and 16 international retail stores in 2013, while closing 10
underperforming domestic stores and one international store. We periodically review all of our stores for impairment. During 2014
and 2013, we did not record an impairment charge. 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 decreased $0.3 million to $26.9 million for 2014, a 1.3% decrease compared to sales of $27.2 million
for 2013. Our e-commerce sales made up approximately 1.1% and 1.5% of our consolidated net sales for 2014 and 2013, respectively.

Gross profit

Gross profit for 2014 increased $253.1 million to $1.072 billion from $818.8 million for 2013. Gross profit as a percentage of net
sales, or gross margin, increased to 45.1% in 2014 from 44.4% for 2013. Our domestic wholesale segment gross profit increased $79.2
million, or 27.4%, to $368.0 million for 2014 from $288.8 million for 2013 attributable to increased sales volume. Domestic
wholesale margins increased to 36.9% for 2014 from 36.0% for 2013. The increase in domestic wholesale margins was primarily
attributable to higher margins in our Men’s USA and Women’s Sport lines.

Gross profit for our international wholesale segment increased $93.8 million, or 47.2%, to $292.7 million for 2014 compared to
$198.9 million for 2013. Gross margins were 42.5% for 2014 compared to 41.5% for 2013. The increase in gross margins for our
international wholesale segment was primarily attributable to increased sales by our subsidiaries, which historically have achieved
higher gross margins attributable to direct sales to customers than our international wholesale sales through our foreign distributors.
Gross margins for our international direct subsidiary sales were 48.6% for 2014 as compared to 47.3% for 2013 primarily attributable
to increased sales of our newer products. Gross margins for our international distributor sales were 26.5% for 2014 as compared to
25.1% for 2013.

Gross profit for our retail segment increased $79.6 million, or 24.9%, to $398.6 million for 2014 as compared to $319.0 million for
2013. Gross margins for all stores were 60.1% for 2014 compared to 59.3% for 2013. Gross margins for our domestic stores were
60.8% for 2014 as compared to 59.6% for 2013. Gross margins for our international stores were 57.2% for 2014 and 2013. The
increases in domestic and overall retail margins were primarily attributable to increased sales of our newer products at higher margins.

Selling expenses

Selling expenses increased by $27.5 million, or 17.9%, to $181.0 million for 2014 from $153.5 million for 2013, although selling
expenses decreased as a percentage of net sales to 7.6% for 2014 from 8.3% for 2013 attributable to increased net sales. The increase
in selling expenses was primarily the result of higher advertising expenses, which also decreased as a percentage of net sales to 5.3%
in 2014 from 5.6% in 2013 attributable to increased net sales.

General and administrative expenses

General and administrative expenses increased by $111.5 million, or 19.2%, to $690.9 million for 2014 from $579.4 million for
2013. As a percentage of sales, general, administrative and legal expenses were 29.1% and 31.4% for 2014 and 2013, respectively.
The increase in general, administrative and legal expenses was primarily attributable to $41.6 million related to supporting our
growing international operations, increased store operating costs of $31.6 million primarily attributable to an additional 59 stores in
comparison to the prior year, increased salaries and wages of $19.9 million, which includes incentive compensation, $7.5 million from
bad debt write-offs and increased warehouse and distribution costs of $11.9 million. In addition, the expenses related to our
distribution network, including the functions of purchasing, receiving, inspecting, allocating, warehousing and packaging of our
products totaled $134.8 million and $122.9 million for 2014 and 2013, respectively.

Other income (expense)

Interest income was $0.8 million for each of 2014 and 2013. Interest expense for 2014 increased $0.6 million to $12.5 million
compared to $11.9 million in 2013. The increase was primarily attributable to increased interest expense of $1.3 million attributable to
interest incurred on purchases from our foreign manufacturers that increased compared to the prior year, which was offset by reduced
interest paid on loans for our domestic distribution center equipment. Loss on foreign currency transactions for 2014 increased $4.6
million to $5.4 million compared to $0.8 million in 2013. This increased foreign currency exchange loss was primarily attributable to
higher short-term intercompany investments balances in our foreign subsidiaries and a stronger U.S. dollar. Gain on disposal of assets
for 2014 decreased $1.3 million to a loss of $0.9 million as compared to a gain of $0.4 million in 2013.

Income taxes

Our provision for income tax expense (benefit) and our effective income tax rate are significantly impacted by the mix of our
domestic and foreign earnings (loss) before income taxes. In the non-U.S. jurisdictions in which we have operations, the applicable
statutory rates are generally significantly lower than in the U.S., ranging from 0% to 34%. Our provision for income tax expense
(benefit) was calculated using the applicable statutory income tax rate for each jurisdiction applied to our pre-tax earnings (loss) in
each jurisdiction, while our effective tax rate is calculated by dividing income tax expense (benefit) by earnings (loss) before income
taxes.

Our earnings (loss) before income taxes and income tax expense (benefit) for 2014, 2013 and 2012 are as follows (in thousands):

Years Ended December 31,

Income tax jurisdiction

2014

Earnings (loss)
before income
taxes

Income tax
expense

2013

Earnings (loss)
before income
taxes

2012

Income tax
expense

Earnings (loss)
before income
taxes

Income tax
expense
(benefit)

United States ..............................................................
Canada ................................................................
Chile ................................................................
Peoples Republic of China (“China”) .........................
Jersey (1) ................................................................
Non-benefited loss operations (2) ..............................
Other jurisdictions (3) ................................
$
Earnings before income taxes ................................

82,778
6,241
629
15,201
77,555
(13,021)
21,997
191,380

$ 32,500
1,572
138
1,179
0
0
3,795
$ 39,184

38,705
4,091
9,622
6,148
25,348
(15,841)
14,142
82,215

$ 12,807
1,187
1,920
1,646
0
0
3,787
$ 21,347

(27,379)
2,564
5,971
1,278
25,162
(13,492)
16,369
10,473

(5,867)
545
1,043
319
0
0
3,921
(39)

20.5%

Effective tax rate (4) ................................
__________
(1) Jersey does not assess income tax on corporate net earnings.
(2) Consists of entities in the following tax jurisdictions where no tax benefit is recognized in the period being reported because of the
provision of offsetting valuation allowances: Japan, Brazil and India.
(3) Consists of entities in the following tax jurisdictions, each of which comprises not more than 5%, of 2014 consolidated earnings (loss)
before taxes: UK, Germany, France, Spain, Belgium, Italy, Netherlands, Switzerland, Malaysia, Thailand, Singapore, Hong Kong,
Portugal and Austria.
(4) The effective tax rate is calculated by dividing income tax expense (benefit) by earnings before income taxes.

(0.4)%

26.0%

For 2014, the effective tax rate was lower than the U.S. federal and state combined statutory rate of approximately 39% primarily
because of earnings from foreign operations in jurisdictions imposing either lower tax rates on corporate earnings or no corporate
income tax. During 2014, as reflected in the table above, earnings (loss) before income taxes in the U.S. was earnings of $82.8
million, with income tax expense of $32.5 million, an average rate of 39.3%, while earnings (loss) before income taxes in non-U.S.
jurisdictions was earnings of $108.6 million, with aggregate income tax expense of $6.7 million, an average rate of 6.2%. Combined,
this results in consolidated earnings before income taxes for the period of $191.4 million, and consolidated income tax expense for the
period of $39.2 million, resulting in an effective tax rate of 20.5%. We estimate our annual effective tax rate for 2015 to be between
20 percent and 25 percent. The estimated effective tax rate for 2015 is subject to management’s ongoing review and revision, if
necessary.

For 2014, of our $108.6 million in earnings before income tax earned outside the U.S., $77.6 million was earned in Jersey, which
does not impose a tax on corporate earnings. In addition, there were foreign losses of $13.0 million for which no tax benefit was
recognized during the year ended December 31, 2014 because of the provision of offsetting valuation allowances. Individually, none
of the other foreign jurisdictions included in “Other jurisdictions” in the table above had more than 5% of our 2014 consolidated
earnings (loss) before taxes.

Unremitted earnings of non-U.S. subsidiaries are expected to be reinvested outside of the U.S. indefinitely. Such earnings would

become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends.

As of December 31, 2014, we had approximately $466.7 million in cash and cash equivalents, of which $193.2 million, or 41.4%,
was held outside the U.S. Of the $193.2 million held by our non-U.S. subsidiaries, approximately $42.8 million is available for
repatriation to the U.S. without incurring U.S. income taxes and applicable non-U.S. income and withholding taxes in excess of the
amounts accrued in our financial statements as of December 31, 2014. We believe our cash and cash equivalents held in the U.S. and
cash provided from operations are sufficient to meet our liquidity needs in the U.S. for the next twelve months and we do not expect
that we will need to repatriate any of the funds presently designated as indefinitely reinvested outside the U.S. Under current
applicable tax laws, if we chose to repatriate some or all of the funds we have designated as indefinitely reinvested outside the U.S.,
the amount repatriated would be subject to U.S. income taxes and applicable non-U.S. income and withholding taxes. As of December
31, 2014 and 2013, U.S. income taxes have not been provided on cumulative total earnings of approximately $318.2 million and
$226.0 million, respectively.

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

Non-controlling interest for 2014 increased $7.3 million to expense of $13.4 million as compared expense of $6.1 million for

2013. Non-controlling interest represents the share of net earnings or loss that is attributable to our joint venture partners.

YEAR ENDED DECEMBER 31, 2013 COMPARED TO THE YEAR ENDED DECEMBER 31, 2012

Net sales

Net sales for 2013 were $1.846 billion, which was an increase of $286.0 million, or 18.3%, compared to net sales of $1.560 billion
for 2012. The increase in net sales was primarily attributable to higher sales in our domestic wholesale, international subsidiaries and
retail segments of new styles and lines of footwear that we launched in the second half of 2012.

Our domestic wholesale net sales increased $149.5 million, or 22.9%, to $802.2 million for 2013 compared to $652.7 million for
2012. The increase in our domestic wholesale segment was attributable to strong sales and significant growth in several key divisions
including our Women’s Go, and Men’s and Women’s Sport and BOBS divisions, which were offset by reduced sales in our Women’s
Active and Women’s USA divisions. The increase in the domestic wholesale segment’s net sales also resulted from a 24.3% unit sales
volume increase to 37.7 million pairs in 2013 from 30.4 million pairs in 2012. The average selling price per pair within the domestic
wholesale segment decreased slightly to $21.26 per pair for 2013 from $21.50 for 2012, which was primarily the result of lower
selling prices in our BOBS and Men’s lines and increased closeouts as compared to 2012.

Our international wholesale segment net sales increased $46.6 million, or 10.8%, to $478.8 million for 2013 compared to sales of
$432.2 million for 2012. Direct sales by our foreign subsidiaries increased $59.7 million, or 20.3%, to $354.1 million for 2013
compared to sales of $294.4 million for 2012. The largest sales increases during the year came from our subsidiaries in Canada and
France and our joint ventures in Hong Kong, China, Singapore and India, which were offset by decreases in Spain and Italy. The
increases are primarily attributable to sales of our Women’s and Men’s Go, Women’s Active, Women’s Sport and Twinkle Toes’
lines. Our distributor sales decreased $13.0 million, or 9.5%, to $124.7 million for 2013, compared to sales of $137.7 million for 2012.
This was primarily attributable to decreased sales to our distributors in Panama, South Korea, Ukraine and the United Arab Emirates.

Our retail segment net sales increased $84.6 million, or 18.7%, to $538.2 million for 2013, compared to sales of $453.6 million for
2012. The increase in retail sales was attributable to positive comparable store sales and a net increase of 21 domestic stores and 15
international stores. For 2013, we realized positive comparable store sales of 14.8% in our domestic retail stores and 15.2% in our
international retail stores. The comparable store sales increase was principally driven by increased sales of our newer products. During
2013, we opened 10 new domestic concept stores, 13 domestic factory outlet stores, eight domestic warehouse outlet stores, eight
international concept stores and eight international factory outlet stores. Our domestic retail sales increased 17.8% for 2013 in
comparison to 2012 as the result of the positive comparable store sales and the net increase of 21 domestic stores. Our international
retail sales increased 24.1% for 2013 compared to 2012, which was primarily attributable to increases in net sales in Canada, Chile
and the United Kingdom as well as a net increase of 15 international stores.

We believe that we have established our presence in most major domestic retail markets. We had 324 domestic stores and 70
international retail stores as of February 15, 2014. We opened 31 domestic retail stores and 16 international retail stores in 2013, while
closing 10 underperforming domestic stores and one international store. In 2012, we closed five domestic stores and two international
concept stores. We periodically review all of our stores for impairment. During 2013 and 2012, we did not record an impairment
charge. 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 $5.3 million to $27.2 million for 2013, a 24.2% increase compared to sales of $21.9 million
for 2012. Our e-commerce sales made up approximately 1.5% and 1.4% of our consolidated net sales for 2013 and 2012, respectively.

Gross profit

Gross profit for 2013 increased $135.5 million to $818.8 million from $683.3 million for 2012. Gross profit as a percentage of net
sales, or gross margin, increased to 44.4% in 2013 from 43.8% for 2012. Our domestic wholesale segment gross profit increased $45.9
million, or 18.9%, to $288.8 million for 2013 from $242.9 million for 2012 attributable to increased sales volume. Domestic
wholesale margins decreased to 36.0% for 2013 from 37.2% for 2012. The decrease in domestic wholesale margins was primarily

attributable to lower margins in our Men’s and Women’s Active lines as well as increased non-toning closeouts, which were partially
offset by reduced sales of discounted toning products as compared to the same period in the prior year.

Gross profit for our international wholesale segment increased $32.4 million, or 19.5%, to $198.9 million for 2013 compared to
$166.5 million for 2012. Gross margins were 41.5% for 2013 compared to 38.5% for 2012. The increase in gross margins for our
international wholesale segment was primarily attributable to increased sales by our European subsidiaries, which historically have
achieved higher gross margins attributable to direct sales to customers than our international wholesale sales through our foreign
distributors. Gross margins for our direct foreign subsidiary sales were 47.3% for 2013 as compared to 44.7% for 2012 primarily
attributable to reduced sales of discounted toning products and increased sales of our newer products. Gross margins for our
international distributor sales were 25.1% for 2013 as compared to 25.3% for 2012.

Gross profit for our retail segment increased $55.0 million, or 20.8%, to $319.0 million for 2013 as compared to $264.0 million for
2012. Gross margins for all stores were 59.3% for 2013 compared to 58.2% for 2012. Gross margins for our domestic stores were
59.6% for 2013 as compared to 58.6% for 2012. Gross margins for our international stores were 57.2% for 2013 as compared to
56.1% for 2012. The increases in domestic and overall retail margins were primarily attributable to increased sales of our newer
products at higher margins and reduced sales of discounted toning products at lower margins.

Selling expenses

Selling expenses increased by $18.6 million, or 13.8%, to $153.5 million for 2013 from $134.9 million for 2012, although selling
expenses decreased as a percentage of net sales to 8.3% for 2013 from 8.7% for 2012 attributable to increased net sales. The increase
in selling expenses was primarily the result of higher advertising expenses, which also decreased as a percentage of net sales to 5.6%
in 2013 from 5.8% in 2012 attributable to increased net sales.

General, administrative and legal expenses

General, administrative and legal expenses increased by $46.2 million, or 8.7%, to $579.4 million for 2013 from $533.2 million for
2012. As a percentage of sales, general, administrative and legal expenses were 31.4% and 34.2% for 2013 and 2012, respectively.
The increase in general, administrative and legal expenses was primarily attributable to increased salaries and wages of $14.3 million,
which includes incentive compensation, increased warehouse and distribution costs of $8.1 million and increased rent expense of $5.3
million primarily attributable to an additional 36 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 $122.9 million and $119.3 million for 2013 and 2012, respectively.

Interest income

Interest income for 2013 increased $0.2 million to $0.8 million as compared to $0.6 million for 2012. The increase in interest

income was primarily attributable to higher cash balances.

Interest expense

Interest expense for 2013 decreased $1.4 million to $11.9 million compared to $13.3 million in 2012. The decrease was primarily
attributable to decreased interest expense of $0.3 million attributable to reduced principal balances on loans related to equipment in
our domestic distribution center and reduced interest expense of $0.5 million attributable to lower interest rates on loans related to our
domestic distribution center that we refinanced in November 2012. Interest expense was also incurred on amounts owed to our foreign
manufacturers.

Gain on disposal of assets

Gain on disposal of assets for 2013 increased $0.6 million to a gain of $0.4 million as compared to a loss of $0.2 million in 2012.

Income taxes

(benefit) was calculated using the applicable statutory income tax rate for each jurisdiction applied to our pre-tax earnings (loss) in
each jurisdiction, while our effective tax rate is calculated by dividing income tax expense (benefit) by earnings (loss) before income
taxes.

Our earnings (loss) before income taxes and income tax expense (benefit) for 2013, 2012 and 2011 are as follows (in thousands):

Income tax jurisdiction

2013

Earnings (loss)
before income
taxes

2012

2011

Income tax
expense

Earnings (loss)
before income
taxes

Income tax
expense
(benefit)

Earnings (loss)
before income
taxes

Income tax
expense
(benefit)

Years Ended December 31,

United States ..............................................................
Canada ................................................................
Chile ................................................................
Peoples Republic of China (“China”) .........................
Jersey (1) ................................................................
Non-benefited loss operations (2) ..............................
Other jurisdictions (3) ................................
$
Earnings (loss) before income taxes ..........................

38,705
4,091
9,622
6,148
25,348
(15,841)
14,142
82,215

$ 12,807
1,187
1,920
1,646
0
0
3,787
$ 21,347

(27,379)
2,564
5,971
1,278
25,162
(13,492)
16,369
10,473

(5,867) $
545
1,043
319
0
0
3,921

(39) $

(161,976)
945
9,321
1,416
25,109
(16,844)
10,982
(131,047)

$ (66,355)
309
2,030
354
0
0
195
$ (63,467)

26.0%

Effective tax rate (4) ................................
__________
(1) Jersey does not assess income tax on corporate net earnings.
(2) Consists of entities in the following tax jurisdictions where no tax benefit is recognized in the period being reported because of the
provision of offsetting valuation allowances: Japan, Brazil, China, Hong Kong and India.
(3) Consists of entities in the following tax jurisdictions, each of which comprises not more than 5%, of 2013 consolidated earnings (loss)
before taxes: UK, Germany, France, Spain, Belgium, Italy, Netherlands, Switzerland, Malaysia, Thailand, Singapore, China, Hong Kong,
Portugal and Austria.
(4) The effective tax rate is calculated by dividing income tax expense (benefit) by earnings (loss) before income taxes.

(0.4%)

48.4%

For 2013, the effective tax rate was lower than the U.S. federal and state combined statutory rate of approximately 40% primarily
because of earnings from foreign operations in jurisdictions imposing either lower tax rates on corporate earnings or no corporate
income tax. During 2013, as reflected in the table above, earnings (loss) before income taxes in the U.S. was earnings of $38.7
million, with income tax expense of $12.8 million, an average rate of 33.1%, while earnings (loss) before income taxes in non-U.S.
jurisdictions was earnings of $43.5 million, with aggregate income tax expense of $8.5 million, an average rate of 19.6%. Combined,
this results in consolidated earnings (loss) before income taxes for the period of $82.2 million, and a consolidated income tax expense
for the period of $21.3, resulting in an effective tax rate of 26.0%.

For 2013, of our $43.5 million in earnings before income tax earned outside the U.S., $25.3 million was earned in Jersey, which
does not impose a tax on corporate earnings. In addition, there were foreign losses of $15.8 million for which no tax benefit was
recognized during the year ended December 31, 2013 because of the provision of offsetting valuation allowances. Individually, none
of the other foreign jurisdictions included in “Other jurisdictions” in the table above had more than 5% of our 2013 consolidated
earnings (loss) before taxes.

Unremitted earnings of non-U.S. subsidiaries are expected to be reinvested outside of the U.S. indefinitely. Such earnings would

become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends.

As of December 31, 2013, we had approximately $372.0 million in cash and cash equivalents, of which $166.5 million, or 44.8%,
was held outside the U.S. Of the $166.5 million held by our non-U.S. subsidiaries, approximately $51.2 million is available for
repatriation to the U.S. without incurring U.S. income taxes and applicable non-U.S. income and withholding taxes in excess of the
amounts accrued in our financial statements as of December 31, 2013. We believe our cash and cash equivalents held in the U.S. and
cash provided from operations are sufficient to meet our liquidity needs in the U.S. for the next twelve months and we do not expect
that we will need to repatriate any of the funds presently designated as indefinitely reinvested outside the U.S. Under current
applicable tax laws, if we chose to repatriate some or all of the funds we have designated as indefinitely reinvested outside the U.S.,
the amount repatriated would be subject to U.S. income taxes and applicable non-U.S. income and withholding taxes. As of December

31, 2013 and 2012, U.S. income taxes have not been provided on cumulative total earnings of approximately $226.0 million and
$171.2 million, respectively.

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

Non-controlling interest for 2013 increased $5.1 million to expense of $6.1 million as compared expense of $1.0 million for 2012.

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

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Our working capital at December 31, 2014 was $779.3 million, an increase of $74.8 million from working capital of $704.5
million at December 31, 2013. Our cash and cash equivalents at December 31, 2014 was $466.7 million compared to $372.0 million at
December 31, 2013. This increase in cash of $94.7 million, after consideration of the effect of exchange rates, was the result of our net
earnings of $152.2 million, depreciation of property and equipment of $47.6 million and increased payables of $98.7 million, which
was partially offset by capital expenditures of $56.9 million, increased receivables of $70.7 million and increased inventory levels of
$100.2 million. Our primary sources of operating cash are collections from customers on wholesale and retail sales. Our primary uses
of cash are inventory purchases, selling, general and administrative expenses and debt service payments.

Net cash provided by operating activities was $163.9 million for 2014 and net cash provided by operating activities was $99.0
million for 2013. On a comparative year-to-year basis, the $64.9 million increase in cash flows from operating activities in 2014 from
cash used in operating activities in 2013 primarily resulted from an increase in net earnings of $91.3 million and an increase in
accounts payable balances of $81.1 million primarily attributable to increased unpaid balances to our contract manufactures due to
increased purchases at the end of the year when compared to the same period in the prior year. The increase in net earnings and
accounts payable balances were partially offset by a $127.0 million increase in inventories to support increased worldwide backlogs
and increased accounts receivable balances as of December 31, 2014 as compared to December 31, 2013.

Net cash used in investing activities was $56.9 million for 2014 as compared to $41.4 million in 2013. The increase in cash used in
investing activities in 2014 as compared to 2013 was the result of increased capital expenditures. Capital expenditures for 2014 were
approximately $56.9 million, which consisted of $28.4 million for new store openings and remodels, $13.9 million for the initial phase
of automation upgrades for our European Distribution Center equipment, $2.5 million in domestic warehouse equipment upgrades,
$1.8 million for equipment costs for our new distribution center in Chile and $2.1 million related to a property purchase for potential
future corporate development. This was compared to capital expenditures of $41.3 million in the prior year, which primarily consisted
of development costs for our Rancho Belago distribution center and new store openings and remodels. We expect our ongoing capital
expenditures for 2015 to be between $35.0 million and $45.0 million, which includes opening 50 to 60 retail stores, store remodels, a
property purchase for potential future corporate development and investments in information technology. In addition, we are currently
in the process of designing and installing additional phases of equipment upgrades for our European Distribution Center and Rancho
Belago distribution center and estimate the remaining cost of these equipment upgrades to be approximately $25.0 million. We expect
these upgrades to be substantially complete by the end of 2015. We believe our current cash, operating cash flows, 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 used in financing activities was $9.0 million during 2014 compared to $9.9 million during 2013. The increase in cash
used by financing activities was primarily attributable to decreased contributions received from the non-controlling interest which
were offset by increased short-term borrowings.

Sources of Liquidity

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 October 31, 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 $77.9 million outstanding under the Loan Agreement and the Modification, which is included in
short-term borrowings on December 31, 2014. We paid commitment fees of $0.6 million on the Modification, which are being
amortized to interest expense over the three-year life of the Modification.

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 accrues 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 accrues at a
fixed rate of 3.19% per annum. As of December 31, 2014, an aggregate of $37.1 million was outstanding under the Notes, of which
$23.2 million is included in long-term borrowings and $13.9 million is included in short-term borrowings. We paid commitment fees
of $0.8 million 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 banks,
of which six currently remain as participants. On November 5, 2009, March 4, 2010, May 3, 2011, and September 30, 2013, we
entered into four 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 (0.50%, 0.75% or
1.00% for Base Rate loans and 1.50%, 1.75% or 2.00% for LIBOR loans). We pay a monthly unused line of credit fee of 0.25% or
0.375% 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 six-year life of the facility.

As of December 31, 2014, outstanding short-term and long-term borrowings were $118.3 million, of which $37.1 million relates to
notes payable for warehouse equipment for our domestic distribution center that are secured by the equipment, and $79.4 million
primarily relates to our construction loans for our domestic distribution center and $1.7 million relates to our joint venture in India.

We believe that existing cash balances, anticipated cash flows from operations, available borrowings under our secured line of
credit, and current financing arrangements will be sufficient to provide us with the liquidity necessary to fund our anticipated working
capital and capital requirements through at least March 31, 2016 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 $318.2 million of cumulative
undistributed earnings as of December 31, 2014. However, in connection with our current strategies, we will face significant working
capital requirements and capital expenditures. Our future capital requirements will depend on many factors, including, but not limited
to, the sustained pace and strength of the economic recovery in our markets, costs associated with upgrading the equipment in both our
European Distribution Center and Rancho Belago distribution center, 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 terms
favorable to our stockholders and us. Failure to obtain such financing could delay or prevent our current business plans, which could
adversely affect our business, financial condition and results of operations. In addition, if additional capital is raised through the sale
of additional equity or convertible securities, dilution to our stockholders could occur.

DISCLOSURE ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table summarizes our material contractual obligations and commercial commitments as of December 31, 2014 (In
thousands):

Less than

One
Year

One to
Three
Years

Three to

Five
Years

More Than
Five
Years

Total

1,810 $

Short-term borrowings .................................... $
Long-term borrowings (1) ..............................
116,488
Operating lease obligations (2) ....................... 1,069,447
733,578
Purchase obligations (3) .................................
Rancho Belago and EDC equipment ..............
24,016
Minimum payments related to
other arrangements.........................................
1,761
Total (4) ......................................................... $ 1,951,848 $ 1,008,254 $ 271,685

-
14,525
255,399
-
-

101,407
142,695
733,578
24,016

1,810 $

4,748

6,509

-
556
209,997
-
-

-
-
461,356
-
-

-
$ 210,553

-
$ 461,356

__________

(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, European and
other international distribution centers. These leases frequently include options that permit us to extend beyond the terms of
the initial fixed term. We currently expect to fund these commitments with cash flows from operations and existing cash
balances.

(3) Purchase obligations include the following: (i) accounts payable balances for the purchase of footwear of $171.5 million, (ii)
outstanding letters of credit of $3.4 million and (iii) open purchase commitments with our foreign manufacturers for $558.7
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, 2014, included $7.9 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, and 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. 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. Sales and value added taxes collected from retail customers are excluded from reported revenues.
While customers do not have the right to return goods, we periodically decide to accept returns or provide customers with credits.
Allowances for estimated returns, discounts, doubtful accounts and chargebacks are provided for when related revenue is recorded.

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 returns, sales allowances and customer chargebacks are
recorded against revenue. Allowances for bad debts are recorded to general and administrative expenses.

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 were $293.1 million and $241.9 million, and the allowance for bad debts, returns, sales allowances and customer
chargebacks were $21.0 million and $15.9 million, at December 31, 2014 and 2013, respectively. Our credit losses charged to expense
for the years ended December 31, 2014, 2013 and 2012 were $11.8 million, $2.6 million and $1.5 million, respectively. In addition,
we recorded sales return and allowance expense (recoveries) for the years ended December 31, 2014, 2013 and 2012 of $2.3 million,
$0.2 million and $(0.4) 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
$457.1 million and $361.9 million and our inventory reserve was $3.3 million and $3.8 million, at December 31, 2014 and 2013,
respectively.

Valuation of intangibles and 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:

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

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

•

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, 2014, 2013 and
2012, respectively we did not record an impairment charge.

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, 2014, we had net deferred tax assets of $26.4
million reduced by a valuation allowance of $17.5 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.

EXCHANGE RATES

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 2014 and 2013, 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.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) amended the FASB Accounting Standards Codification and
created a new Topic 606, “Revenue from Contracts with Customers” (“ASC 606”). This amendment prescribes that an entity should
recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to
which the entity expects to be entitled in exchange for those goods or services. The amendment supersedes the revenue recognition
requirements in Topic 605, “Revenue Recognition”, and most industry-specific guidance throughout the Industry Topics of the
Codification. For annual and interim reporting periods the mandatory adoption date of ASC 606 is January 1, 2017, and there will be
two methods of adoption allowed, either a full retrospective adoption or a modified retrospective adoption. The Company is currently
evaluating the impact of ASC 606, but at the current time does not know what impact the new standard will have on revenue
recognized and other accounting decisions in future periods, if any, nor what method of adoption will be selected if the impact is
material.

In August 2014, the FASB amended the FASB Accounting Standards Codification and amended Subtopic 205-40, “Presentation
of Financial Statements – Going Concern.” This amendment prescribes that an entity’s management should evaluate whether there are
conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern
within one year after the date that the financial statements are issued. The amendments will become effective for the Company’s
annual and interim reporting periods beginning January 1, 2017. The Company is evaluating the impact on its consolidated financial
statements, however, the Company does not expect that the adoption of this standard will have a material impact on the Company’s
consolidated financial statements.

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 either of these rates of interest could have an effect on the interest charged on our outstanding balances. At December
31, 2014 we had $1.8 million and $77.9 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, 2014 would have reduced the
values of our net investments by approximately $11.0 million.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ......................................................................... 49

CONSOLIDATED BALANCE SHEETS ............................................................................................................................................ 50

CONSOLIDATED STATEMENTS OF EARNINGS ........................................................................................................................ 51

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ........................................................................................ 52

CONSOLIDATED STATEMENTS OF EQUITY .............................................................................................................................. 53

CONSOLIDATED STATEMENTS OF CASH FLOWS ................................................................................................................... 54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ........................................................................................................ 55

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS ............................................................................................. 77

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Skechers U.S.A., Inc.
Manhattan Beach, CA

We have audited the accompanying consolidated balance sheets of Skechers U.S.A., Inc. and subsidiaries as of December 31,
2014 and 2013 and the related consolidated statements of earnings, comprehensive income, equity, and cash flows for each of the
three years in the period ended December 31, 2014. In connection with our audits of the financial statements, we have also
audited the financial statement schedule listed in the accompanying index. These financial statements and schedule are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and
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, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements and schedule. 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 at December 31, 2014 and 2013, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally
accepted in the United States of America.

Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements
taken as a whole, present 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),
Skechers U.S.A., Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and our report dated February 27, 2015 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP

Los Angeles, CA
February 27, 2015

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

December 31,
2014

December 31,
2013

Current Assets:

ASSETS

Cash and cash equivalents ................................................................................................
Trade accounts receivable, less allowances of $21,007 in 2014 and $15,926 in 2013 .....
Other receivables ..............................................................................................................
Total receivables .......................................................................................................
Inventories ........................................................................................................................
Prepaid expenses and other current assets ........................................................................
Deferred tax assets ............................................................................................................
Total current assets ...................................................................................................
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 ..............................................................................................................
Total non-current assets ............................................................................................
TOTAL ASSETS .................................................................................................................

$ 466,685
272,103
16,510
288,613
453,837
57,015
18,864
1,285,014
373,183
1,630
2,044
13,047
389,904
$1,674,918

$ 372,011
225,941
10,599
236,540
358,168
26,094
22,115
1,014,928
361,755
2,377
9,950
19,560
393,642
$1,408,570

LIABILITIES AND EQUITY

Current Liabilities:

Current installments of long-term borrowings ..................................................................
Short-term borrowings ......................................................................................................
Accounts payable ..............................................................................................................
Accrued expenses .............................................................................................................
Total current liabilities ..............................................................................................
Long-term borrowings, excluding current installments ........................................................
Other long-term liabilities ....................................................................................................
Total non-current liabilities ......................................................................................
Total liabilities ..........................................................................................................

$ 101,407
1,810
352,815
49,705
505,737
15,081
19,993
35,074
540,811

$ 12,028
87
258,183
40,124
310,422
116,488
1,740
118,228
428,650

Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $.001 par value; 10,000 shares authorized; none issued and outstanding ..
Class A Common Stock, $.001 par value; 100,000 shares authorized; 40,287 and
39,688 shares issued and outstanding at December 31, 2014 and 2013, respectively .........
Class B Common Stock, $.001 par value; 60,000 shares authorized; 10,470 and
10,870 shares issued and outstanding at December 31, 2014 and 2013, respectively .........
Additional paid-in capital .....................................................................................................
Accumulated other comprehensive loss ...............................................................................
Retained earnings .................................................................................................................
Skechers U.S.A., Inc. equity .....................................................................................
Noncontrolling interests .......................................................................................................
Total equity ...............................................................................................................
TOTAL LIABILITIES AND EQUITY ................................................................................

10
355,636
(16,077)
735,640
1,075,249
58,858
1,134,107
$1,674,918

11
342,143
(8,701)
596,829
930,322
49,598
979,920
$1,408,570

See accompanying notes to consolidated financial statements.

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

Net sales ......................................................................................................... $ 2,377,561
1,305,656
Cost of sales ....................................................................................................
1,071,905
Gross profit ................................................................................................
9,107
Royalty income ...............................................................................................
1,081,012

$ 1,846,361
1,027,569
818,792
7,734
826,526

$ 1,560,321
876,995
683,326
7,104
690,430

Years Ended December 31,
2013

2014

2012

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

Earnings from operations.............................................................................

181,018
690,923
871,941
209,071

Other income (expense):
Interest income ..............................................................................................
Interest expense .............................................................................................
Other, net .......................................................................................................
Gain (loss) on foreign currency transactions .................................................

837
(12,466)
(662)
(5,400)
(17,691)
191,380
39,184
152,196
13,385
Net earnings attributable to Skechers U.S.A., Inc. ....................................... $ 138,811

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

153,491
579,426
732,917
93,609

841
(11,890)
447
(792)
(11,394)
82,215
21,347
60,868
6,080
54,788

134,920
533,191
668,111
22,319

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

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

$
$

2.74
2.72

$
$

1.09
1.08

$
$

0.19
0.19

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

50,613
51,026

50,363
50,563

49,495
49,942

See accompanying notes to consolidated financial statements.

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

Years Ended December 31,

2014

2013

2012

Net earnings ....................................................................................................
Other comprehensive income, net of tax:

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

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

$ 152,196

$ 60,868

$ 10,512

(7,954)
144,242

(6,363)
54,505

(1,251)
9,261

12,807
$ 131,435

6,018
$ 48,487

1,255
8,006

See accompanying notes to consolidated financial statements.

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

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
T ax benefit of stock options exercised
Conversion of Class B Common Stock into
Class A Common Stock
Balance at December 31, 2012
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
T ax benefit of stock options exercised
Conversion of Class B Common Stock into
Class A Common Stock
Balance at December 31, 2013
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
T ax benefit of stock options exercised
Conversion of Class B Common Stock into
Class A Common Stock
Balance at December 31, 2014

S HA R ES

A M OU N T

A C C U M U LA TED

C LA S S A

C LA S S B

C LA S S A

C LA S S B

A D D ITION A L

OTHER

S KEC HER S

N ON

TOTA L

C OM M ON

P A ID - IN

C OM P R EHEN S IV E

R ETA IN ED

U . S . A . , IN C .

C ON TR OLLIN G

S TOC KHOLD ER S '

S TOC K
37,959
--
--

S TOC K

11,297
--
--

S TOC K
38
$
--
--

S TOC K
$

11
--
--

C A P ITA L

320,877
--
--

LOS S

(894)
--
(1,506)

EA R N IN GS
532,529
$
9,512
--

EQU ITY

852,561
9,512
(1,506)

IN TER ES TS
$

39,966
1,000
255

EQU ITY

892,527
10,512
(1,251)

--
--

186

853
--

--
--

1
--

--
--

--
11,527

2,374

1,050
450

--
--

3,501

--
11,527

2,374

1,051
450

(1,602)
--

--
--

(1,602)
11,527

2,374

1,051
450

23
39,021
--
--

(23)
11,274
--
--

--
39
--
--

--
11
--
--

--
336,278
--
--

--
(2,400)
--
(6,301)

--
542,041
54,788
--

--
875,969
54,788
(6,301)

--
43,120
6,080
(62)

--
919,089
60,868
(6,363)

--
--

149

114
--

--
--

1
--

--
--

--
2,388

2,614

332
531

--
--

3,635

--
2,388

2,614

333
531

(3,175)
--

--
--

3,635

(3,175)
2,388

2,614

333
531

404
39,688
--
--

(404)
10,870
--
--

--
40
--
--

--
11
--
--

--
342,143
--
--

--
(8,701)
--
(7,376)

--
596,829
138,811
--

--
930,322
138,811
(7,376)

--
49,598
13,385
(578)

--
979,920
152,196
(7,954)

--
--

102

97
--

--
--

--
8,684

3,363

--
1,446

--
--

--
8,684

3,363

--
1,446

503

(4,050)
--

--
--

503

(4,050)
8,684

3,363

--
1,446

400
40,287

(400)
10,470

--
40

(1)
10

--
355,636

--
(16,077)

--
735,640

(1)
1,075,249

--
58,858

(1)
1,134,107

See accompanying notes to consolidated financial statements

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

Years Ended December 31,

2014

2013

2012

Cash flows from operating activities:

Net earnings. ...................................................................................................................
$ 152,196
Adjustments to reconcile net earnings to net cash provided by (used in)

operating activities:
Depreciation of property, plant and equipment ............................................................
47,557
1,201
Amortization of deferred financing costs ................................................................
Amortization of intangible assets ................................................................
747
14,153
Provision for bad debts, returns and allowances ..........................................................
Tax benefit from share-based compensation ................................................................
-
8,684
Non-cash share-based compensation ................................................................
Deferred income taxes (benefits) ..................................................................................
22,411
Loss (gain) on disposal of property, plant and equipment ................................
837
(Increase) decrease in assets:

$ 60,868

$ 10,512

42,397
1,201
912
2,868
(201)
2,388
11,583
(447)

41,542
1,195
906
1,112
(78)
11,527
(7,538)
216

Receivables................................................................................................
(70,695)
Inventories ................................................................................................ (100,162)
Prepaid expenses and other current assets ..............................................................
(31,788)
4,548
Other assets ................................................................................................

(21,279)
(22,589)
1,205
(3,239)

(36,989)
(111,813)
60,266
(4,955)

Increase (decrease) in liabilities:

98,686
Accounts payable ................................................................................................
Accrued expenses ................................................................................................
15,507
Net cash provided by (used in) operating activities ................................ 163,882

Cash flows from investing activities:

Capital expenditures ................................................................................................
Intangible additions ................................................................................................
Net cash used in investing activities ................................................................

(56,905)
-
(56,905)

Cash flows from financing activities:

Net proceeds from the issuances of stock through employee

stock purchase plan and the exercise of stock options ................................

3,363
Contribution from non-controlling interest of consolidated entity ...............................
503
(4,050)
Distributions to non-controlling interest of consolidated entity ................................
1,446
Excess tax benefits from share-based compensation ....................................................
Proceeds (payments) on short-term borrowings ...........................................................
1,723
Proceeds from long-term debt ......................................................................................
-
(12,028)
Payments on long-term debt .........................................................................................
(9,043)
97,934
Net increase (decrease) in cash and cash equivalents ...................................................
(3,260)
Effect of exchange rates on cash and cash equivalents ................................
Cash and cash equivalents at beginning of year ...........................................................
372,011
Cash and cash equivalents at end of year ...........................................................$ 466,685

Net cash (used in) provided by financing activities ................................

17,596
5,714
98,977

(41,294)
(87)
(41,381)

9,958
20,692
(3,447)

(52,452)
-
(52,452)

2,947
3,635
(3,175)
732
(2,382)
-
(11,667)
(9,910)
47,686
(1,501)
325,826
$ 372,011

3,425
3,501
(1,602)
528
(47,998)
82,143
(10,243)
29,754
(26,145)
827
351,144
$ 325,826

Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest ............................................................................................................. $ 10,822
29,499
Income taxes paid (recovered) ........................................................................

$ 10,624
5,480

$ 11,812
(48,706)

See accompanying notes to consolidated financial statements.

SKECHERS U.S.A., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014, 2013 and 2012

(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 362 domestic and 87 international retail stores and an e-commerce business as of December 31, 2014.

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.

(b) Use of Estimates

The Company 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 estimates relate primarily to
revenue recognition, allowance for bad debts, returns, sales allowances and customer chargebacks, inventory write-downs, valuation
of intangibles and long-lived assets, litigation reserves and valuation of deferred income taxes. Actual results could differ from those
estimates.

The Company recognizes 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. Wholesale sales, which include amounts billed for shipping and
handling costs, are recognized net of allowances for estimated returns, sales allowances, discounts, chargebacks. Allowances for
estimated returns, discounts, doubtful accounts and chargebacks are recorded when related revenue is recorded. Related costs paid to
third-party shipping companies are recorded as cost of sales. The Company recognizes revenue from retail and e-commerce sales at
the point of sale. Sales and value added taxes collected from retail customers are excluded from reported revenues.

Royalty income is earned from licensing arrangements. Upon signing a new licensing agreement, the Company receives up-front
fees, which are generally characterized as prepaid royalties. These fees are initially deferred and recognized as revenue as earned. In
addition, the Company receives royalty payments based on actual sales of the licensed products. Typically, at each quarter-end the
Company receives correspondence from licensees indicating the actual sales for the period. This information is used to calculate and
record the related royalties based on the terms of the agreement.

(d) Business Segment Information

The Company’s 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 13 –
Segment Information.

(e) Noncontrolling Interests

The Company has equity interests in several joint ventures that were established either to exclusively 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 2014 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.

(f)

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 approximate fair value due to the relatively short maturity of such
instruments.

The carrying amount of the Company’s long-term borrowings are considered Level 2 liabilities, which approximates the fair value

based upon current rates and terms available to the Company for similar debt.

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

The Company provides a reserve charged against revenue and 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 its historical loss rate as a percentage of
sales.

(i)

Inventories

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)

Property, Plant and Equipment

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

Property, plant and equipment subject to depreciation and amortization is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. The Company reviews both quantitative and
qualitative factors to assess if a triggering event occurred. The Company prepares a summary of store cash flows from its retail stores
to assess potential impairment of the fixed assets and leasehold improvements. Stores with negative cash flows opened in excess of 24
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 years
ended December 31, 2014, December 31, 2013 or December 31, 2012.

(k) Goodwill, Intangible Assets, Purchased Intangibles and Deferred Financing Costs

Goodwill and other 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 designs, trade names and
trademarks 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, 2014 and 2013, are as follows (in thousands):

Intellectual property ................................................................
Goodwill...................................................................................
Less accumulated amortization ................................................
Total intangible assets ..............................................................

2014
$ 7,887
1,575
(7,832)
$ 1,630

2013

$ 7,887
1,575
(7,085)
$ 2,377

The Company recorded, in general and administrative expenses, amortization expense of $0.7 million, $0.9 million and $0.9
million for the years ended December 31, 2014, 2013 and 2012, respectively. The Company recorded, in interest expense,
amortization of deferred financing costs of $1.2 million, $1.2 million and $1.2 million for the years ended December 31, 2014, 2013
and 2012, respectively. The Company did not record impairment charges during the years ended December 31, 2014, December 31,
2013 or December 31, 2012.

(l)

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.

(m) 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
reporting currency. The Company operates internationally through several foreign subsidiaries. Translation adjustments for these
subsidiaries are included in other comprehensive income. 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. 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.

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

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

The Company has two classes of issued and outstanding common stock, Class A Common Stock and Class B Common Stock.
Holders of Class A Common Stock and holders of Class B Common Stock have substantially identical rights, including rights with
respect to any declared dividends or distributions of cash or property and the right to receive proceeds on liquidation or dissolution of
the Company after payment of the Company’s indebtedness. The two classes have different voting rights, with holders of Class A
Common Stock entitled to one vote per share while holders of Class B Common Stock are entitled to ten votes per share on all matters
submitted to a vote of stockholders. The Company uses the two-class method for calculating net earnings per share. Basic and diluted
net earnings per share of Class A Common Stock and Class B Common Stock are identical. 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.

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

earnings per share (in thousands):

Basic earnings per share

Net earnings attributable to Skechers U.S.A., Inc. ....
Weighted average common shares outstanding ........
Basic earnings per share ...........................................

Diluted earnings per share

Years Ended December 31,
2013

2012

2014

$ 138,811 $ 54,788 $ 9,512
49,495
50,363
0.19

1.09 $

2.74 $

50,613

Years Ended December 31,
2013

2014

2012

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

$ 138,811 $ 54,788 $ 9,512

Weighted average common shares outstanding ........
Dilutive stock options ...............................................
Weighted average common shares outstanding ........

50,613
413
51,026

50,363
200
50,563

49,495
447
49,942

Diluted earnings per share ........................................

2.72

1.08

0.19

There were no options excluded from the computation of diluted earnings per share for the years ended December 31, 2014, 2013

or 2012.

(o) Comprehensive Income

Comprehensive income consists of net earnings and foreign currency translation adjustments. Comprehensive income is presented
in the consolidated statements of comprehensive income. Components of accumulated other comprehensive income consist of foreign
currency translation adjustments and income 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.

(p) 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, 2014, 2013 and 2012 was approximately $141.7 million, $118.5 million and
$103.9 million, respectively. Prepaid advertising costs were $13.0 million and $5.5 million at December 31, 2014 and 2013,
respectively. Prepaid amounts outstanding at December 31, 2014 and 2013, represent the unamortized portion of endorsement
contracts, advertising in trade publications and media productions created which had not run as of December 31, 2014 and 2013,
respectively.

(q)

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 $10.3 million, $9.2 million, and $9.5 million during the years ended
December 31, 2014, 2013 and 2012, respectively.

(r) Warehouse and Distribution Costs

The Company’s distribution network related costs are included in general and administrative expenses and are not allocated to
specific segments. The expenses related to its distribution network, including the functions of purchasing, receiving, inspecting,
allocating, warehousing and packaging of its products totaled $134.8 million, $122.9 million and $119.3 million for 2014, 2013 and
2012, respectively.

(s) Recent Accounting Pronouncements

In May 2014, the FASB amended the FASB Accounting Standards Codification and created a new Topic ASC 606. This
amendment prescribes that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The
amendment supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition”, and most industry-specific
guidance throughout the Industry Topics of the Codification. For annual and interim reporting periods the mandatory adoption date of
ASC 606 is January 1, 2017, and there will be two methods of adoption allowed, either a full retrospective adoption or a modified
retrospective adoption. The Company is currently evaluating the impact of ASC 606, but at the current time does not know what
impact the new standard will have on revenue recognized and other accounting decisions in future periods, if any, nor what method of
adoption will be selected if the impact is material.

In August 2014, the FASB amended the FASB Accounting Standards Codification and amended Subtopic 205-40, “Presentation
of Financial Statements – Going Concern.” This amendment prescribes that an entity should evaluate whether there are conditions or
events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one
year after the date that the financial statements are issued. The amendments will become effective for the Company’s annual and
interim reporting periods beginning January 1, 2017. The Company is evaluating the impact on its consolidated financial statements,
however, the Company does not expect that the adoption of this standard will have a material impact on the Company’s consolidated
financial statements.

(2) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2014 and 2013 is summarized as follows (in thousands):

2014

2013

Land ........................................................................................ $ 61,163 $ 59,113
Buildings and improvements .................................................. 177,348 176,987
Furniture, fixtures and equipment ........................................... 217,271 195,629
Leasehold improvements ........................................................ 197,467 174,663
Total property, plant and equipment ...................................... 653,249 606,392
Less accumulated depreciation and amortization ................... 280,066 244,637
Property, plant and equipment, net ........................................ $ 373,183 $ 361,755

(3) ACCRUED EXPENSES

Accrued expenses at December 31, 2014 and 2013 are summarized as follows (in thousands):

Accrued inventory purchases ..................................................$ 22,553 $ 15,514
Accrued payroll and taxes ....................................................... 27,152
24,610
Accrued expenses...................................................................$ 49,705 $ 40,124

2014

2013

(4) LINE OF CREDIT AND SHORT-TERM BORROWINGS

On June 30, 2009, the Company entered into a $250.0 million secured credit agreement, (the “Credit Agreement”) with a syndicate
of banks, of which six currently remain as participants. On November 5, 2009, March 4, 2010, May 3, 2011, and September 30, 2013,
the company entered into four successive amendments to the Credit Agreement (collectively, the “Amended Credit Agreement”). The
Amended Credit Agreement matures in June 2015. The Amended Credit Agreement permits the Company and certain of its
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 its request and upon satisfaction of certain conditions including obtaining the commitment of
existing or prospective lenders willing to provide the incremental amount. Borrowings bear interest at the Company’s 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 (0.50%, 0.75% or 1.00% for Base Rate loans and 1.50%, 1.75% or 2.00% for LIBOR loans). The company pays a
monthly unused line of credit fee of 0.25% or 0.375% 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 the Company is permitted to incur as well as other restrictions on certain transactions. The Company paid
syndication and commitment fees of $6.7 million on this facility, which are being amortized to interest expense over the six-year life
of the facility. As of December 31, 2014, there is $0.1 million outstanding under this facility, which is classified as short-term
borrowings in the consolidated balance sheet. The remaining balance in short-term borrowings, as of December 31, 2014, is related to
the Company’s joint venture in India.

(5) LONG-TERM BORROWINGS

Long-term borrowings at December 31, 2014 and 2013 is as follows (in thousands):

2014

2013

Note payable to bank, due in monthly installments of $346.6 (includes principal
and interest), variable rate interest at 3.92% per annum, secured by property,
balloon payment of $77,060 due October 2015 ......................................................

Note payable to bank, due in monthly installments of $531.4 (includes principal
and interest), fixed rate interest at 3.54% per annum, 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% per annum, secured by property,
balloon payment of $11,670 due June 2016 ...........................................................

Note payable to TCF Equipment Finance, Inc., due in monthly installments of

$ 77,900

$ 78,908

19,159

23,573

17,940

24,265

$30.5 (includes principal and interest), fixed rate interest at 5.24% per annum,
maturity date of July 2019 ......................................................................................

1,489
Subtotal....................................................................................................................... 116,488
Less current installments ............................................................................................ 101,407
Total long-term borrowings, excluding current installments ...................................... $ 15,081

1,770
128,516
12,028
$ 116,488

The aggregate maturities of long-term borrowings at December 31, 2014 are as follows:

2015 ...........................................................................................................................
2016 ...........................................................................................................................
2017 ...........................................................................................................................
2018 ...........................................................................................................................
2019 ...........................................................................................................................
Thereafter ...................................................................................................................

101,407
14,198
328
345
210
-
$ 116,488

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 its
long-term borrowings as of December 31, 2014.

On April 30, 2010, the Company 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 the
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 October 31, 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 the 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. As of December 31, 2014, there was $77.9 million outstanding under the Loan Agreement and the
Modification, which is included in current installments of long-term borrowings. As of December 31, 2013, there was $78.9 million
outstanding under the Loan Agreement and the Modification, which was included in long-term borrowings. The Company 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
“Loan Documents”), by and among us, Banc of America Leasing & Capital, LLC, and Bank of Utah, as agent (“Agent”). The
Company used the proceeds to refinance certain equipment already purchased and to purchase new equipment for use in the 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, the Company 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, 2014, the Company had
$37.1 million outstanding on the Notes, of which $23.2 is included in current installments of long-term borrowings and $13.9 million
is included in long-term borrowings. As of December 31, 2013, there was $47.8 million outstanding on the Notes, which was included
in long-term borrowings. The Company paid commitment fees of $0.8 million on this loan, which are being amortized to interest
expense over the five-year life of the Notes.

(6) INCOME TAXES

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

2014

2013

2012

Federal:
Current ............................................................................................ $ 7,677
Deferred .......................................................................................... 23,659
Total federal .................................................................................. 31,336
State:
Current ............................................................................................
Deferred ..........................................................................................
Total state .....................................................................................
Foreign:
8,228
Current ............................................................................................
312
Deferred ..........................................................................................
Total foreign ..................................................................................
8,540
Total income taxes (benefit) .......................................................... $ 39,184 $ 21,347

$
632
11,537
12,169

2,060
529
2,589

5,399
(140)
5,259

519
119
638

$
(67)
(6,381)
(6,448)

1,796
(307)
1,489

5,325
(405)
4,920
(39)
$

The Company’s provision for income tax expense (benefit) and effective income tax rate are significantly impacted by the mix of
the Company’s domestic and foreign earnings (loss) before income taxes. In the non-U.S. jurisdictions in which the Company has
operations, the applicable statutory rates are generally significantly lower than in the U.S., ranging from 0% to 34%. The Company’s
provision for income tax expense (benefit) was calculated using the applicable statutory rate for each jurisdiction applied to the
Company’s pre-tax earnings (loss) in each jurisdiction, while the Company’s effective tax rate is calculated by dividing income tax
expense (benefit) by earnings before income taxes.

The Company’s earnings (loss) before income taxes and income tax expense (benefit) for 2014, 2013 and 2012 are as follows (in

thousands):

Income tax jurisdiction

2014

Earnings (loss)
before income
taxes

Income tax
expense

2013

Earnings (loss)
before income
taxes

2012

Income tax
expense

Earnings (loss)
before income
taxes

Income tax
expense
(benefit)

Years Ended December 31,

82,778
6,241
629
15,201
77,555
(13,021)
21,997
191,380

$ 32,500
1,572
138
1,179
-
-
3,795
$ 39,184

38,705
4,091
9,622
6,148
25,348
(15,841)
14,142
82,215

$ 12,807
1,187
1,920
1,646
-
-
3,787
$ 21,347

(27,379)
2,564
5,971
1,278
25,162
(13,492)
16,369
10,473

(5,867)
545
1,043
319
-
-
3,921
(39)

20.5%

(0.4)%

26.0%

For 2014, of the Company’s $108.6 million in earnings before income tax earned outside the U.S., $77.6 million was earned in
Jersey, which does not impose a tax on corporate earnings. In addition, there were foreign losses of $13.0 million for which no tax
benefit was recognized during the year ended December 31, 2014 because of the provision of offsetting valuation allowances.
Individually, none of the other foreign jurisdictions included in “Other jurisdictions” in the table above had more than 5% of 2014
consolidated earnings (loss) before taxes.

Unremitted earnings of non-U.S. subsidiaries are expected to be reinvested outside of the U.S. indefinitely. Such earnings would

become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends.

As of December 31, 2014, the Company had approximately $466.7 million in cash and cash equivalents, of which $193.2 million,
or 41.4%, was held outside the U.S. Of the $193.2 million held by the Company’s non-U.S. subsidiaries, approximately $42.8 million
is available for repatriation to the U.S. without incurring U.S. income taxes and applicable non-U.S. income and withholding taxes in
excess of the amounts accrued in the Company’s financial statements as of December 31, 2014. The Company’s cash and cash
equivalents held in the U.S. and cash provided from operations are sufficient to meet the Company’s liquidity needs in the U.S. for the
next twelve months and the Company does not expect to repatriate any of the funds presently designated as indefinitely reinvested
outside the U.S. Under current applicable tax laws, if the Company chooses to repatriate some or all of the funds designated as
indefinitely reinvested outside the U.S., the amount repatriated would be subject to U.S. income taxes and applicable non-U.S. income
and withholding taxes. As of December 31, 2014 and 2013, U.S. income taxes have not been provided on cumulative total earnings of
$318.2 million and $226.0 million, respectively.

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

2014

2013

2012

Expected income tax expense ..........................................................$ 66,981
State income tax, net of federal benefit ............................................
1,032
(27,364)
Rate differential on foreign income .................................................
(2,717)
Change in unrecognized tax benefits ...............................................
288
Non-deductible expenses ................................................................
-
Prior year R&D credit claims ...........................................................
3,333
Other ................................................................................................
(2,369)
Change in valuation allowance ........................................................
Total provision (benefit) for income taxes ......................................$ 39,184

$ 28,775
255
(11,897)
740
(150)
(493)
(1,187)
5,304
$ 21,347

3,666
1,406
(8,752)
(149)
194
-
79
3,517
(39)

Effective tax rate...........................................................................

20.5%

26.0%

(0.4)%

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

December 31, 2014 and 2013 are presented below (in thousands):

DEFERRED TAX ASSETS:

2014

2013

Deferred tax assets – current:

Inventory adjustments ................................................. $
Accrued expenses ........................................................
Allowances for bad debts and chargebacks .................
Total current assets .....................................................

Deferred tax assets – long term:

Loss carryforwards ......................................................
Business credit carryforward .......................................
Share-based compensation ..........................................
Valuation allowance ....................................................
Total long term assets ................................................
Total deferred tax assets ................................................
Deferred tax liabilities – current:

Prepaid expenses .........................................................

Deferred tax liabilities – long term:

4,942
15,103
6,407
26,452

5,075
17,084
6,179
28,338

23,247
4,042
2,282
(17,534)
12,037
38,489

43,711
9,763
279
(19,903)
33,850
62,188

7,588

6,223

Depreciation on property, plant and equipment ..........
Total deferred tax liabilities ...........................................
Net deferred tax assets .................................................... $

22,050
29,638
8,851

24,703
30,926
$ 31,262

The Company 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.

Unused U.S. Federal tax credits and net operating losses carried forward from 2012 and prior tax years were used to reduce the
Company’s 2014 and 2013 federal tax liability. There were no Federal carry-forward amounts remaining as of December 31, 2014.
Federal tax credits and net operating loss carry-forward amounts remaining as of December 31, 2013 were $7.8 million and $47.7
million, respectively. As of December 31, 2014 and 2013, no valuation allowance against the related deferred tax asset has been set up
for these loss and tax credit carry-forwards as the carry-forwards were fully utilized in reducing taxable income in 2013 and 2014.

State tax credit and net operating loss carry-forward amounts remaining as of December 31, 2014 were $7.2 million and $65.6
million, respectively. State tax credit and net operating loss carry-forward amounts remaining as of December 31, 2013 were $6.0
million and $109.2 million, respectively. These tax credit and net operating loss carry-forward amounts don’t begin to expire until
2028 and 2021, respectively. As of December 31, 2014 and 2013, no valuation allowance against the related deferred tax asset has
been set up for these loss and credit carry-forwards as it is believed the carry-forwards will be fully utilized in reducing future taxable
income.

As of December 31, 2014 and 2013, the Company had combined foreign net operating loss carry-forwards available to reduce
future taxable income of approximately $56.9 million and $55.9 million, respectively. Some of these net operating losses expire
beginning in 2015; however others can be carried forward indefinitely. As of December 31, 2014 and 2013, valuation allowances of
$15.9 million and $16.5 million, respectively, had been set up against the related deferred tax assets for those loss carry-forwards that
are not more likely than not to be fully utilized in reducing future taxable income.

The balance of unrecognized tax benefits included in net prepaid expenses and long-term liabilities in the consolidated balance
sheets decreased by $2.9 million during the year. A reconciliation of the beginning and ending amount of unrecognized tax benefits is
as follows (in thousands):

2014

2013

Beginning balance ...................................................................$ 10,816 $ 10,221
Additions for current year tax positions .............................
696
Additions for prior year tax positions .................................
164
Reductions for prior year tax positions ...............................
(5)
Settlement of uncertain tax positions ..................................
-
Reductions related to lapse of statute of limitations ...........
(260)
Ending balance ........................................................................$ 7,936 $ 10,816

773
-
(2,227)
-
(1,426)

If recognized, $7.1 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
(benefit) and totaled ($0.2) million for the year ended December 31, 2014, $0.1 million for the year ended December 31, 2013, and
$0.2 million for the year ended December 31, 2012. Accrued interest and penalties were $1.7 million and $1.8 million as of December
31, 2014 and 2013, 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 its 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, 2014, 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 2014
and prior year unrecognized tax benefits by $1.4 million as a result of expiring statutes.

The Company is currently under examination by the IRS for tax years 2007 through 2011. The Company is also under examination
by a number of states and certain foreign jurisdictions. During the year ended December 31, 2014, there was no reduction in the
balance of 2014 and prior year unrecognized tax benefits due to any settlement of an examination. It is reasonably possible that certain
federal, state and foreign examinations could be settled during the next twelve months which would reduce the balance of 2014 and
prior year unrecognized tax benefits by $4.1 million.

(7) 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 2018. Rent expense for the years ended December 31, 2014,
2013 and 2012 approximated $107.0 million, $94.0 million and $88.7 million, respectively.

Minimum lease payments, which take into account escalation clauses, are recognized on a straight-line basis over the minimum
lease term. Subsequent adjustments to the lease payments due to changes in an existing index, usually the consumer price index, are
typically included in the 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, usually a free rent period, are
considered in the calculation of the minimum lease payments for the minimum lease term.

Future minimum lease payments under noncancellable leases at December 31, 2014 are as follows (in thousands):

OPERATING
LEASES

Year ending December 31:
2015 .................................................................................. $ 142,695
135,195
2016 ..................................................................................
120,204
2017 ..................................................................................
110,608
2018 ..................................................................................
2019 ..................................................................................
99,389
Thereafter .......................................................................... 461,356
$ 1,069,447

(b) Litigation

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

In accordance with accounting principles generally accepted in the U.S., 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. Accordingly, the Company cannot determine the final amount, if any, of its liability beyond the amount accrued in the
consolidated financial statements as of December 31, 2014, nor is it possible to estimate what litigation-related costs will be in the
future.

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 0.5% for 30- to 60- day financing.
The amounts outstanding under these arrangements at December 31, 2014 and 2013 were $171.4 million and $69.1 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 $5.1 million in 2014, $3.9 million in 2013, and $3.8 million in 2012. The
Company has open purchase commitments with its foreign manufacturers at December 31, 2014 of $558.7 million, which are not
included in the accompanying consolidated balance sheets.

(8) NONCONTROLLING INTERESTS

The following VIE’s 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, 2014 December 31, 2013

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

$
6,812
118,837
$ 125,649

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

$ 78,668
1,194
$ 79,862

$
3,076
129,796
$ 132,872

1,835
79,389
$ 81,224

Distribution joint ventures (1)

December 31, 2014 December 31, 2013

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

$ 94,819
10,322
$ 105,141

$ 38,470
66
$ 38,536

$ 49,835
9,209
$ 59,044

$ 15,687
32
$ 15,719

(1) Distribution joint ventures include Skechers China Limited, Skechers Southeast Asia Limited, Skechers Thailand Limited,
Skechers South Asia Private Limited, and Skechers Retail India Private Limited.

Noncontrolling interest earnings was $13.4 million, $6.1 million and $1.0 million for the years ended December 31, 2014, 2013
and 2012, 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 cash capital distributions of $3.7 million and $3.2 million during the years ended December 31, 2014
and 2013, respectively. Skechers China Limited made capital distributions of $0.4 million during the year ended December 31, 2014.
The distribution joint venture partners made cash capital contributions of $0.5 million, $3.6 million and $3.5 million during the year
ended December 31, 2014, 2013 and 2012, respectively.

(9) 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 Incentive Award Plan (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 2014, 2013 or 2012. There were no
options exercised during 2014. The total intrinsic value of options exercised during 2013 and 2012 was $0.9 million and $1.9 million,
respectively.

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:

WEIGHTED AVERAGE
OPTION EXERCISE PRICE

Outstanding at December 31, 2011 ................................
Granted................................................................
Exercised ................................................................
Cancelled ................................................................
Outstanding at December 31, 2012 ................................
Granted................................................................
Exercised ................................................................
Cancelled ................................................................
Outstanding at December 31, 2013 ................................
Granted................................................................
Exercised ................................................................
Cancelled ................................................................
Outstanding at December 31, 2014 ................................

206,400
-
(149,489)
(4,215)
52,696
-
(37,696)
-
15,000
-
-
(15,000)
0

7.62
-
7.03
6.95
9.34
-
8.83
-
10.60
-
-
10.60
0

There was no unrecognized compensation cost related to stock option shares as of December 31, 2014 and 2013, respectively.

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

December 31, 2014 is presented below:

WEIGHTED AVERAGE
GRANT-DATE FAIR
VALUE

Nonvested at December 31, 2011 ................................
Granted ................................................................
Vested/Released ..........................................................
Cancelled ................................................................
Nonvested at December 31, 2012 ................................
Granted ................................................................
Vested/Released ..........................................................
Cancelled ................................................................
Nonvested at December 31, 2013 ................................
Granted ................................................................
Vested/Released ..........................................................
Cancelled ................................................................
Nonvested at December 31, 2014 ................................

740,493
281,000
(704,160)
(33,000)
284,333
67,500
(75,667)
-
276,166
1,092,500
(97,333)
(7,500)
1,263,833

19.02
17.58
18.58
27.60
17.69
27.70
18.03
-
20.05
47.02
19.98
18.75
43.38

As of December 31, 2014, a total of 3,716,381 shares remain available for grant as equity awards under the 2007 Plan.

The Company recognized compensation expense of $8.7 million, $2.4 million and $11.5 million and related income tax benefits
(expense) of $1.4 million, $0.5 million, and $0.5 million for grants under its stock-based compensation plans in the consolidated
statements of operations for the years ended December 31, 2014, 2013, and 2012, respectively. There was $48.7 million and $5.0
million of unrecognized compensation cost related to nonvested common shares as of December 31, 2014 and 2013, respectively. That
cost is expected to be recognized over a weighted average period of 3.0 years and 2.7 years, respectively. The total fair value of shares
vested during the period ended December 31, 2014 and 2013 was $1.9 million and $1.4 million, respectively.

(d) Stock Purchase Plans

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. The 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 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 2014, 2013 and 2012, 102,153 shares, 149,257 shares and 186,199 shares were issued under the 2008 ESPP for which the

Company received approximately $3.4 million, $2.6 million and $2.4 million, respectively.

(10) 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 Company has two classes of issued and outstanding common stock, Class A Common Stock and Class B Common Stock.
Holders of Class A Common Stock and holders of Class B Common Stock have substantially identical rights, including rights with
respect to any declared dividends or distributions of cash or property and the right to receive proceeds on liquidation or dissolution of
the Company after payment of the Company’s indebtedness. The two classes have different voting rights, with holders of Class A
Common Stock entitled to one vote per share while holders of Class B Common Stock are 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 2014, 2013 and 2012, certain Class B stockholders converted 399,776 shares, 404,396 shares and 22,880 shares,

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

(11) 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 the Company’s estimates and its performance. The Company
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 $166.9 million and
$138.4 million before allowances for bad debts and sales returns, and chargebacks at December 31, 2014 and 2013, respectively.
Foreign accounts receivable, which generally are collateralized by letters of credit, amounted to $126.2 million and $103.5 million
before allowance for bad debts, sales returns, and chargebacks at December 31, 2014 and 2013, respectively. International net sales
amounted to $819.3 million, $558.1 million and $496.0 million for the years ended December 31, 2014, 2013 and 2012, respectively.
The Company’s credit losses charged to expense for the years ended December 31, 2014, 2013 and 2012 were $11.8 million, $2.6
million and $1.5 million, respectively. In addition, the Company’s recorded sales return and allowance expense (recoveries) for the
years ended December 31, 2014, 2013 and 2012 were $2.3 million, $0.2 million and $(0.4) 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 $548.9 million and $413.2 million at December 31, 2014 and 2013,
respectively.

During 2014, 2013 and 2012, 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, 2014 or December 31, 2013. During 2014, 2013 and 2012, net sales to the five largest customers
were approximately 15.7%, 18.1% and 18.1%, respectively.

The Company’s top five manufacturers produced the following for the years ended December 31, 2014, 2013 and 2012,

respectively:

Percentage of total production
Years Ended December 31,
2012

2013

2014

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

37.5% 37.8%
7.1%
6.1%
6.1%
5.7%
4.8%
4.9%
4.1%
4.7%
59.9%
58.9%

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

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.

(12) EMPLOYEE BENEFIT PLANS

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, 2014, 2013 and 2012,
respectively.

In May 2013, the Company established the Skechers U.S.A., Inc. Deferred Compensation Plan (the “Plan”), which allows eligible
employees to defer compensation up to a maximum amount to a future date on a nonqualified basis. The Plan provides for the
Company to make discretionary contributions to participating employees, which will be determined by the Company’s Compensation
Committee. The Company did not make a contribution to the plan for the year ended December 31, 2014 or 2013. The value of the
deferred compensation is recognized based on the fair value of the participants’ accounts as determined monthly. The Company has
established a rabbi trust (the “Trust”) as a reserve for the benefits payable under the Plan. The assets of the Trust and deferred
liabilities are presented in the Company’s condensed consolidated balance sheets.

(13) SEGMENT INFORMATION

The Company has four reportable segments – domestic wholesale sales, international wholesale sales, retail sales, and e-commerce
sales. The Company 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):

2014

2013

2012

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

997,994 $
689,195
663,528
26,844

802,163
478,799
538,186
27,213
$ 2,377,561 $ 1,846,361

652,651
432,163
453,600
21,907
$ 1,560,321

2014

2013

2012

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

367,980
292,722
398,613
12,590
$ 1,071,905

288,818 $
198,853
319,036
12,085
818,792 $

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

2014

2013

Identifiable assets
979,582 $
Domestic wholesale................................................................
$
510,063
International wholesale ................................................................
185,041
Retail ................................................................................................
E-commerce ................................................................................................
232
$ 1,674,918
Total ................................................................................................

865,071
374,738
168,532
229
$ 1,408,570

2014

2013

2012

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

9,655
18,899
28,351
56,905

9,652
4,828
26,814
41,294

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

Geographic Information

The following summarizes the Company’s operations in different geographic areas as of and for the years ended December 31:

2014

2013

2012

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

$ 1,558,226

$ 1,288,302

85,139
734,196

63,665
494,394

$ 2,377,561

$ 1,846,361

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

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

332,383

$
7,203
33,597

373,183

337,727
5,079
18,949
361,755

2014

2013

(1) The Company has subsidiaries in Canada, the United Kingdom, Germany, France, Spain, Portugal, Italy, the 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
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, the United Kingdom, Germany, Austria, France, Spain, Portugal, Italy, the

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

(14) RELATED PARTY TRANSACTIONS

The Company paid approximately $160,000, $178,000, and $162,000 during 2014, 2013 and 2012, 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, 2014.

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 year ended December 31, 2014, the Company did not make any contributions
to the Foundation. During the years ended December 31, 2013 and 2012, the Company contributed $1.1 million and $1.0 million,
respectively, to the Foundation to use for various charitable causes.

The Company had receivables from officers and employees of $0.6 million and $0.4 million at December 31, 2014 and 2013,
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. The Company had no other
significant transactions with or payables to officers, directors or significant shareholders of the Company.

(15) SUBSEQUENT EVENTS

The Company has evaluated events subsequent to December 31, 2014, 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.

(16) SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

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

2014

MARCH 31

JUNE 30

SEPTEMBER 30

DECEMBER 31

Net sales ................................................ $ 546,518
240,403
Gross profit ...........................................
Net earnings attributable to
Skechers U.S.A., Inc. ...........................

30,965

$ 587,051
269,375

$ 674,270
304,498

$ 569,722
257,629

34,802

51,123

21,921

Net earnings per share:

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

0.61
0.61

0.69
0.68

1.01
1.00

$ 0.43
0.43

2013

MARCH 31

JUNE 30

SEPTEMBER 30

DECEMBER 31

Net sales ................................................ $ 451,621
Gross profit ............................................
192,732
Net earnings attributable to
Skechers U.S.A., Inc............................

6,680

$ 428,247
194,894

$ 515,756
230,521

$ 450,737
200,645

7,094

26,849

14,165

Net earnings per share:

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

0.13
0.13

0.14
0.14

0.53
0.53

0.28
0.28

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.

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:

(i)

(ii)

(iii)

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

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 (2013), our management has concluded that as of
December 31, 2014, our internal control over financial reporting is effective.

Our independent registered public accountants, BDO USA, 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, 2014, 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 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 2014. The results of our evaluation are
discussed above in Management’s Report on Internal Control Over Financial Reporting.

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Skechers U.S.A., Inc.
Manhattan Beach, CA

We have audited Skechers U.S.A., Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). Skechers U.S.A., Inc. and subsidiaries’ 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 Item 9A, Management’s Report on Internal Control Over Financial Reporting. 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. and subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2014, based on the COSO criteria.

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, 2014 and 2013, and the related consolidated
statements of earnings, comprehensive income, equity, cash flows, and schedule for each of the three years in the period ended
December 31, 2014, and our report dated February 27, 2015 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP

Los Angeles, CA
February 27, 2015

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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 2014 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 2014 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 2014 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 2014 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 2014 fiscal year.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

PART IV

Financial Statements: See “Index to Consolidated Financial Statements and Financial Statement Schedule” in Part II, Item 8
on page 48 of this annual report on Form 10-K.

Financial Statement Schedule: See “Schedule II—Valuation and Qualifying Accounts” on page 77 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.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

Years Ended December 31, 2014, 2013, and 2012

DESCRIPTION

BALANCE AT
BEGINNING OF
PERIOD

CHARGED TO
REVENUE
COSTS AND
EXPENSES

DEDUCTIONS
AND
WRITE-OFFS

BALANCE
AT END
OF PERIOD

Year-ended December 31, 2012:
Allowance for chargebacks .................................. $
Allowance for doubtful accounts .........................
Reserve for sales returns and allowances .............
Reserve for shrinkage ...........................................
Reserve for obsolescence .....................................
Year-ended December 31, 2013:
Allowance for chargebacks .................................. $
Allowance for doubtful accounts .........................
Reserve for sales returns and allowances .............
Reserve for shrinkage ...........................................
Reserve for obsolescence .....................................
Year-ended December 31, 2014:
Allowance for chargebacks .................................. $
Allowance for doubtful accounts .........................
Reserve for sales returns and allowances .............
Reserve for shrinkage ...........................................
Reserve for obsolescence .....................................

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

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

2,490
5,980
7,456
266
3,485

1,357
186
(431)
1,300
931

1,514
1,105
249
1,166
1,333

5,530
6,284
2,339
1,292
5,656

(896) $

(3,350)
(367)
(1,300)
(4,041)

(1,825) $
(2,292)
253
(1,200)
(6,697)

(1,469) $

(6,823)
(780)
(1,220)
(6,140)

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

2,490
5,980
7,456
266
3,485

6,551
5,441
9,015
338
3,001

See accompanying report of independent registered public accounting firm

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).

10.9(d)

10.10

10.11

Amendment Number Four to Credit Agreement dated September 30, 2013, 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 September 30, 2013).

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).

10.12

10.12(a)

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

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).

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
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).

10.20

Skechers U.S.A., Inc. Deferred Compensation 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 3, 2013).

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 and/or a renewal is being requested from the SEC to the
previously granted confidential treatment 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.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Manhattan Beach, State of California on
the 27th day of February 2015.

SIGNATURES

By:

SKECHERS U.S.A., INC.

/s/ Robert Greenberg
Robert Greenberg
Chairman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on

behalf of the Registrant and in the capacities and on the dates indicated.

SIGNATURE

TITLE

DATE

/s/ Robert Greenberg
Robert Greenberg

/s/ Michael Greenberg
Michael Greenberg

/s/ David Weinberg
David Weinberg

/s/ Jeffrey Greenberg
Jeffrey Greenberg

/s/ Geyer Kosinski
Geyer Kosinski

/s/ Morton D. Erlich
Morton D. Erlich

/s/ Richard Siskind
Richard Siskind

/s/ Thomas Walsh
Thomas Walsh

/s/ Rick Rappaport
Rick Rappaport

Chairman of the Board and Chief Executive Officer February 27, 2015

(Principal Executive Officer)

President and Director

February 27, 2015

Executive Vice President, Chief Operating Officer, February 27, 2015

Chief Financial Officer and Director
(Principal Financial and Accounting Officer)

Director

February 27, 2015

Director

February 27, 2015

Executive Officers
and Board of Directors

Executive
Management

Stockholder
Information

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

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

Mark Bravo
Senior Vice President,
Finance and 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

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.

Skechers

@skechersusa

@skechers

SkechersPerformance

@skechersGO

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
BDO USA, LLP
1888 Century Park East, 4th Floor
Los Angeles, CA 90067

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 2014 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 2014 Annual Report on Form 10-K. In addition,
Skechers submitted to the NYSE on June 17, 2014, 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(a).

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 2015 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 2014 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.