Skechers U.S.A.
Annual Report 2015

Plain-text annual report

The Grand Canal Shoppes at the Venetian, Las Vegas (front and back cover) ANNUAL REVENUE PERFORMANCE ($ in millions) $3 BILLION IN SALES $3,147 $2,378 ANNUAL REVENUE PERFORMANCE ($ in millions) 3,500 $3,147 3,000 ANNUAL REVENUE PERFORMANCE ($ in millions) A MASSIVE FOOTPRINT Shoppers find our brand in small towns and major metropolitan areas across the United States and around the world. We target distribution by delivering each of our many distinct lines to the right stores in the right markets at the right time. From Skechers retail stores and e-commerce sites to our network of wholesale accounts, it’s easy for shoppers to discover and fall in love with Skechers on every continent except Antarctica. ANNUAL REVENUE PERFORMANCE ($ in millions) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 $1.50 $1.00 $0.50 $0 $3,147 $2,378 $1,606 $1,560 $1,846 2011 2012 2013 2014 2015 DILUTED EPS $1.50 $0.91 $0.36 $0.06 2012 2011 2013 2014 2015 $0.50 ($0.46) All diluted earnings (loss) per share information has been retroactively adjusted for the three-for-one stock split that was effective on October 16, 2015. 3,500 3,000 2,500 2,000 1,500 1,000 500 0 $1.50 $1.00 $0.50 $0 $1,606 $1,560 $1,846 2011 2012 2013 2014 2015 DILUTED EPS $1.50 $0.91 $0.36 $0.06 2012 2011 2013 2014 2015 $0.50 ($0.46) All diluted earnings (loss) per share information has been retroactively adjusted for the three-for-one stock split that was effective on October 16, 2015. GLOBAL REVENUE BY CHANNEL 35% INTERNATIONAL WHOLESALE 26% RETAIL / E-COMMERCE 39% DOMESTIC WHOLESALE YEAR-END 2015 GLOBAL REVENUE BY CHANNEL GLOBAL PRODUCT BREAKDOWN 35% INTERNATIONAL WHOLESALE 26% RETAIL / E-COMMERCE 13% KIDS 30% MEN 39% DOMESTIC WHOLESALE YEAR-END 2015 57% WOMEN YEAR-END 2015 GLOBAL PRODUCT BREAKDOWN 13% KIDS 30% MEN 57% WOMEN YEAR-END 2015 3,500 2,500 3,000 2,000 2,500 1,500 2,000 1,000 1,500 500 1,000 0 500 0 $1.50 $1.00 $1.50 $0.50 $1.00 $0 $0.50 $0.50 $0 $0.50 $2,378 $3,147 $1,606 $1,560 $2,378 $1,846 $1,606 $1,560 $1,846 2011 2012 2013 2014 2015 2011 2011 ($0.46) 2011 2012 DILUTED EPS 2013 2014 DILUTED EPS $0.91 2015 $1.50 $1.50 $0.06 2012 $0.36 2013 $0.36 $0.91 2014 2015 All diluted earnings (loss) per share information has been retroactively adjusted for the three-for-one stock split that was effective on October 16, 2015. 2013 2014 2015 $0.06 2012 ($0.46) GLOBAL REVENUE BY CHANNEL All diluted earnings (loss) per share information has been retroactively adjusted for the three-for-one stock split that was effective on October 16, 2015. 35% INTERNATIONAL WHOLESALE GLOBAL REVENUE BY CHANNEL 39% DOMESTIC WHOLESALE 35% INTERNATIONAL WHOLESALE 26% RETAIL / E-COMMERCE 39% DOMESTIC WHOLESALE YEAR-END 2015 26% RETAIL / E-COMMERCE 13% KIDS YEAR-END 2015 57% WOMEN GLOBAL PRODUCT BREAKDOWN GLOBAL PRODUCT BREAKDOWN 13% KIDS 30% MEN 30% MEN 57% WOMEN YEAR-END 2015 YEAR-END 2015 To Our Shareholders and Customers, 2015 was about remarkable achievements, milestones and new records. We experienced unprecedented growth, faced challenges head-on and became more efficient because of it, expanded our operations in familiar territories, and navigated new waters, all while building the Skechers brand globally through our in-demand product and impactful marketing. For the first time in our 23-year history, we surpassed $3 billion in annual sales, a milestone we are particularly proud of as we saw growth across both our domestic and international businesses, which speaks to the global strength of the Skechers brand. This growth also impacted our position in the domestic marketplace as we became the second largest footwear company in the United States, thanks to the broad acceptance of our lifestyle and performance footwear. We also became the number one walking and work footwear brand in the United States, achievements that speak to the diversity of our product offering. The accolades continued when we were named the 2015 Company of the Year (for the seventh time) and received the Athleisure Design Excellence award by Footwear Plus magazine, as well as the Lifetime Achievement award from Footwear News. The growth we achieved for the full year was due to the strength of our men’s, women’s and kids’ lines, led by the global acceptance of our Skechers Sport, Skechers GOwalk, Relaxed Fit and sporty styles for kids. While we achieved high single-digit growth on our more mature business in the United States, our international sales grew by 59 percent, resulting in it becoming 40 percent of our total sales in 2015. These gains came despite the challenges of a sluggish U.S. retail environment in the back half of the year and the negative impact of foreign currency exchange rates in several key international markets. Our accelerated international growth is an indicator of positive global response to our product and marketing, which included icons Ringo Starr and Sugar Ray Leonard as well as pop superstars Demi Lovato and Meghan Trainor, among others in 2015. While we continue to increase our shelf space among our existing accounts worldwide, in 2015 we saw three key opportunities to grow our business: by widening our target audience, developing our international operations, and expanding our retail base. A pivotal strategy has been our continued product innovation and expansion into more categories, enabling us to appeal to an even broader demographic. With a diverse lifestyle and performance footwear offering for men, women and kids, we already reach a broad spectrum of consumers globally, meeting most of their footwear needs, but we are consistently seeking new opportunities, innovating, and staying fresh and on top of trends. New in 2015 were the launches of Skechers GOwalk Flex; Skechers GOrun 4 and Skechers GOrun Forza; Skechers Burst for men and women; the expansion of Skech-Air into men’s and boys’ styles; Twinkle Wishes for girls; a women’s line of Modern Comfort footwear; and the return of D’Lites with new patterns for both men and women. 2 | SKECHERS USA INC. With an expanding Skechers Performance offering, we started the year as the official running partner for the Houston Marathon, participated in professional golf events, and ended it as the title sponsor of the Skechers Performance Los Angeles Marathon. Our roster of professional golfers and elite runners are inspiring and engaging with like-minded athletes, allowing us to reach an audience of enthusiasts like never before. We continued to grab the attention of millennials with the pop superstar Demi Lovato, who has had more than 700,000 likes on several of her social media posts about Skechers and a television campaign that garnered 4.5 million views on YouTube and aired around the globe in 2015. Adding to the impact on young people was the 2015 signing of pop singer and songwriter Meghan Trainor, whose campaign will launch globally in conjunction with her album in 2016. Meghan Trainor, the new face of Skechers Our cast of characters remains a focus for our kids’ advertising, but we have also captured the attention of tweens with these pop superstars, as well as through more youthful designs of our popular adult sport styles. In addition, we created live action print and television campaigns to appeal to this set. Reaching an older demographic as well as the sports and music fans, we continued with our “legend” campaigns for Relaxed Fit from Skechers and Skechers Sport. In 2015, these campaigns starred football icons Joe Namath and Joe Montana, baseball greats Pete Rose and Mariano Rivera, legendary drummer Ringo Starr, and boxing champ Sugar Ray Leonard. As we continue to focus on comfort, style and quality in every shoe design, we are expanding our business globally within both existing and new accounts. Our vast product assortment has allowed us entry into more athletic, golf and running stores. The strength of our brand globally has allowed us to reach into new markets previously untapped, including Poland and Kenya. We see the biggest opportunity in our growing international business. The significant gains in 2015 came across nearly every region—the Americas, Asia Pacific, Europe, and the Middle East—with triple-digit, year-over-year improvements in Indonesia, Turkey, Scandinavia, and our two largest markets, China and the Middle East/Africa through our distributor based in the United Arab Emirates. With a combined increase of 31.5 percent, all of our existing wholly-owned international subsidiaries had year-over-year double-digit sales increases in 2015, except for one that was limited to a mid-single-digit increase due to the strength of the U.S. dollar affecting foreign currency translation. In 2015, we established offices and showrooms in Budapest and transitioned the business of several distributors to our newly formed Central Eastern Europe subsidiary, which now oversees product distribution to 13 countries in the region. We also transitioned our distributor’s business in Panama to a new Latin America subsidiary, which oversees product distribution to Peru, Costa Rica, Colombia, Panama and numerous other countries in the area. With a strong network of stores in Latin America and stores opening in Central Eastern Europe, we believe these new subsidiaries will positively impact our operations in the next couple of years. We see our biggest growth opportunity among China’s approximately 1.35 billion people through our joint venture operations. With more than 160 Skechers retail stores, over 600 shop-in-shops, an extremely strong e-commerce business and triple-digit year-over-year growth in 2015, we believe there is still tremendous opportunity across China to build our brand—especially within our men’s and kids’ divisions, which are just getting started in this vast market. Along with a thriving international wholesale business, most of our distribution partners have opened Skechers retail stores, and we have a growing network of franchised Skechers stores in countries where we handle the distribution of our product. At year-end, there were 1,323 Skechers retail stores worldwide, including 517 company-owned SKECHERS retail stores—which had year-over-year sales growth of 21 percent. In 2015, we opened our second store in Times Square, and we expanded our warehouse store in Gardena, California to 30,000 square feet, making it our largest Skechers store. We also opened our first stores in the Czech Republic, Kenya, Nigeria, Northern Ireland, Oman, Poland, and Sweden. With an additional 330 to 340 Skechers retail stores expected to open worldwide this year, we estimate there will be more than 1,650 Skechers stores by the end of 2016, of which approximately 575 will be company-owned. With our product and marketing on point and expanding to meet a widening demographic, and a new annual sales record of $3.15 billion in 2015—including annual year-over- year growth of 22 percent in our domestic wholesale channel, 59 percent in our international distributor and subsidiary business channel, and 21 percent in our worldwide company- owned retail stores and strong comp store gains—we have the infrastructure to support this ongoing growth and are confident that our positive momentum will continue in 2016 with new milestones and records. Already in 2016, we launched the Meghan Trainor campaign for Skechers Originals, a new Demi Lovato campaign for the Skechers Burst Demi boot, Brooke Burke-Charvet for Skechers Burst women and a product-focused campaign for men. We started the marathon season as the official running footwear sponsor of the Houston Marathon, and then to Southern California where we were the title sponsor of the Skechers Performance Los Angeles Marathon, which was won by an athlete running in Skechers Performance footwear. Our ambassadors also competed for a place on the U.S. Team in Brazil in 2016, with Meb achieving a coveted position on the team and Kara Goucher becoming the first women’s alternate. Additionally, we became the official running partner of the European Ironman 2016, and were named Footwear Brand of the Year for 2016 from Footwear Industry Awards in the United Kingdom. Title sponsor of the Skechers Performance Los Angeles Marathon We are very proud of all that we achieved in 2015—and have already accomplished in 2016. It’s clear that our strength is in our numbers—our increasing sales, varied channels of distribution, and the vast offering of comfortable and stylish product. But we believe that our real strength lies in the people who work daily to make our company a success— executive management, designers, the creative teams, our sales representatives around the world, employees in our retail operations, and our logistics support globally—and it is their experience, commitment and ambition that will drive the company forward for years to come. We look forward to setting new records and continuing to grow Skechers into one of the most dynamic footwear companies in the world. To prepare for our accelerated growth around the world, Sincerely, we have increased our capacity and efficiencies through improved automation in our 1.82-million-square-foot North American distribution center, and have been expanding our European distribution center through two additional connected buildings and an upgraded automation system to increase efficiencies. By the end of the second quarter, we will complete the fourth expansion phase, which will provide more than one million square feet of distribution space in Europe. Robert Greenberg Chairman & CEO Michael Greenberg President 2015 ANNUAL REPORT | 3 3,000+ STYLES. Product – Lifestyle & Performance Shoes for every age, audience and activity, from babies to baby boomers. Consumer and industry awards continually highlight our designs, technical achievements and growing popularity around the world. 2015 COMPANY OF THE YEAR FOOTWEAR PLUS ATHLEISURE DESIGN EXCELLENCE AWARD FOOTWEAR PLUS 2016 FOOTWEAR BRAND OF THE YEAR FOOTWEAR INDUSTRY AWARDS Making comfort stylish, staying on top of the trends, giving through charity collections, and innovating with technologies that create demand. 4 | SKECHERS USA INC. 2015 ANNUAL REPORT | 5 15,000+ DOORS. Domestic Distribution Arkansas Washington You’ll find Skechers in thousands of department stores, athletic retailers, specialty locations and independents nationwide. Walls, stands and shop-in-shops beckon shoppers with vivid displays of eye-catching product. Wyoming Colorado California California Florida Michigan Building the brand through online accounts, a thriving digital presence that connects millions to Skechers. Indiana Florida 6 | SKECHERS USA INC. 2015 ANNUAL REPORT | 7 160+ COUNTRIES. International Distribution Germany Skechers’ biggest opportunity for growth is in every corner of the globe: a world of untapped potential. Panama United Kingdom Canada France Our 13 subsidiaries, four joint ventures and 26 distributors work with key accounts to build Skechers worldwide. Germany We speak to every language: driving record numbers through every sales channel. Spain 8 | SKECHERS USA INC. Australia Indonesia Croatia 2015 ANNUAL REPORT | 9 1,300+ STORES. Company-owned and third-party locations that evoke the Skechers DNA: modern, forward-thinking, as innovative as the shoes they house. Turkey Each a living catalog and marketing vehicle for our product, in accessible, high-traffic locales swarming with tourists and locals. Retail Kuwait Concept, outlet and warehouse destinations designed to move inventory and maximize profits. Mexico Japan 10 | SKECHERS USA INC. Scotland New York 2015 ANNUAL REPORT | 11 CAMPAIGNS THAT REACH BILLIONS. Marketing Houston Marathon Vivid, dynamic marketing designed to impress, awe, educate and inspire consumers to act. Australia China Global celebrities: from musical superstars Demi, Meghan and Ringo to athletic greats like Meb and Sugar Ray. 12 | SKECHERS USA INC. Canada Hong Kong Whether you’re on your smartphone, watching TV, at a grassroots event or in a stadium with thousands, you’ll experience the sheer size of Skechers’ impact. United Kingdom Germany Czech Republic 2015 ANNUAL REPORT | 13 Operations & Distribution ONE COMPANY POSITIONED FOR GROWTH. Our global vision is rooted in our Manhattan Beach corporate headquarters, with a planned expansion to 275,000+ square feet, which will include a new design center. Manhattan Beach With approximately 65 offices and showrooms around the world, Skechers is equipped for global growth. Domestic Distribution Center Serving North America We continue to invest in our supply chain and logistics network with improvements to our 1.82 million- square-foot domestic distribution center, and the expansion of our European distribution center, which will be one million square feet by the second quarter of 2016. 14 | SKECHERS USA INC. European Distribution Center 2015 ANNUAL REPORT | UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K (Mark One)xxANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015ORooTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934For 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 95-4376145(State or Other Jurisdiction ofIncorporation or Organization) (I.R.S. EmployerIdentification No.) 228 Manhattan Beach Blvd., Manhattan Beach, California 90266(Address of Principal Executive Offices) (Zip Code)Registrant’s telephone number, including area code: (310) 318-3100Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredClass A Common Stock, $0.001 par value New York Stock ExchangeSecurities 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 x No oIndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No xIndicate 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 12months (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 x No oIndicate 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 andposted 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 andpost such files). Yes x No oIndicate 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 ofregistrant’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. oIndicate 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 “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company oIndicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No xAs of June 30, 2015, 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 $4.56billion based upon the closing price of $36.60 of the Class A Common Stock on the New York Stock Exchange on such date.The number of shares of Class A Common Stock outstanding as of February 15, 2016: 130,675,283.The number of shares of Class B Common Stock outstanding as of February 15, 2016: 25,652,991.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s Definitive Proxy Statement issued in connection with the 2016 Annual Meeting of the Stockholders of the Registrant are incorporated by reference intoPart III. SKECHERS U.S.A., INC. AND SUBSIDIARIESTABLE OF CONTENTS TO ANNUAL REPORT ON FORM 10-KFOR THE YEAR ENDED DECEMBER 31, 2015 PART I ITEM 1. BUSINESS 2ITEM 1A. RISK FACTORS 15ITEM 1B. UNRESOLVED STAFF COMMENTS 22ITEM 2. PROPERTIES 22ITEM 3. LEGAL PROCEEDINGS 23ITEM 4. MINE SAFETY DISCLOSURES 25 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES 26ITEM 6. SELECTED FINANCIAL DATA 28ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 29ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 43ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 45ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 71ITEM 9A. CONTROLS AND PROCEDURES 71ITEM 9B. OTHER INFORMATION 74 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 74ITEM 11. EXECUTIVE COMPENSATION 74ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS 74ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 74ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 74 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 74 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. Thisreport contains additional trademarks of other companies. We do not intend our use or display of other companies’ trade names or trademarks to imply anendorsement or sponsorship of us by such companies, or any relationship with any of these companies. i SPECIAL NOTE ON FORWARD-LOOKING STATEMENTSThis annual report on Form 10-K contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private SecuritiesLitigation Reform Act of 1995, including statements with regards to future revenue, projected 2016 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 expecteddistribution to specific retailers, liquidity, capital resources and market risk, strategies and objectives. Forward-looking statements include, withoutlimitation, any statement that may predict, forecast, indicate or simply state future results, performance or achievements, and can be identified by the use offorward-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 causeactual results to differ materially from those projected in forward-looking statements, and reported results shall not be considered an indication of ourcompany’s future performance. Factors that might cause or contribute to such differences include: ·international economic, political and market conditions including the uncertainty of the China markets and of sustained recovery in ourEuropean markets; ·our ability to maintain our brand image and to anticipate, forecast, identify, and respond to changes in fashion trends, consumer demand for theproducts 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 ofreasons, many of which are beyond our control; ·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 emergefrom 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 factoror combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Given these inherent andchanging risks and uncertainties, investors should not place undue reliance on forward-looking statements, which reflect our opinions only as of the date ofthis annual report, as a prediction of actual results. We undertake no obligation to publicly release any revisions to the forward-looking statements after thedate of this document, except as otherwise required by reporting requirements of applicable federal and states securities laws. 1 PART IITEM 1.BUSINESSWe were incorporated in California in 1992 and reincorporated in Delaware in 1999. Throughout this annual report, we refer to Skechers U.S.A., Inc., aDelaware 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 onForm 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 thosereports 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.GENERALWe design and market Skechers-branded lifestyle footwear for men, women and children, and performance footwear for men and women under theSkechers GO brand name. Our footwear reflects a combination of style, comfort, quality and value that appeals to a broad range of consumers. Our brands aresold through department and specialty stores, athletic and independent retailers, boutiques and internet retailers. In addition to wholesale distribution, ourfootwear is available at our e-commerce websites and our own retail stores. As of February 15, 2016, we owned and operated 119 concept stores, 155 factoryoutlet stores and 117 warehouse outlet stores in the United States, and 82 concept stores, 41 factory outlet stores, and five warehouse outlet storesinternationally. Our objective is to profitably grow our operations worldwide while leveraging our recognizable Skechers brand through our strong productlines, innovative advertising and diversified distribution channels.We seek to offer consumers a vast array of stylish and comfortable 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 fitnessenthusiasts attracted to our performance footwear. Many of our best-selling and core styles are also developed for children with colors and materials thatreflect 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 throughcomprehensive marketing campaigns for men, women and children. During 2015, our Skechers brand was supported by print, television, digital and outdoorcampaigns for men and women; animated and live action kids’ television campaigns featuring our own action heroes and characters; marathons and otherevents 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 globally known recordingartists Demi Lovato and Ringo Starr; sports legends Sugar Ray Leonard, Pete Rose, Joe Montana, Joe Namath and Mariano Rivera; and televisionpersonalities and actresses Brooke Burke-Charvet and Kelly Brook. For the Skechers Performance Division, we also had Olympians Meb Keflezighi and KaraGoucher; and professional golfers Matt Kuchar, Belen Mozo, Billy Andrade and Colin Montgomerie.Since 1992, when we introduced our first line, Skechers USA Sport Utility Footwear, we have expanded our product offering and grown our net saleswhile substantially increasing the breadth and penetration of our account base. Our men’s, women’s and children’s Skechers-branded product lines benefitfrom the Skechers reputation for styling, quality, comfort, innovation and affordability. Our Performance lines benefit from our marketing, productdevelopment and manufacturing support, and management expertise. To promote innovation and brand relevance, we manage our product lines separately byutilizing dedicated sales and design teams. Our product lines share back office services in order to limit our operating expenses and fully utilize ourmanagement’s vast experience in the footwear industry.SKECHERS LINESWe 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-storesupport. Management evaluates segment performance based primarily on net sales and gross margins; however, sales and costs are not allocated to specificproduct lines.2 Lifestyle BrandsSkechers USA. Our Skechers USA category for men and women includes: (i) Relaxed Fit from Skechers, (ii) Dress Casuals/Modern Comfort, (iii)Casuals, (iv) Casual Fusion, and (v) seasonal sandals and boots. This category is generally sold through mid-tier retailers, department stores and somefootwear specialty shops. ·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 withoutcompromising style. Characteristics of the product line include comfortable outsoles, Skechers Memory Foam insoles and quality leatheruppers. We market and package Relaxed Fit from Skechers styles in a unique shoe box that is distinct from other categories in the SkechersUSA line of footwear. ·The Dress Casuals category for men is comprised of basic “black and brown” men’s shoes that feature shiny leathers and dress details, but mayutilize traditional or lugged outsoles as well as value-oriented materials. The Dress Casual line—also referred to as the Modern Comfortcollection—for women is comprised of trend-influenced, stylized boots and shoes, which may include leather uppers, shearling or faux furlining or trim, and water-resistant materials. ·The Casuals line for men and women is defined by lugged outsoles and utilizes value-oriented and leather materials in the uppers. For men, theCasuals 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 fashionboots, and casual sandals. We design and price both the men’s and women’s categories to appeal primarily to younger consumers with broadacceptance across age groups. ·Our Casual Fusion line is comprised of low-profile, sport-influenced casuals targeted to trend-conscious young men and women. The outsolesare primarily rubber and adopted from our men’s Sport and women’s Active lines. This collection features leather or nubuck uppers, but mayalso include mesh. ·Our seasonal sandals and boots for men and women are designed with many of our existing and proven outsoles for our Dress Casuals, Casualsand 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, faux fur and sherpa linings for boots.Skechers Sport. Our Skechers Sport footwear collection for men and women includes: (i) lightweight sport athletic lifestyle products, (ii) classicathletic-inspired styles and (iii) sport sandals and boots. Many Skechers Sport styles are enhanced with comfort features such as high-volume SkechersMemory Foam insoles, lightweight designs, flexible outsoles and soft uppers such as bio-engineered mesh, soft knit fabrics and stretchable woven materials.Known for bright, multi-colored and solid basic-colored uppers, Skechers Sport is distinguished by its technical performance-inspired looks; however, wegenerally do not promote the technical performance features of these shoes. Skechers Sport is typically sold through specialty shoe stores, department storesand athletic footwear retailers. In addition to the standard Skechers Sport lines, a collection of licensed Star Wars™ Skechers footwear for men featurescharacters and designs inspired by the popular film saga. This collection was packaged in a unique box separate from the Skechers Sport collection. ·Our lightweight sport athletic-inspired product is 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, theproduct line features leather and trubuck uppers in both bright and classic athletic colors. ·Classic Skechers styles are core-proven looks that continue to be strong performers. With all-day comfort and durable rubber tread, these shoesare intended to be a mainstay of any footwear collection. Many of the designs are in white, black and natural shades, with some athleticaccents. 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 asour sneakers with the addition of new technologies geared toward making a comfortable sport sandal. Sport sandals and boots are designed asseasonal 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 acasual everyday line into two complete lines of sneakers and casual sneakers for active females of all ages. The Skechers Active line, with lace-ups, MaryJanes, 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 variousclosures — traditional laces, zig-zag and cross straps, among others. The Skechers Sport Active line includes low-profile, lightweight, flexible and sportystyles, many of which have Skechers Memory Foam. Skechers Active and Skechers Sport Active shoes are typically available through specialty casual shoestores and department stores.3 BOBS from Skechers. The BOBS from Skechers line has grown into a year-round product offering with the addition of vulcanized looks and an “AtHome” line. Primarily designed for women, the BOBS collection is also available for girls. BOBS are available at department stores, specialty shoe stores andonline retailers. ·The BOBS classic espadrille collection is designed in basic colors with canvas, tweed, crochet and boiled wool uppers, suede and patternedfabrics. 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, theline 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 ultimatedorm or winter shoe. The uppers are primarily designed with tweeds, knits or suede.When consumers purchase BOBS, Skechers donates funds to help save dogs’ and cats’ lives, and new shoes for children in need. In 2015, Skechersannounced that up to three million dollars will be donated to help support Best Friends Animal Society®, an organization focused on stopping theeuthanizing of nearly four million pets annually in shelters across America. For children, more than 13 million pairs of new shoes have been donatedprimarily to charity partners SolesforSouls and Fashion Delivers since the program’s launch. The organizations donate the shoes to various reputable charityorganizations in the United States and around the world.Mark Nason. The Mark Nason Collection includes a wide range of on-trend casual, dress and active styles for style-conscious men: Mark NasonSkechers, a low-profile collection of casuals for everyday wear; Mark Nason Los Angeles Collection, casual sneakers for the active male; and the Mark NasonDress Collection, dress shoes crafted with high-quality leathers and exquisite detailing. Many styles feature Premium Relaxed Fit construction and MemoryFoam Lux insoles for enhanced comfort. The offering is available at Skechers retail stores and www.skechers.com.Performance BrandsSkechers Performance. Skechers Performance is a collection of technical footwear designed with a focus on a specific activity to maximizeperformance and promote natural motion. Developed by the Skechers Performance Design Team, the footwear utilizes the latest advancements in materialsand innovative design, including an ultra-lightweight Resalyte compound for the midsole and GOimpulse sensors for responsive feedback. Limited editionpacks with Skechers GOdri all-weather protection or Skechers Nite Owl glow-in-the-dark technology are featured across multiple product lines. The footwearis 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 amidfoot strike design for efficient running. Skechers GOrun Ride 4 and Skechers GOrun Ride 3 feature similar designs to their GOruncounterparts, with enhanced cushioning for elevated comfort and support. Skechers GOrun Ultra offers maximum cushioning with the mostsupport, making it perfect for distance or recovery runs. Skechers GOmeb Speed 3 is the high-performance racing shoe worn by elite marathonrunner 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 2 offers aunique V-Stride outsole and the latest Skechers GOwalk 3 collection 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 GO FLEX Walkfeatures a unique articulated, segmented flexible outsole that is designed to move with you. Skechers on-the-GO footwear fuses iconic designsand premium materials with Skechers Performance technologies for comfort and style. ·Skechers GOtrain. Skechers GOtrain is designed for the gym and features a wider forefoot and extended outriggers for maximum stability andcontrol at lateral and medial strike points. This shoe is an all-encompassing trainer that meets the need of intense and rigorous workouts. ·Skechers GO GOLF. Skechers GO GOLF is designed for the golf course and offers a zero heel drop design, which keeps feet in a neutralposition that is low to the ground to promote a solid foundation while playing golf. A Resagrip outsole helps with traction control and a softResamax cushioned insole delivers comfort. Skechers GO GOLF Pro, the official shoe of PGA golfer Matt Kuchar, also offers H2GO Shieldwaterproof protection and features replaceable softspikes on the outsole.4 Skechers KidsThe Skechers Kids line includes: (i) Skechers Kids, which is a range of infants’, toddlers’, boys’ and girls’ boots, shoes and sneakers, (ii) SkechersLightweight Sport, (iii) Skech-Air by Skechers, (iv) Twinkle Toes and Twinkle Wishes by Skechers, (v) Skechers Cali for Girls, (vi) Airators by Skechers, (vii)Skechers Super Z-Strap, (viii) Elastika by Skechers, (ix) Skechers GOrun and Skechers GOwalk, (x) S-Lights, Hot Lights by Skechers and Luminators bySkechers, (xi) Mega Flex, (xii) Air-Mazing by Skechers, (xiii) Foamies by Skechers and (xiv) Game Kicks. ·The Skechers Kids line includes embellishments or adornments such as fresh colors and fabrics from our Skechers adult shoes. Some of thesestyles 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 theadult Skechers Sport styles in bright colors and patterns. The collection is designed to appeal both to younger kids as well as tweenstransitioning to adult shoes. ·Skech-Air by Skechers for boys and girls are athletic sneakers with a unique visible air-cushioned outsole and a gel-infused memory foaminsole. ·Twinkle Toes by Skechers is a line of girls’ sneakers and boots that feature bejeweled toe caps and brightly designed uppers. Some styles alsoinclude lights. The product line is marketed with the character, Twinkle Toes. Twinkle Wishes adds a magical light and sound feature that isactivated when the toes are tapped together. ·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 productline 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 thecharacter, Z-Strap. ·Elastika by Skechers is a line of girls’ sneakers with bungee closures. The product line is marketed with the character, Elastika. ·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 toadult shoes. ·S-Lights, Hot Lights by Skechers and Luminators by Skechers are lighted sneakers and sandals for boys and girls. The S-Lights combinepatterns 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 ason other areas of the shoes. Luminators by Skechers feature glowing green lights and a marketing campaign with the Luminators character. ·Mega Flex is a line of athletic sneakers for boys based on a robot character. Styles include fun embellishments like heel springs or anarticulated bladed outsole in the Mega Blades collection. ·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 caneasily be washed in a washing machine. ·Game Kicks for boys and girls are innovative sneakers with a built-in interactive sound and light memory game that kids can play any timethey’re wearing the shoes.Skechers Kids lines are comprised primarily of shoes that are designed as “takedowns” of their adult counterparts, allowing the younger consumers theopportunity to wear the same popular styles as their older siblings and schoolmates. This “takedown” strategy maintains the product’s integrity by offeringpremium leathers, hardware and outsoles without the costs involved in designing and developing new products. In addition, we adapt current fashions fromour 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 inthe children’s footwear market. Each Skechers Kids line is marketed and packaged separately with a distinct shoe box. Skechers Kids shoes are available atdepartment stores and specialty and athletic retailers. In addition to the standard Skechers Kids’ lines, a collection of licensed Star Wars™ Skechers footwearfor boys features characters and designs inspired by the popular film saga. This collection was packaged in a unique box separate from the Skechers Kidscollection.5 Skechers WorkSkechers 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 includeSkechers Memory Foam. The Skechers Work line includes athletic-inspired, casual safety toe and non-slip safety toe categories that may feature lightweightaluminum safety toe, electrical hazard and slip-resistant technologies, as well as breathable, seam-sealed waterproof membranes. Designed for men andwomen working in jobs with certain safety requirements, these durable styles are constructed on high-abrasion, long-wearing soles, and feature breathablelining, oil- and abrasion-resistant outsoles offering all-day comfort and prolonged durability. The Skechers Work line incorporates design elements fromother 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, clogs and comfortable Shape-ups are ideal for the service industry. Our safety toe products have been independently tested andcertified to meet ASTM standards, and our slip-resistant soles have been tested pursuant to the Mark II testing method for slip-resistance. Skechers Work istypically sold through department stores, athletic footwear retailers and specialty shoe stores, and is marketed directly to consumers through business-to-business channels.PRODUCT DESIGN AND DEVELOPMENTOur principal goal in product design is to generate fresh and innovative on-trend and classic footwear in all of our product lines. Targeted to theactive, 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 ofour lines appeal to the broader range of 5- to 50-year olds, with an exclusive selection for infants and toddlers. Designed by the Skechers PerformanceDivision, 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 andaccommodate consumers’ ever-evolving preferences. We are able to quickly translate the latest fashion trends into stylish, quality footwear at a reasonableprice by analyzing and interpreting current and emerging lifestyle trends. Lifestyle trend information is compiled and analyzed by our designers in variousways, including reviewing and analyzing pop culture, clothing, and trend-setting media; traveling to domestic and international fashion markets to identifyand confirm current trends; consulting with our retail and e-commerce customers for information on current retail selling trends; participating in majorfootwear trade shows to stay abreast of popular brands, fashions and styles; and subscribing to various fashion and color information services. In addition, akey 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 byour in-house design staff. To promote innovation and brand relevance, we utilize dedicated design teams, who report to our senior design executives andfocus 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 ourinternal 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 ourproducts. These interpretations include variations in product color, material structure and embellishments, which are arrived at after close consultation withour production department. Prototype blueprints and specifications are created and forwarded to our manufacturers for design prototypes. The designprototypes are then sent back to our design teams. Our major retail customers may also review these new design concepts. Customer input not only allows usto measure consumer reaction to the latest designs, but also affords us an opportunity to foster deeper and more collaborative relationships with ourcustomers. We also occasionally order limited production runs that may initially be tested in our concept stores. By working closely with store personnel, weobtain customer feedback that often influences product design and development. Our design teams can easily and quickly modify and refine a design basedon 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 SignificantAccounting Policies in the consolidated financial statements included in this annual report.SOURCINGFactories. Our products are produced by independent contract manufacturers located primarily in China and Vietnam. We do not own or operate anymanufacturing facilities. We believe that the use of independent manufacturers substantially increases our production flexibility and capacity, whilereducing capital expenditures and avoiding the costs of managing a large production work force. For disclosure of information regarding the risks associatedwith having our manufacturing operations abroad and relying on independent contract manufacturers, see the relevant risk factors under Item 1A of thisannual report.6 When possible, we seek to use manufacturers that have previously produced our footwear, which we believe enhances continuity and quality whilecontrolling production costs. We source product for styles that account for a significant percentage of our net sales from at least five different manufacturers.During 2015, five of our contract manufacturers accounted for approximately 56.5% of total purchases. One manufacturer accounted for 31.5%, and anotheraccounted for 9.1% of our total purchases. To date, we have not experienced difficulty in obtaining manufacturing services or with the availability of rawmaterials.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 0.3% and 0.5% for 30- to 60-day financing, depending on the factory. We believe that the use of thesearrangements 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 astyle, thereby aiding us in our sourcing decisions. Styles that have substantial consumer appeal are highlighted in upcoming collections or offered as part ofour periodic style offerings, while less popular styles can be discontinued after a limited production run. We believe that sales in our concept stores can alsohelp forecast sales in national retail stores, and we share this sales information with our wholesale customers. Sales, merchandising, production andallocations management analyze historical and current sales, and market data from our wholesale account base and our own retail stores to develop aninternal product quantity forecast that allows us to better manage our future production and inventory levels. For those styles with high sell-throughpercentages, we maintain an in-stock position to minimize the time necessary to fill customer orders by placing orders with our manufacturers prior to thetime 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 320-person staff working from our offices in China and Vietnam. We believe that our Asian presence allows us tonegotiate supplier and manufacturer arrangements more effectively, decrease product turnaround time, and ensure timely delivery of finished footwear. Inaddition, we require our manufacturers to certify that neither convicted, forced nor indentured labor (as defined under U.S. law), nor child labor (as defined bylaw 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 incompliance 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. Ourquality control program is designed to ensure that not only finished goods meet our established design specifications, but also that all goods bearing ourtrademarks meet our standards for quality. Our quality control personnel located in China and Vietnam perform an array of inspection procedures at variousstages of the production process, including examination and testing of prototypes of key raw materials prior to manufacture, samples and materials at variousstages of production and final products prior to shipment. Our employees are on-site at each of our major manufacturers to oversee production. For some ofour lower volume manufacturers, our staff is on-site during significant production runs, or we will perform unannounced visits to their manufacturing sites tofurther monitor compliance with our manufacturing specifications.ADVERTISING AND MARKETINGWith a marketing philosophy of “Unseen, Untold, Unsold,” we take a targeted approach to marketing to drive traffic, build brand recognition andproperly position our diverse lines within the marketplace. Senior management is directly involved in shaping our image and the conception, developmentand implementation of our advertising and marketing activities. Our marketing plan has a multi-pronged approach: traditional print and televisionadvertising, supported by online, outdoor, trend-influenced marketing, public relations, social media, promotions, events and in-store. In addition, we utilizecelebrity endorsers in some of our advertisements. We also believe our websites and trade shows are effective marketing tools to both consumers andwholesale 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 creativecampaigns are directly related to our success. Through our lifestyle, performance-inspired and image-driven advertising, we generally seek to build andincrease brand awareness by linking the Skechers brand to youthful attitudes for our lifestyle lines, and technology with runners and athletes for ourperformance lines. Our campaigns are designed to provide merchandise flexibility and to facilitate the brand’s direction.To further build brand awareness and influence consumer spending, we have selectively signed endorsement agreements with celebrities whom webelieve will reach new markets. Our Skechers lifestyle endorsees include Demi Lovato, Brooke Burke-Charvet, Kelly Brook, Joe Montana, Joe Namath, andPete Rose. We also signed Ringo Starr, Sugar Ray Leonard and Mariano Riviera, all of7 whom appeared in campaigns in 2015. Our Skechers Performance Division endorsees are elite runner and Olympic medalist Meb and elite runner KaraGoucher, who both appeared in marketing campaigns during 2015. To support our Skechers GO GOLF line, we launched a campaign with professional golferMatt Kuchar, and signed Belen Mozo, Billy Andrade and Colin Montgomerie to appear in campaigns in 2016. Additionally, we signed pop superstarMeghan Trainor to a global agreement in 2015, with her campaign launching in 2016. From time to time, we may sign other celebrities to endorse our brandname 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, 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. In2015, we developed commercials for men, women and children for our Skechers brands, including our animated spots for kids featuring our own actionheroes, as well as live action commercials that appeal to older kids and tweens. We also have many commercials for our performance lines that feature eliteathletes, and for our lifestyle lines that feature retired athletes, musicians and actors. We have found these to be cost-effective ways to advertise on keynational and cable programming during high-selling seasons. In 2015, many of our television commercials were translated into multiple languages and airedin Brazil, Canada, the United Kingdom, France, Mexico, Germany, Spain, Italy, Chile, Japan, Austria, Switzerland, the Philippines and across the MiddleEast, among other countries and regions.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 campaignthat included mall and telephone kiosks, billboards, and transportation systems in the Americas, Asia, the Middle East and across Europe. In addition, weadvertised on perimeter boards at soccer matches and professional sporting events in several European countries, Canada and Mexico. We believe these areeffective and efficient ways to reach a broad range of consumers and leave a lasting impression for our brands.Public Relations/Trend-Influenced Marketing. Our public relations objectives are to accurately position Skechers as a leading footwear brand withinthe business, general news and trade publications as well as to secure product placement in key fashion and lifestyle magazines and television shows, andplace our footwear on the feet of trend-setting celebrities and their children. We have been featured on leading business shows with interviews of ourexecutives discussing the Company’s business strategy and position within the footwear market. We have amassed an array of prominent product placementsin leading fashion, lifestyle, sports and pop culture magazines and websites, and seeded our footwear to celebrities and influencers who have appeared inmagazines, online sites and social media pages in our footwear.Social Media. With the goal of engaging with consumers, showcasing our product in relatable settings and relaying the latest news, we have builtcommunities on Facebook, Twitter, Instagram, Pinterest and Snapchat in the United States and countries around the world where are product is sold. Thesocial platforms are divided into Skechers and Skechers Performance sites, as well as a BOBS page to feature our charitable footwear line. The onlinecommunities also connect consumers around the world, allowing an easy glimpse into trends and events in other countries. Additionally, many countries alsoutilize platforms specific to their market, such as Weibo in China.Promotions and Events. By applying creative sales techniques via a broad spectrum of media, our marketing team seeks to build brand recognitionand 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 2015, we appeared at walks and at numerousmarathons in Boston, New York, London, Paris, Santiago and other cities with Skechers Performance-branded booths to allow runners the ability to try on andoften buy our products. In 2015, the Skechers Performance Division was the footwear and apparel sponsor for the Houston Marathon, and became the titlesponsor of The Skechers Performance Los Angeles Marathon, which saw the first Skechers-branded event in 2016. Our products were made available toconsumers directly or through key accounts at many of these events. In addition, we partnered with many key accounts for BOBS donation events in citiesthroughout the United States, Puerto Rico and Spain, building both our relationships with these accounts, as well as with the community as we donatedfootwear to children in need.Visual Merchandising. Our in-house visual merchandising department supports wholesale customers, distributors and our retail stores by developingdisplays 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, and drawconsumers 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 retaillevel by generating greater consumer awareness through Skechers brand displays. Our VMC’s communicate8 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 ofSkechers 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, weregularly exhibit at leading trade shows. Along with specialty trade shows, we exhibit at FFANY, Platform, The Licensing Show and Outdoor Retailer in theUnited States; GDS, MICAM, and ISPO in Europe; and many other international shows. Our dynamic, state-of-the-art trade show exhibits showcase our latestproduct offerings in a setting reflective of each of our brands. By investing in innovative displays and individual rooms showcasing each line, our sales forcecan present a sales plan for each line and buyers are able to truly understand the breadth and depth of our offerings, thereby optimizing commitments andsales 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 in Chile, Germanyand the United Kingdom, among other countries. This enables consumers 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 enhancesthe Skechers brand experience while driving sales through all our retail channels. In addition, in 2015 we launched the Skechers shopping mobile app.PRODUCT DISTRIBUTION CHANNELSWe have three reportable segments: domestic wholesale sales, international wholesale sales, and retail sales, which includes e-commerce sales. In theUnited States, our products are available through a network of wholesale customers comprised of department, athletic and specialty stores and onlineretailers. Internationally, our products are available through wholesale customers in more than 160 countries and territories via our global network ofdistributors, in addition to our subsidiaries in Asia, Europe, Canada, Central America and South America. Skechers owns and operates retail stores bothdomestically and internationally through three integrated retail formats—concept, factory outlet and warehouse outlet stores. Each of these channels servesan integral function in the global distribution of our products. In addition, twenty distributors and 16 licensees have opened and operate 413 distributor-owned or -licensed Skechers retail stores and 250 licensee-owned Skechers retail stores, respectively, in over 60 countries as of December 31, 2015.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 distributionchannels, 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 distinctproduct lines, variety of styles and the price criteria of their specific customers. Management has a clearly defined growth strategy for each of our channels ofdistribution. An integral component of our strategy is to offer our accounts the highest level of customer service so that our products will be fully representedin existing and new customer retail locations.In an effort to provide knowledgeable and personalized service to our wholesale customers, the sales force is segregated by product line, each of whichis headed by a vice president or national sales manager. Reporting to each sales manager are knowledgeable account executives and territory managers. Thevice presidents and national sales managers report to our senior vice president of sales. All of our vice presidents and national sales managers arecompensated on a salary basis, while our account executives and territory managers are compensated on a commission basis. None of our domestic salespersonnel sells competing products.We believe that we have developed a loyal customer base through exceptional customer service. We believe that our close relationships with theseaccounts help us to maximize their retail sell-throughs. Our marketing teams work with our wholesale customers to ensure that our merchandise andmarketing materials are properly presented. Sales executives and merchandise personnel work closely with accounts to ensure that appropriate styles arepurchased 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 weprovide our wholesale customers help us maintain strong relationships with our existing wholesale customers and attract potential new wholesale customers.Retail stores and e-commerce. We pursue our retail store strategy through our three integrated retail formats: the concept store, the factory outlet storeand the warehouse outlet store. Our domestic website, www.skechers.com, as well as our foreign e-commerce sites, are virtual storefronts that promote theSkechers 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 andbrand experience. These websites are an9 additional efficient and effective retail distribution channel, which has improved our customer service. Our three store formats enable us to promote the fullSkechers product offering in an attractive environment that appeals to a broad group of consumers. In addition, most of our retail stores are profitable andhave a positive effect on our operating results. In 2015, we upgraded the technologies in many of our stores, providing visibility to our merchandise in otherstores and at our distribution center in order to better serve our customers with an omni-channel approach to sales. We periodically review all of our stores forimpairment. We prepare a summary of cash flows for each of our retail stores to assess potential impairment of the fixed assets and leasehold improvements. Ifthe 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 theassets. In addition, we base the useful lives and related amortization or depreciation expense on our estimate of the period that the assets will generaterevenues or otherwise be used by us. As of February 15, 2016, we owned and operated 119 concept stores, 155 factory outlet stores and 117 warehouse outletstores in the United States, and 82 concept stores, 41 factory outlet stores, and five warehouse outlet stores internationally. During 2015, we took over theoperations of 15 international concept stores and two international outlet stores from our distributor in Panama. During 2016, we plan to open 55 to 65 newstores. ·Concept StoresOur concept stores are located at marquee street locations, major tourist areas or in key shopping malls in metropolitan cities. Our conceptstores have a threefold purpose in our operating strategy. First, concept stores serve as a showcase for a wide range of our product offering for thecurrent season, as we estimate that our average wholesale customer carries no more than 5% of the complete Skechers line in any one location. Ourconcept 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 frontpresentation and interior design. Domestic locations include concept stores at Times Square (with a second location opened in 2015), 5th Avenue,Union Square, Roosevelt Field Mall, and 34th Street in New York, Powell Street in San Francisco, Hollywood and Highland in Hollywood, SantaMonica’s Third Street Promenade, Ala Moana Center in Hawaii and Las Vegas’ Grand Canal Shoppes at the Venetian and Fashion Show Mall.International locations include Westfield London and Westfield Stratford in London, Buchanan Street in Glasgow, Princes Street in Edinburgh,Toronto’s Eaton Centre, Vancouver’s Pacific Centre, the Shinsaibashi shopping district of Osaka and Kalverstraat Street in Amsterdam. The stores aretypically designed to create a distinctive Skechers look and feel, and enhance customer association of the Skechers brand name with current youthfullifestyle trends and styles. Third, the concept stores serve as marketing and product testing venues. We believe that product sell-through informationand rapid customer feedback derived from our concept stores enables our design, sales, merchandising and production staff to respond to marketchanges and new product introductions. Such responses serve to augment sales and limit our inventory markdowns and customer returns andallowances.The typical Skechers concept store is approximately 2,400 square feet, although in certain markets we have opened concept stores as large as7,800 square feet or as small as 1,500 square feet. When deciding where to open concept stores, we identify top geographic markets in the largermetropolitan cities in North America, Europe, Central America, South America and Asia. When selecting a specific site, we evaluate the proposedsites’ traffic pattern, co-tenancies, sales volume of neighboring concept stores, lease economics and other factors considered important within thespecific location. If we are considering opening a concept store in a shopping mall, our strategy is to obtain space as centrally located as possible inthe mall, where we expect foot traffic to be most concentrated. We believe that the strength of the Skechers brand name has enabled us to negotiatemore favorable terms with shopping malls that want us to open up concept stores to attract customer traffic to their venues. ·Factory Outlet StoresOur factory outlet stores are generally located in manufacturers’ direct outlet centers throughout the United States. In addition, we have 41international factory outlet stores – nine in England, eight in Canada, four each in Chile and Spain, three in Japan, two each in Austria, Germany andItaly, and one each in Colombia, the Netherlands, Panama, Poland, Portugal, Scotland and Wales. Our factory outlet stores provide opportunities for usto sell discontinued and excess merchandise, thereby reducing the need to sell such merchandise to discounters at excessively low prices andpotentially compromise the Skechers brand image. Skechers’ factory outlet stores range in size from approximately 1,000 to 9,000 square feet. Unlikeour warehouse outlet stores, inventory in these stores is supplemented by certain first-line styles sold at full retail price points. ·Warehouse Outlet StoresOur free-standing and inline warehouse outlet stores, which are primarily located throughout the United States and Canada, enable us toliquidate excess merchandise, discontinued lines and odd-size inventory in a cost-efficient manner. Skechers’ warehouse outlet stores are typicallylarger than our factory outlet stores and typically range in size from approximately 4,400 to 30,000 square feet. Our warehouse outlet stores enable usto sell discontinued and excess merchandise that would otherwise typically be sold to discounters at excessively low prices, which could otherwisecompromise the Skechers10 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 ofinventory that we want to liquidate as soon as practicable.Store count, openings and closings for our domestic, international and consolidated joint venture stores are as follows: Number of StoreLocations Opened during Closed during Number of StoreLocations December 31, 2014 2015 2015 December 31, 2015 Domestic stores Concept 120 5 (6) 119 Factory Outlet 145 11 (1) 155 Warehouse Outlet 97 19 — 116 Domestic stores total 362 35 (7) 390 International stores Concept 51 31 (1) 81 Factory Outlet 33 8 — 41 Warehouse Outlet 3 2 — 5 International stores total 87 41 (1) 127 Joint venture stores China Concept 24 10 (2) 32 China Factory Outlet 18 5 (3) 20 Hong Kong Concept 24 5 — 29 Hong Kong Outlet — — — — South East Asia Concept 18 4 (1) 21 South East Asia Outlet — — — — India Concept 18 12 (1) 29 India Outlet 2 — (1) 1 Joint venture stores total 104 36 (8) 132 Total domestic, international and joint venture stores 553 112 (16) 649 International Wholesale. Our products are sold in more than 160 countries and territories throughout the world. We generate revenues from outsidethe United States from three principal sources: (i) direct sales to department stores and specialty retail stores through our joint ventures in Asia, as well asthrough our subsidiaries in Central America, Europe, Japan, North America and South America; (ii) sales to foreign distributors who distribute our footwear todepartment stores and specialty retail stores in select countries and territories across Asia, South America, Africa, the Middle East and Australia; and (iii) to alesser 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 furtherincrease our share of the international footwear market by heightening our marketing in those countries in which we currently have a presence through ourinternational advertising campaigns, which are designed to establish Skechers as a global brand synonymous with trend-right casual shoes. ·International SubsidiariesEuropeWe currently merchandise, market and distribute product in most of Europe through the following subsidiaries: Skechers USA Ltd., with itsoffices and showrooms in London, England; Skechers S.a.r.l., with its offices in Lausanne, Switzerland; Skechers USA France S.A.S., with its officesand 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;Skechers USA Italia S.r.l., with its offices and showrooms in Milan, Italy; Skechers CEE, Kft. with its offices and showrooms in Budapest, Hungry aswell as regional showrooms in Albania, Bosnia-Herzegovina, Bulgaria, Croatia, the Czech Republic, Kosovo, Macedonia, Moldova, Montenegro,Romania, Serbia, Slovakia and Slovenia. Skechers-owned retail stores in Europe include 15 concept stores and 24 factory outlet stores located in 12countries.11 To accommodate our European subsidiaries’ operations, we operate an approximately 780,000 square-foot distribution center in Liege,Belgium. During 2015, we completed the third phase of automation upgrades of our European Distribution Center equipment, allowing us to moreefficiently receive and ship product to our subsidiaries and retail stores throughout Europe. In 2016, we plan to complete the fourth expansion phase,bringing our European facility to one million square-feet. The additional space that we added in 2015 will consolidate off-site storage facilities into asingle on-site location that will further increase efficiencies and offer storage capacity of up to four million pairs of shoes.CanadaWe currently merchandise, market and distribute product in Canada through Skechers USA Canada, Inc. with its offices and showrooms outsideToronto in Mississauga, Ontario. Product sold in Canada is primarily sourced from our U.S. distribution center in Rancho Belago, California. We have15 concept stores, eight factory outlet stores, and five warehouse outlet stores.South America and Central AmericaWe currently merchandise, market and distribute product in South America and Central America through the following subsidiaries: SkechersDo Brasil Calcados LTDA, with its offices and showrooms located in Sao Paulo, Brazil; Comercializadora Skechers Chile Limitada, with its officesand showrooms located in Santiago, Chile; Skechers Latin America LLC, with its offices and showrooms in Panama City, Panama as well as regionalshowrooms in Panama, Peru, Colombia and Costa Rica also distributes products in the Caribbean, Ecuador, Guatemala, El Salvador, Honduras andNicaragua. Product sold in South America and Central America is primarily shipped directly from our contract manufacturers’ factories in China andVietnam.JapanWe currently merchandise, market and distribute product in Japan through our wholly-owned subsidiary, Skechers Japan GK, with its officesand showrooms located in Tokyo, Japan. Product sold in Japan is primarily shipped directly from our contract manufacturers’ factories in China. Ourretail stores are in key locations in Osaka, Tokyo, and other cities.China and Hong KongWe 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 thosecountries. Under the joint venture agreements, the joint venture partners contribute capital in proportion to their respective ownership interests. Ourretail stores are in key locations in Shanghai, Beijing, Guangzhou, Hong Kong, Macau and other cities. These joint ventures are consolidated in ourfinancial statements.Malaysia and SingaporeWe have a 50% interest in a joint venture in Malaysia and Singapore that generates net sales in those countries. Under the joint ventureagreement, the joint venture partners contribute capital in proportion to their respective ownership interests. Our retail stores are in key locations inSingapore, Kuala Lumpur, Petaling Jaya and other cities. These joint ventures are consolidated in our financial statements.IndiaWe have a 51% interest in Skechers South Asia Private Limited and a 49% interest in Skechers Retail India Private Limited, which are bothjoint ventures, that generate net sales in India. Under the joint venture agreements, the joint venture partners contribute capital in proportion to theirrespective ownership interests. Our retail stores are in key locations in Bangalore, Mumbai, New Delhi and other cities. These joint ventures areconsolidated in our financial statements.12 ·Distributors and Licensees Where we do not sell directly through our international subsidiaries and joint ventures, our footwear is distributed through an extensivenetwork of more than 25 distributors who sell our products to department, athletic and specialty stores in more than 75 countries around the world. Asof December 31, 2015, we also had agreements with 19 of these distributors and 17 licensees regarding 413 distributor-owned or -licensed Skechersretail stores and 250 licensee-owned Skechers retail stores, respectively, that are open in over 65 countries. Our distributors and licensees own andoperate the following retail stores: Number of StoreLocations Opened during Closed during Number of StoreLocations December 31, 2014 2015 2015 December 31, 2015 Distributor and licensee stores North America Concept 46 7 — 53 North America Factory Outlet 12 2 — 14 Central America Concept 8 2 (7) 3 Central America Factory Outlet 1 1 (2) — South America Concept 26 7 (13) 20 South America Factory Outlet 1 — (1) — Africa Concept 26 5 — 31 Asia Concept 193 98 (22) 269 Asia Factory Outlet 18 55 (2) 71 Australia/New Zealand Concept 20 10 — 30 Australia/New Zealand Factory Outlet 11 — — 11 Europe Concept 63 36 (5) 94 Europe Factory Outlet 4 1 — 5 Middle East Concept 43 17 (1) 59 Middle East Factory Outlet 2 1 — 3 Total distributor and licensee stores 474 242 (53) 663 Distributors and licensees are responsible for their respective stores’ operations, have ownership of their respective stores’ assets, and select the broadcollection of our products to sell to consumers in their regions. In order to maintain a globally consistent image, we provide architectural, graphic and visualguidance 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 internationalpresence and global recognition of the Skechers brand name by continuing to sell our footwear to foreign distributors and by opening flagship retail storeswith distributors that have local market expertise.For disclosure of financial information about geographic areas and segment information for our three reportable segments–domestic wholesale sales,international wholesale sales, and retail sales, see Note 17 – Segment Information in the consolidated financial statements included in this annual report.LICENSINGWe believe that selective licensing of the Skechers brand name and our product line names to manufacturers may broaden and enhance the individualbrands without requiring significant capital investments or additional incremental operating expenses. Our multiple product lines plus additionalsubcategories present many potential licensing opportunities on terms with licensees that we believe will provide more effective manufacturing, distributionor 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 withreputable non-footwear brands to design and market their footwear.As of February 15, 2016, 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, fitness, yoga and running accessories, work accessories and watches,Skechers Sport apparel, BOBS from Skechers apparel, and Twinkle Toes dolls, toys backpacks, lunchboxes, do-it-yourself fashion kits and fashionaccessories. We have international licensing agreements for the design and distribution of men’s, women’s and kids’ apparel in Chile, Israel, the Philippines,the United Kingdom and South Korea; socks in France; apparel, socks, bags, backpacks and luggage in Mexico; bags, backpacks, apparel, watches andaccessories in Latin America; and watches in the Philippines.13 DISTRIBUTION FACILITIES AND OPERATIONSWe believe that strong distribution support is a critical factor in our operations. Once manufactured, our products are packaged in shoe boxes bearingbar codes that are shipped either: (i) to our approximate 1.8 million square-foot distribution center located in Rancho Belago, California, (ii) to ourapproximate 780,000 square-foot European Distribution Center (“EDC”) located in Liege, Belgium, (iii) to our company-operated distribution centers orthird-party distribution centers in Central American, South America and Asia or (vi) directly from third-party manufacturers to our other internationalcustomers and other international third-party distribution centers. Upon receipt at either of the distribution centers, merchandise is inspected and recorded inour management information system and packaged according to customers’ orders for delivery. Merchandise is shipped to customers by whatever means eachcustomer requests, which is usually by common carrier. The distribution centers have multi-access docks, enabling us to receive and ship simultaneously, andto pack separate trailers for shipments to different customers at the same time. We have an electronic data interchange system (“EDI system”) which is linkedto some of our larger customers. This system allows these customers to automatically place orders with us, thereby eliminating the time involved intransmitting and inputting orders, and it includes direct billing and shipping information.BACKLOGAs of December 31, 2015 our backlog was $1.08 billion, compared to $988.7 million as of December 31, 2014. Backlog orders are subject tocancellation by customers, as evidenced by order cancellations that we have experienced in the past, due to the weakened U.S. economy and shiftingfootwear trends. For a variety of reasons, including changes in the economy, customer demand for our products, the timing of shipments, product mix ofcustomer 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 forany succeeding period.INTELLECTUAL PROPERTY RIGHTSWe own and utilize a variety of trademarks, including the Skechers trademark. We have a significant number of both registrations and pendingapplications for our trademarks in the United States. In addition, we have trademark registrations and trademark applications in approximately 128 foreigncountries. 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 valuableintellectual property. We regard our trademarks and other intellectual property as valuable assets, and believe that they have significant value in marketingour products. We vigorously protect our trademarks against infringement, including through the use of cease and desist letters, administrative proceedingsand lawsuits.We rely on trademark, patent, copyright and trade secret protection, non-disclosure agreements and licensing arrangements to establish, protect andenforce intellectual property rights in our logos, trade names and in the design of our products. In particular, we believe that our future success will largelydepend on our ability to maintain and protect the Skechers trademark and other key trademarks. Despite our efforts to safeguard and maintain our intellectualproperty rights, we cannot be certain that we will be successful in this regard. Furthermore, we cannot be certain that our trademarks, products andpromotional materials or other intellectual property rights do not, or will not, violate the intellectual property rights of others, that our intellectual propertywould be upheld if challenged, or that we would, in such an event, not be prevented from using our trademarks or other intellectual property rights. Suchclaims, if proven, could materially and adversely affect our business, financial condition and results of operations. In addition, although any such claims mayultimately prove to be without merit, the necessary management attention and associated legal costs with litigation or other resolution of future claimsconcerning 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 impairedour 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 UnitedStates. Although we continue to implement protective measures and intend to defend our intellectual property rights vigorously, these efforts may not besuccessful, or the costs associated with protecting our rights in certain jurisdictions may be prohibitive. From time to time, we discover products in themarketplace that are counterfeit reproductions of our products or that otherwise infringe upon intellectual property rights held by us. Actions taken by us toestablish and protect our trademarks and other intellectual property rights may not be adequate to prevent imitation of our products by others, or to preventothers from seeking to block sales of our products as violating trademarks and intellectual property rights. If we are unsuccessful in challenging a thirdparty’s products on the basis of infringement of our intellectual property rights, continued sales of such products by that or any other third party couldadversely impact the Skechers brand, result in the shift of consumer preferences away from our products, and generally have a material adverse effect on ourbusiness, financial condition and results of operations.14 COMPETITIONThe footwear industry is a competitive business. Although we believe that we do not compete directly with any single company with respect to itsentire range of products, our products compete with other branded products within their product category as well as with private label products sold byretailers, including some of our customers. Our casual shoes and utility footwear compete with footwear offered by companies such as Columbia SportswearCompany, 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 SE, ASICS America Corporation, New Balance Athletic Shoe, Inc. and Under Armour, Inc. The intensecompetition among these companies and the rapid changes in technology and consumer preferences in the markets for performance footwear, including thewalking fitness category, constitute significant risk factors in our operations. Our children’s shoes compete with footwear offered by these companies andothers including, Payless Holdings, and with other brands such as Stride Rite by Wolverine World Wide, Inc. In varying degrees, depending on the productcategory involved, we compete on the basis of style, price, quality, comfort and brand name prestige and recognition, among other factors. These and othercompetitors pose challenges to our market share in our major domestic markets, and may make it more difficult to establish our products in Europe, Asia andother international regions. We also compete with numerous manufacturers, importers and distributors of footwear for the limited shelf space available fordisplaying such products to the consumer. Moreover, the general availability of contract manufacturing capacity allows ease of access by new marketentrants. Many of our competitors are larger, have been in existence for a longer period of time, have achieved greater recognition for their brand names, havecaptured greater market share and/or have substantially greater financial, distribution, marketing and other resources than we do. We cannot be certain thatwe will be able to compete successfully against present or future competitors, or that competitive pressures will not have a material adverse effect on ourbusiness, financial condition and results of operations.EMPLOYEESAs of January 31, 2016, we employed approximately 9,200 persons, of whom approximately 3,600 were employed on a full-time basis andapproximately 5,600 were employed on a part-time basis, primarily in our retail stores. None of our employees are subject to a collective bargainingagreement. We believe that our relations with our employees are satisfactory. ITEM 1A.RISK FACTORSIn 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 imagedepends on sustained effort and commitment to, and significant investment in, both the successful development of high-quality, innovative, fashion forwardproducts, and fresh and relevant marketing and advertising campaigns. Even if we are able to timely and appropriately respond to changing consumerpreferences and trends with new high-quality products, our marketing and advertising campaigns may not resonate with consumers, or consumers mayconsider our brand to be outdated or associated with footwear styles that are no longer popular or relevant. Our brand name and image with consumers couldalso 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 tomaintain, promote and grow our brand image, then our business, financial condition and results of operations could be materially and adversely affected.15 Our Future Success Also Depends On Our Ability To Respond To Changing Consumer Preferences, Identify And Interpret Consumer Trends, AndSuccessfully Market New Products.The footwear industry is subject to rapidly changing consumer preferences. The continued popularity of our footwear and the development of newlines and styles of footwear with widespread consumer appeal, including consumer acceptance of our performance footwear, requires us to accurately identifyand interpret changing consumer trends and preferences, and to effectively respond in a timely manner. Continuing demand and market acceptance for bothexisting 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 footwearspecifically, 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 andmarketing expenditures several months in advance of the time when actual consumer acceptance can be determined. As a result, we may not be successful inresponding to shifting consumer preferences and trends with new products that achieve market acceptance. Because of the ever-changing nature of consumerpreferences and market trends, a number of companies in the footwear industry, including ours, experience periods of both rapid growth, followed bydeclines, in revenue and earnings. If we fail to identify and interpret changing consumer preferences and trends, or are not successful in responding to thesechanges 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 materiallyand 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 minimizepurchasing costs, the time necessary to fill customer orders and the risk of non-delivery. We also maintain an inventory of certain products that we anticipatewill be in greater demand. Any unanticipated decline in the popularity of Skechers footwear or other unforeseen circumstances may make it difficult for usand our customers to accurately forecast product demand trends, and we may be unable to sell the products we have ordered in advance from manufacturers orthat we have in our inventory. Inventory levels in excess of customer demand may result in inventory write-downs and the sale of excess inventory atdiscounted 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 weneed them, we may experience inventory shortages. Inventory shortages might delay shipments to customers, negatively impact retailer and distributorrelationships, and diminish brand loyalty.We Face Intense Competition, Including Competition From Companies In The Performance Footwear Market and Those With Significantly GreaterResources Than Ours, And If We Are Unable To Compete Effectively With These Companies, Our Market Share May Decline And Our Business CouldBe Harmed.We face intense competition from other established companies in the footwear industry. Our competitors’ product offerings, pricing, costs ofproduction, and advertising and marketing expenditures are highly competitive areas in our business. If we do not adequately and timely anticipate andrespond to our competitors, consumer demand for our products may decline significantly. 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 tobetter withstand periodic downturns in the footwear industry, compete more effectively on the basis of price and production, keep up with rapid changes infootwear technology, and more quickly develop new products. New companies may also enter the markets in which we compete, further increasingcompetition in the footwear industry. In addition, negative consumer perceptions of our performance features due to our historical reputation as a fashion andlifestyle footwear company may place us at a competitive disadvantage in the performance footwear market. We may not be able to compete successfully inthe future, and increased competition may result in price reductions, cost increases, reduced profit margins, loss of market share and an inability to generatecash 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.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 shouldconsumer demand for such style or group of styles decrease in subsequent periods. We attempt to mitigate this16 risk by offering a broad range of products, and no style comprised over 5% of our gross wholesale sales during 2015 or 2014. However, this may change inthe future, and fluctuations in sales of any style representing a significant portion of our future net sales could have a negative impact on our operatingresults.The Uncertainty Of Global Market Conditions May Continue To Have A Negative Impact On Our Business, Results Of Operations Or FinancialCondition.While global economic conditions have recently improved slightly, their uncertain state continues to negatively impact our business, which dependson the general economic environment and levels of consumers’ discretionary spending that affect not only the ultimate consumer, but also retailers, who areour 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 toexisting customers, make sales to new customers, open and operate new retail stores, maintain sales levels at our existing stores, maintain or increase ourinternational operations on a profitable basis, or maintain or improve our earnings from operations as a percentage of net sales. Additionally, if there is anunexpected decline in sales, our results of operations will depend on our ability to implement a corresponding and timely reduction in our costs and manageother aspects of our operations. These challenges include (i) managing our infrastructure, (ii) hiring and maintaining, as required, the appropriate number ofqualified employees, (iii) managing inventory levels and (iv) controlling other expenses. If the uncertain global market conditions continue for a significantperiod 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 EconomicConditions.The global financial crisis affected the banking system and financial markets and resulted in a tightening in the credit markets, more stringent lendingstandards and terms, and higher volatility in fixed income, credit, currency and equity markets. There could be a number of follow-on effects from the creditcrisis 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 alsoexperience 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, resultsof operations and financial condition.We Depend Upon A Relatively Small Group Of Customers For A Large Portion Of Our Sales.During 2015, 2014 and 2013, our net sales to our five largest customers accounted for approximately 14.6%, 15.7% and 18.1% of total net sales,respectively. No customer accounted for more than 10.0% of our net sales during 2015, 2014 and 2013. As of December 31, 2015, one customer accountedfor 10.6% of trade receivables. No other customer accounted for more than 10.0% of trade receivables at December 31, 2015 and 2014. Although we havelong-term relationships with many of our customers, our customers do not have a contractual obligation to purchase our products and we cannot be certainthat we will be able to retain our existing major customers. Furthermore, the retail industry regularly experiences consolidation, contractions and closingswhich may result in our loss of customers or our inability to collect accounts receivable of major customers. If we lose a major customer, experience asignificant 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 ForFootwear, 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 offactors, many of which are beyond our control. Our major customers have no obligation to purchase forecasted amounts, may and have canceled orders, andmay 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 accuratelypredict our quarterly sales. In addition, sales of footwear products have historically been somewhat seasonal in nature, with the strongest sales generallyoccurring 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 inthe timing, cancellation, or rescheduling of these customer orders and shipments by our wholesale customers could negatively impact our net sales andresults of operations for our second or third quarters. More specifically, the timing of when products are shipped is determined by the delivery schedules setby our wholesale customers, which could cause sales to shift between our second and third quarters. Because our expense levels are partially based on ourexpectations of future net sales, our expenses may be disproportionately large relative to our revenues, and we may be unable to adjust spending in a timelymanner to compensate for any unexpected revenue shifts, which could have a material adverse effect on our operating results.17 Our annualized tax rate is based on projections of our domestic and international operating results for the year, which we review and revise asnecessary at the end of each quarter, and it is highly sensitive to fluctuations in projected international earnings. Any quarterly fluctuations in our annualizedtax 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 operatingresults 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. Anyshortfall in revenues or net earnings from levels expected by securities analysts and investors could cause a decrease in the trading price of our Class ACommon Stock.Our International Sales And Manufacturing Operations Are Subject To The Risks Of Doing Business Abroad, Particularly In China, Which CouldAffect Our Ability To Sell Or Manufacture Our Products In International Markets, Obtain Products From Foreign Suppliers Or Control The Costs OfOur Products.Substantially all of our net sales during the year ended December 31, 2015 were derived from sales of footwear manufactured in foreign countries, withmost manufactured in China and Vietnam. We also sell our footwear in several foreign countries and plan to increase our international sales efforts as part ofour growth strategy. Foreign manufacturing and sales are subject to a number of risks, including the following: political and social unrest, includingterrorism; changing economic conditions, including higher labor costs; increased costs of raw materials; currency exchange rate fluctuations; labor shortagesand 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 differentlegal 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 ortyphoon in China, or the outbreak of a pandemic disease in China could severely interfere with the manufacturing and/or shipment of our products and wouldhave a material adverse effect on our operations. In addition, electrical shortages, labor shortages or work stoppages may extend the production timenecessary 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 ofproduct to our customers. If we incur a significant amount of premium charges to airfreight product for our customers, our gross profit will be negativelyaffected 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 AndProfitability.All of our products manufactured overseas and imported into the United States, the European Union (“EU”) and other countries are subject to customsduties collected by customs authorities. Customs information submitted by us is routinely subject to review by customs authorities. We are unable to predictwhether additional customs duties, quotas, tariffs, anti-dumping duties, safeguard measures, cargo restrictions to prevent terrorism or other trade restrictionsmay 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 mightadversely 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 wedepend 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 thatare heavily dependent on customer traffic generated by tourism. Any substantial decrease in tourism resulting from an economic slowdown, political, socialor military events or otherwise, is likely to adversely affect sales in our existing stores, particularly those with street locations. The effects of these factorscould 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 2015 and 2014, the top five manufacturers of ourproducts produced approximately 56.5% and 58.9% of our total purchases, respectively. One manufacturer accounted for 31.5% and 37.5% of total purchasesduring 2015 and 2014, respectively. Another manufacturer accounted for 9.1% and18 6.1% of our total purchases during 2015 and 2014, respectively. We do not have long-term contracts with manufacturers, and we compete with other footwearcompanies for production facilities. We could experience difficulties with these manufacturers, including reductions in the availability of productioncapacity, failure to meet our quality control standards, failure to meet production deadlines, or increased manufacturing costs. This could result in ourcustomers canceling orders, refusing to accept deliveries, or demanding reductions in purchase prices, any of which could have a negative impact on our cashflow 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 webelieve that we could find alternative manufacturers, we may be unable to establish relationships with alternative manufacturers that will be as favorable asthe relationships we have now. For example, new manufacturers may have higher prices, less favorable payment terms, lower manufacturing capacity, lowerquality standards, or higher lead times for delivery. If we are unable to provide products consistent with our standards, or the manufacture of our footwear isdelayed 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 lawin the manufacturer’s country) is used in the production process, that compensation is paid in accordance with local law and that their factories are incompliance with local safety regulations. Although we promote ethical business practices and our sourcing personnel periodically visit and monitor theoperations of our independent contract manufacturers, suppliers and licensees, we do not control them or their labor practices. If one of our independentcontract manufacturers, suppliers or licensees violates labor or other laws or diverges from those labor practices generally accepted as ethical in the UnitedStates, 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 countryundesirable 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, significantmonetary penalties, the seizure and the forfeiture of the products we are attempting to import, or the loss of our import privileges. Possible violations ofUnited States or foreign laws or regulations could include inadequate record-keeping of our imported products, misstatements or errors as to the origin, quotacategory, classification, marketing or valuation of our imported products, fraudulent visas, or labor violations. The effects of these factors could render ourconduct 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 AndResults Of Operations.Since 2010, the toning footwear product category, including our Shape-ups products, has come under significant public scrutiny, such as highlypublicized negative professional opinions, negative publicity and media attention, personal injury lawsuits and attorneys publicly marketing their servicesto consumers allegedly injured by toning products, including Shape-ups. In addition, we have been responding to inquiries by state, federal, and foreigngovernmental and quasi-governmental regulators regarding the claims, advertising, and safety of our toning products, and are engaged as defendants in civillawsuits that involve similar claims. This public and regulatory scrutiny has included the questioning of our advertising, promotional claims, and the overallsafety of these products, as well as allegations of personal injuries. We believe that Shape-ups and our other toning products are safe, but the negativepublicity from this public and regulatory scrutiny appears to have had a negative impact on sales of toning footwear generally and our Shape-ups products inparticular. We are not able to predict whether such negative publicity, regulatory review and related litigation will continue or what the continued effect willbe on the sales of our Shape-up products, our business, and our results of operations beyond that included in this annual report. Further details regardingthese 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 benefitsassociated 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 annualreport, we announced on May 16, 2012 that we had settled all domestic legal proceedings relating to advertising claims made in connection with themarketing of our toning shoe products. Under the terms of the global settlement—without admitting any fault or liability, with no findings being made thatour company had violated any law, and with no fines or penalties being imposed—we made payments in the aggregate amount of $5019 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 servedwith 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 andadvertising for Shape-ups and our other toning shoe products. In December 2015, the Assistant United States Attorney informed us that the grand jury hadconcluded its review of this matter and that no legal action would be taken against our company, any of our employees or any other individuals. Althoughthe grand jury’s inquiry was concluded without having a material adverse impact on our results of operations or financial position, it is still too early topredict if there will be any additional government inquiries either in the United States or abroad and whether the final resolution of these matters could havea 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 ThePerformance Of Our Existing Stores.Our ability to successfully open and operate new stores depends on many factors, including, among others, our ability to identify suitable storelocations, the availability of which is outside of our control; negotiate acceptable lease terms, including desired tenant improvement allowances; sourcesufficient levels of inventory to meet the needs of new stores; hire, train and retain store personnel; successfully integrate new stores into our existingoperations; 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 inour existing markets. Any of these challenges could adversely affect our business and results of operations. In addition, to the extent that any new storeopenings 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 ExistingPersonnel, 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 amember 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 alsodepends on our ability to identify, attract and retain additional qualified personnel. Competition for employees in our industry is intense, and we may not besuccessful in attracting and retaining such personnel.The Disruption, Expense And Potential Liability Associated With Existing And Unanticipated Future Litigation Against Us Could Have A MaterialAdverse 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 normalcourse 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 reasonto 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, withrespect to any other such loss contingencies. However, the outcome of litigation is inherently uncertain and assessments and decisions on defense andsettlement can change significantly in a short period of time. Therefore, although we consider the likelihood of such an outcome to be remote with respect tothose 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 samereporting period for amounts in excess of our expectations, our consolidated financial statements of a particular reporting period could be materiallyadversely affected. Further, any unanticipated litigation in the future, regardless of its merits, could also significantly divert management’s attention from ouroperations and result in substantial legal fees being incurred. Such disruptions, legal fees and any losses resulting from these unanticipated future claimscould 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 19 under “It Is Difficult To Predict The Effect Of RegulatoryInquiries About Advertising And Promotional Claims Related To Our Toning Shoe Products.”20 Our Ability To Compete Could Be Jeopardized If We Are Unable To Protect Our Intellectual Property Rights Or If We Are Sued For IntellectualProperty Infringement.We believe that our trademarks, design patents and other proprietary rights are important to our success and our competitive position. We usetrademarks on nearly all of our products and believe that having distinctive marks that are readily identifiable is an important factor in creating a market forour goods, in identifying us and in distinguishing our goods from the goods of others. We consider our Skechers®, Skechers Performance™, SkechersGOrun®, Skechers GOwalk®, ®, ®, ®, Skechers Cali™, Relaxed Fit®, Skechers Memory Foam™, Skech-Air®, BOBS®, Hot Lights®, TwinkleToes® trademarks to be among our most valuable assets, and we have registered these trademarks in many countries. In addition, we own many othertrademarks that we utilize in marketing our products. We also have a number of design patents and a limited number of utility patents covering componentsand features used in various shoes. We believe that our patents and trademarks are generally sufficient to permit us to carry on our business as presentlyconducted. While we vigorously protect our trademarks against infringement, we cannot guarantee that we will be able to secure patents or trademarkprotection for our intellectual property in the future or that protection will be adequate for future products. Further, we have been sued in the past for patentand 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 compelledto prosecute infringing parties, defend our intellectual property or defend ourselves from intellectual property claims made by others, we may face significantexpenses and liability as well as the diversion of management’s attention from our business, each of which could negatively impact our business or financialcondition.In addition, the laws of foreign countries where we source and distribute our products may not protect intellectual property rights to the same extent asdo 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 propertyrights outside the United States will be adequate to prevent imitation of our products by others or, if necessary, successfully challenge another party’scounterfeit products or products that otherwise infringe on our intellectual property rights on the basis of trademark or patent infringement. Continued salesof these products could adversely affect our sales and our brand and result in the shift of consumer preference away from our products. We may facesignificant expenses and liability in connection with the protection of our intellectual property rights outside the United States, and if we are unable tosuccessfully 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 BusinessCould 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 orprivate information regarding our customers, employees, and others, including credit card information and personal identification information. A securitybreach may expose us to a risk of loss or misuse of this information, litigation and potential liability. We may not have the resources or technicalsophistication to anticipate or prevent rapidly-evolving types of cyber-attacks. Attacks may be targeted at us, our customers, or others who have entrusted uswith information. Actual or anticipated attacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, trainemployees, and engage third-party experts and consultants. Advances in computer capabilities, new technological discoveries, or other developments mayresult in the technology used by us to protect against transaction or other data being breached or compromised. In addition, data and security breaches canalso occur as a result of non-technical issues, including breach by us or by persons with whom we have commercial relationships that result in theunauthorized release of personal or confidential information. Any compromise or breach of our cyber security systems could result in private informationexposure and a violation of applicable privacy and other laws, significant potential liability including legal and financial costs, and loss of confidence in oursecurity 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, 2015, a substantial portion of our operations are located in California, including 87 of our retail stores, our headquarters inManhattan Beach, and our domestic distribution center in Rancho Belago. Because a significant portion of our net sales is derived from sales in California, adecline 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 fire affecting California, could significantly disrupt our businessincluding the operation of our only domestic distribution center. We may be more susceptible to these issues than our competitors whose operations are notas concentrated in California.21 Two Principal Stockholders Are Able Exert Significant Influence Over All Matters Requiring A Vote Of Our Stockholders, And Their Interests MayDiffer From The Interests Of Our Other Stockholders.As of December 31, 2015, our Chairman of the Board and Chief Executive Officer, Robert Greenberg, beneficially owned 45.0% of our outstandingClass B common shares, members of Mr. Greenberg’s immediate family beneficially owned an additional 15.7% 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 38.7% of ouroutstanding Class B common shares. The holders of Class A common shares and Class B common shares have identical rights except that holders of Class Acommon 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 voteof our stockholders. As a result, as of December 31, 2015, Mr. Greenberg beneficially owned 30.2% of the aggregate number of votes eligible to be cast byour stockholders, and together with shares beneficially owned by other members of his immediate family, Mr. Greenberg and his immediate familybeneficially owned 41.2% of the aggregate number of votes eligible to be cast by our stockholders, and Mr. Schwartzberg beneficially owned 25.9% of theaggregate number of votes eligible to be cast by our stockholders. Therefore, Messrs. Greenberg and Schwartzberg are each able to exert significant influenceover all matters requiring approval by our stockholders. Matters that require the approval of our stockholders include the election of directors and theapproval of mergers or other business combination transactions. Mr. Greenberg also has significant influence over our management and operations. As aresult of such influence, certain transactions are not likely without the approval of Messrs. Greenberg and Schwartzberg, including proxy contests, tenderoffers, open market purchase programs, or other transactions that can give our stockholders the opportunity to realize a premium over the then-prevailingmarket prices for their shares of our Class A common shares. Because Messrs. Greenberg’s and Schwartzberg’s interests may differ from the interests of theother stockholders, their ability to significantly influence or substantially control, respectively, actions requiring stockholder approval may result in ourcompany 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 Acommon 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 closingsuch a transaction would be beneficial to our stockholders. Mr. Greenberg’s substantial beneficial ownership position, together with the authorization ofPreferred Stock, the disparate voting rights between our Class A Common Stock and Class B Common Stock, the classification of our Board of Directors andthe lack of cumulative voting in our certificate of incorporation and bylaws, may have the effect of delaying, deferring or preventing a change in control, maydiscourage 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 priceof our Class A Common Stock. ITEM 1B.UNRESOLVED STAFF COMMENTSNone.ITEM 2.PROPERTIESOur corporate headquarters are located at several properties in Manhattan Beach, California, which consist of an aggregate of approximately 145,000square feet. We own and lease portions of 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 thedistribution 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 ofbuilding 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 peryear. The JV is consolidated in our financial statements.Our European Distribution Center occupies approximately 780,000 square feet in Liege, Belgium under four operating leases, with base rent ofapproximately $4.1 million per year. Each lease provides for an original term of 15 years, commencing on January 1, 2016 (except for one lease that is notexpected to commence until April 1, 2016), subject to automatic extensions for recurring periods of five years unless we or the landlord terminates the leasein writing 12 months prior to the expiration of the original lease term or 12 months prior to the end of the then applicable five-year extension.All of our domestic retail stores and showrooms are leased with terms expiring between March 2016 and May 2032. The leases provide for rentescalations tied to either increases in the lessor’s operating expenses, fluctuations in the consumer price index in the22 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 retailstores and showrooms was $63.3 million for the year ended December 31, 2015.We also lease all of our international administrative offices, retail stores, showrooms and distribution facilities located in Asia, Central America,Europe, North America and South America. The property leases expire at various dates between March 2016 and November 2027. Total base rent for theleased properties aggregated approximately $46.4 million for the year ended December 31, 2015. ITEM 3.LEGAL PROCEEDINGSOur claims and advertising for our toning products including for our Shape-ups are subject to the requirements of, and routinely come under review byregulators including the U.S. Federal Trade Commission (“FTC”), states’ Attorneys General and government and quasi-government regulators in foreigncountries. We have responded to requests for information regarding our claims and advertising from regulatory and quasi-regulatory agencies in severalcountries and fully cooperated with such requests. While we believe that our claims and advertising with respect to our core toning products are supported byscientific tests, expert opinions and other relevant data, and while we have been successful in defending our claims and advertising in several differentcountries, we have discontinued using certain test results and we periodically review and update our claims and advertising. The regulatory inquiries mayconclude in a variety of outcomes, including the closing of the inquiry with no further regulatory action, settlement of any issues through changes in itsclaims 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 beenreviewing 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 multipleconsumer class actions challenging our claims and advertising for our toning shoe products, including Shape-ups. On May 16, 2012, we announced that wehad settled all domestic legal proceedings relating to advertising claims made in connection with the marketing of our toning shoe products. Under the termsof 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 orpenalties being imposed—we made payments in the aggregate amount of $50 million to settle and finally resolve the domestic advertising class actionlawsuits and related claims brought by the FTC and the SAGs. The FTC Stipulated Final Judgment was approved by the United States District Court for theNorthern 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 actionsettlement, 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 advertisingclaims for our toning footwear, including Shape-ups and Resistance Runners. The Subpoena was issued by a Grand Jury of the United States District Court forthe Northern District of Ohio, in Cleveland, Ohio. The Subpoena sought documents and information related to outside studies conducted on our toningfootwear and appeared to grow out of the FTC’s inquiry into our claims and advertising for Shape-ups and our other toning shoe products, which we settledwith the FTC, SAGs and consumer class as part of a global settlement, as set forth above. In December 2015, after reviewing materials provided in response tothe Subpoena, the Assistant United States Attorney informed us that the Grand Jury had concluded its review of this matter and that no legal action would betaken against our company, any of our employees or any other individuals.The toning footwear category, including our Shape-ups products, has also been the subject of some media attention arising from a number of consumercomplaints and lawsuits alleging injury while wearing Shape-ups. We believe our products are safe and are defending ourselves from these media stories andinjury 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 inany 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 excessof a recorded accrual and whether insurance coverage will be adequate to cover any losses.Personal Injury Lawsuits Involving Shape-ups — As previously reported, on February 20, 2011, Skechers U.S.A., Inc., Skechers U.S.A., Inc. II andSkechers 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 ofalleged risks associated with Shape-ups. In total, we are named as a defendant in 1,141 currently pending cases (some on behalf of multiple plaintiffs) filed invarious 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 ofexpress and implied warranties, loss of consortium, and fraud. Although there are some variations in the relief sought, the plaintiffs generally seekcompensatory and/or economic damages, exemplary and/or punitive damages, and attorneys’ fees and costs.23 On December 19, 2011, the Judicial Panel on Multidistrict Litigation issued an order establishing a multidistrict litigation (“MDL”) proceeding in theUnited 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 1,235 personal injury cases have been filed in or transferred to the MDL proceeding and 414 additional individuals havesubmitted claims by plaintiff fact sheets. Skechers has resolved 481 personal injury claims in the MDL proceedings, comprised of 90 that were filed as formalactions and 391 that were submitted by plaintiff fact sheets. Skechers has also settled 1,332 claims in principle—1,101 filed cases and 231 claims submittedby plaintiff fact sheets—either directly or pursuant to a global settlement program that has been approved by the claimants’ attorneys (described in greaterdetail below). Further, 42 cases in the MDL proceeding have been dismissed either voluntarily or on motions by Skechers and 38 unfiled claims submitted byplaintiff fact sheet have been abandoned. Between the consummated settlements and cases subject to the settlement program, all but two personal injurycases pending in the MDL have been or are expected to soon be resolved. On August 6, 2015, the Court entered an order staying all deadlines, including trial,pending further order of the Court.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 72 personal injury actionsfiled in various Superior Courts of the State of California that were brought on behalf of 920 individual plaintiffs (360 of whom also submitted MDL court-approved questionnaires for mediation purposes in the MDL proceeding). Of those cases, 68 were originally filed in the Superior Court for the County of LosAngeles (the “LASC cases”). On August 20, 2014, the Judicial Council of California granted a petition by our company to coordinate all personal injuryactions filed in California that relate to Shape-ups with the LASC cases (collectively, the “LASC Coordinated Cases”). On October 6, 2014, three cases thathad been pending in other counties were transferred to and coordinated with the LASC Coordinated Cases. On April 17, 2015, an additional case wastransferred to and coordinated with the LASC Coordinated Cases. Thirty-five actions brought on behalf of a total of 476 plaintiffs, have been settled anddismissed. We have also settled in principle an additional 31 actions brought on behalf of 405 plaintiffs pursuant to a global settlement program that hasbeen approved by the plaintiffs’ attorneys (described in greater detail below). One single-plaintiff lawsuit and the claims of 28 additional plaintiffs in multi-plaintiff lawsuits have been dismissed entirely, either voluntarily or on motion by us. The claims of 21 additional persons have been dismissed in part, eithervoluntarily or on motions by us. Thus, taking into account both consummated settlements and cases subject to the settlement program, only five lawsuits onbehalf of a total of ten plaintiffs are expected to remain in the LASC Coordinated Cases. Discovery is continuing in those five remaining cases. No trial dateshave been set.In other state courts, a total of 12 personal injury actions (some on behalf of numerous plaintiffs) have been filed that have not been removed to federalcourt and transferred to the MDL. Ten of those actions have been resolved and dismissed. One of the remaining actions that includes the claims of 65plaintiffs has been settled in principle pursuant to a global settlement program that has been approved by the plaintiffs’ attorneys (described in greater detailbelow). The last remaining action in a state court other than California was recently filed in Missouri on January 4, 2016 on behalf of a single plaintiff. Wehave not yet been served in that action.With respect to the global settlement programs referenced above, the personal injury cases in the MDL and LASC Coordinated Cases and in other statecourts were largely solicited and handled by the same plaintiffs law firms. Accordingly, mediations to discuss potential resolution of the various lawsuitsbrought by these firms were held on May 18, June 18, and July 24, 2015. At the conclusion of those mediations, the parties reached an agreement in principleon a global settlement program that is expected to resolve all or substantially all of the claims by persons represented by those firms. The global settlementprogram involves complex monetary and non-monetary terms that are in the final stages of being documented. If the group settlements are not finalized andthe litigation proceeds, it is too early to predict the outcome of any case, whether adverse results in any single case or in the aggregate would have a materialadverse impact on our operations or financial position, and whether insurance coverage will be adequate to cover any losses. The settlements have beenreached for business purposes in order to end the distraction of litigation, and we continue to believe we have meritorious defenses and intend to defend anyremaining cases vigorously. In addition, even if the global settlement is finalized, it is too early to predict whether there will be future personal injury casesfiled which are not covered by the settlement, whether adverse results in any single case or in the aggregate would have a material adverse impact on ouroperations or financial position, and whether insurance coverage will be available and/or adequate to cover any losses.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 theEastern District of New York, Brooklyn Division, Case 1:14-cv-05977-DLI-MDG, alleging trademark infringement, false designation of origin, unfaircompetition, trademark dilution and deceptive practices arising out of our alleged use of certain design elements on footwear. The complaint seeks, amongother things, injunctive relief, profits, actual damages, enhanced damages, punitive damages, costs and attorneys’ fees. On October 14, 2014, Converse alsofiled a complaint naming 27 respondents including our company with the U.S. International Trade Commission (the “ITC” or “Commission”), FederalRegister Doc. 2014-24890, alleging violations of federal law in the importation into and the sale within the United States of certain footwear. Converse hasrequested that the Commission issue a general exclusion order, or in the alternative a limited exclusion order, and cease and desist orders. On December 8,2014, the District Court stayed the proceedings before it. On December 19, 2014, Skechers responded to the ITC complaint, denying the material allegationsand asserting affirmative defenses. A trial before an administrative law judge of the ITC was held in August 2015. On November 15, 2015, the ITC judgeissued his interim decision finding that certain discontinued24 products (Daddy’$ Money and HyDee HyTops) infringed on Converse’s intellectual property, but that other, still active product lines (Twinkle Toes andBOBS Utopia) did not. On February 3, 2016, the ITC decided that it would review in part certain matters that were decided by the ITC judge. While it is tooearly 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 ouroperations 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 StatesDistrict Court for the Central District of California, Case 2:14-cv-08988-SJO-FFM, alleging trademark infringement, patent infringement, trade dressinfringement, 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. We have finalized asettlement involving both monetary and non-monetary terms, which will not have a material adverse impact on our operations or financial position.Brian Nicklaus v. Skechers USA, Inc. et al. — On July 27, 2015, a former employee named Brian Nicklaus filed an action against our company in theSuperior Court of California, County of Los Angeles, Case No. BC589344, alleging age discrimination, wrongful termination, and retaliation, among othercauses of actions, and seeking compensatory damages, punitive and exemplary damages and attorneys’ fees. Skechers believes it has meritorious defenses,vehemently denies the allegations and intends to defend this case vigorously. Notwithstanding, it is too early to predict the outcome of this legal proceedingor whether an adverse result in this case would have a material adverse impact on our operations or financial position.adidas America, Inc., et. al v. Skechers USA, Inc. — On September 14, 2015, adidas filed an action against our company in the United States DistrictCourt for the District of Oregon, Case No. 3:15-cv-1741, alleging that three Skechers shoe styles (Skechers Onix, Skechers Relaxed Fit Cross Court TR, andSkechers Relaxed Fit – Supernova Style) infringe adidas’ trademarks and/or trade dress rights. adidas asserts claims under federal and state law for trademarkand trade dress infringement, unfair competition, trademark and trade dress dilution, unfair and deceptive trade practices, and breach of a settlementagreement entered into between the parties in 1995. adidas seeks injunctive relief, disgorgement of Skechers’ profits, damages (including treble, enhancedand punitive damages), and attorneys’ fees. On September 14, 2015, adidas filed a motion for preliminary injunction in which it sought to preliminarilyrestrain us from manufacturing, distributing, advertising, selling, or offering for sale any footwear (a) that is confusingly similar to adidas’ STAN SMITHTrade Dress, (b) bearing stripes in a manner that is confusingly similar to adidas’ Three-Stripe Mark, or (c) under adidas’ SUPERNOVA Mark. We opposedadidas’ motion. A hearing on adidas’ motion was held on December 15, 2015. On February 12, 2016, the Court issued a preliminary injunction prohibiting usfrom selling two styles from our vast footwear collection and from using the word “Supernova” in connection with a third style. While it is too early topredict the outcome of this legal proceeding or whether an adverse result in this case would have a material adverse impact on our operations or financialposition, we believe we have meritorious defenses and intend to defend this legal matter vigorously.Nike, Inc., v. Skechers USA, Inc. — On January 4, 2016, Nike filed an action against our company in the United States District Court for the District ofOregon, Case No. 3:16-cv-0007, alleging that certain Skechers shoe designs (Men’s Burst, Women’s Burst, Women’s Flex Appeal, Men’s Flex Advantage,Girls’ Skech Appeal, and Boys’ Flex Advantage) infringe the claims of eight design patents. Nike seeks injunctive relief, damages (including treble damages),pre-judgment and post-judgment interest, attorneys’ fees, and costs. While it is too early to predict the outcome of this legal proceeding or whether an adverseresult in this case would have a material adverse impact on our operations or financial position, we believe we have meritorious defenses and intend to defendthis legal matter vigorously.In addition to the matters included in its reserve for loss contingencies, we occasionally become involved in litigation arising from the normal courseof 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 tobelieve 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 respectto any other such loss contingencies. However, the outcome of litigation is inherently uncertain and assessments and decisions on defense and settlement canchange significantly in a short period of time. Therefore, although we consider the likelihood of such an outcome to be remote with respect to those mattersfor 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 samereporting period for amounts in excess of our expectations, our consolidated financial statements of a particular reporting period could be materiallyadversely affected. ITEM 4.MINE SAFETY DISCLOSURESNot applicable.25 PART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESOur Class A Common Stock trades on the New York Stock Exchange under the symbol “SKX.” The following table sets forth, for the periodsindicated, the high and low sales prices of our Class A Common Stock. LOW HIGH YEAR ENDED DECEMBER 31, 2015 First Quarter $18.41 $24.75 Second Quarter 23.33 38.26 Third Quarter 36.53 54.53 Fourth Quarter 24.56 49.28 YEAR ENDED DECEMBER 31, 2014 First Quarter $8.82 $12.26 Second Quarter 11.05 15.84 Third Quarter 14.82 21.56 Fourth Quarter 15.92 20.78 HOLDERSAs of February 15, 2016, there were 105 holders of record of our Class A Common Stock (including holders who are nominees for an undeterminednumber of beneficial owners) and 29 holders of record of our Class B Common Stock. These figures do not include beneficial owners who hold shares innominee 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 ACommon Stock.DIVIDEND POLICYEarnings have been and will be retained for the foreseeable future in the operations of our business. We have not declared or paid any cash dividendson 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 tofinance the growth and development of our business.EQUITY COMPENSATION PLAN INFORMATIONOur equity compensation plan information is provided as set forth in Part III, Item 12 of this annual report. 26 PERFORMANCE GRAPHThe following graph demonstrates the total return to stockholders of our company’s Class A Common Stock from December 31, 2010 to December 31,2015, relative to the performance of the Russell 2000 Index, which includes our Class A Common Stock, and the peer group index, which is believed toinclude 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, 2010 in each of our company’s Class A Common Stock and the stocks comprising each ofthe Russell 2000 Index and the customized peer group index. Each of the indices assumes that all dividends were reinvested. The stock performance of ourcompany’s Class A Common Stock shown on the graph is not necessarily indicative of future performance. We will neither make nor endorse any predictionsas to our future stock performance.COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN (in dollars) 12/10 12/11 12/12 12/13 12/14 12/15 Skechers U.S.A., Inc. 100.00 60.60 92.50 165.65 276.25 453.15 Russell 2000 100.00 95.82 111.49 154.78 162.35 155.18 Peer Group 100.00 109.30 123.96 188.65 189.57 240.54 27 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 endedDecember 31, 2015 and should be read in conjunction with our audited consolidated financial statements and notes thereto included under Part II, Item 8 ofthis annual report.(In thousands, except net earnings (loss) per share) YEARS ENDED DECEMBER 31, STATEMENT OF OPERATIONS DATA: 2015 2014 2013 2012 2011 Net sales $3,147,323 $2,377,561 $1,846,361 $1,560,321 $1,606,016 Gross profit 1,424,008 1,071,905 818,792 683,326 623,748 Earnings (loss) from operations 350,824 209,071 93,609 22,319 (133,793)Earnings (loss) before income taxes (benefit) 333,497 191,380 82,215 10,473 (131,047)Net earnings (loss) attributable to Skechers U.S.A., Inc. 231,912 138,811 54,788 9,512 (67,484)Net earnings (loss) per share:(1) Basic 1.52 0.91 0.36 0.06 (0.46)Diluted 1.50 0.91 0.36 0.06 (0.46)Weighted average shares:(1) Basic 152,847 151,839 151,090 148,485 145,473 Diluted 154,200 153,079 151,690 149,826 145,473 AS OF DECEMBER 31, BALANCE SHEET DATA: 2015 2014 2013 2012 2011 Working capital $993,454 $779,277 $704,506 $647,771 $578,885 Total assets 2,047,408 1,674,918 1,408,570 1,340,220 1,281,888 Long-term borrowings, excluding current installments 68,942 15,081 116,488 128,517 76,531 Skechers U.S.A., Inc. equity 1,327,556 1,075,249 930,322 875,969 852,561 (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 dilutionthat could occur if options to issue common stock were exercised or converted into common stock. All share and per share information has beenretroactively adjusted for the three-for-one stock split that was effective on October 16, 2015. 28 ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERALWe design, market and sell contemporary footwear for men, women and children under the Skechers brand. Our footwear is sold through a wide rangeof department stores and leading specialty retail stores, mid-tier retailers, boutiques, our own retail stores, distributor and licensee-owned international retailstores and our e-commerce websites. Our objective is to continue to profitably grow our domestic operations while leveraging our brand name to expandinternationally.Our operations are organized along our distribution channels, and we have the following three reportable sales segments: domestic wholesale sales,international wholesale sales, which include international direct subsidiary sales and international distributor sales, and retail sales, which includes our e-commerce sales. We evaluate segment performance based primarily on net sales and gross margins. See detailed segment information in Note 17 – SegmentInformation in our consolidated financial statements included under Part II, Item 8 of this annual report.FINANCIAL OVERVIEWOur net sales for 2015 increased $769.8 million, or 32.4%, to $3.147 billion, compared to net sales of $2.378 billion in 2014. The increase in net saleswas broad based across our domestic wholesale, international wholesale and retail segments, with the largest increases across our Women’s Go, Women’sActive, Men’s and Women’s Sport, and Men’s USA divisions during 2015. Net earnings attributable to Skechers U.S.A., Inc. were $231.9 million for 2015, anincrease of $93.1 million, or 67.1%, compared to net earnings of $138.8 million in 2014. Diluted earnings per share for 2015 was $1.50, which reflected a65.9% increase from the $0.91 diluted earnings per share reported in the prior year. The increase in net earnings attributable to Skechers U.S.A., Inc. for 2015was primarily the result of increased sales in our domestic wholesale, international wholesale and retail segments following the introduction of new productswith increased margins in our domestic wholesale and domestic retail segments. Our working capital was $993.5 million at December 31, 2015, which was anincrease of $214.2 million from working capital of $779.3 million at December 31, 2014. Our cash and cash equivalents increased $41.3 million to $508.0million at December 31, 2015 from $466.7 million at December 31, 2014. This increase in cash of $41.3 million was primarily the result of our increased netearnings and increased payables, which were partially offset by increased inventories and increased accounts receivables.2015 OVERVIEWIn 2015, we focused on product development, building a strong team of global brand ambassadors, domestic and international growth, development ofour global infrastructure, and balance sheet and expense management.New product design and delivery. Our success depends on our ability to design and deliver comfortable, stylish, affordable product to consumersacross a broad range of demographics. In 2015, we focused on innovation and comfort across all of our core and existing styles, added fresh looks to ourproduct lines, and developed new product lines that included lifestyle and performance footwear. This included the addition of Skech-Air for men, womenand kids, Skechers Modern Comfort, Skechers GOwalk Flex, and Game Kicks and Twinkle Wishes for kids.Grow our domestic business. In 2015, our focus was on maintaining our core Skechers business in our domestic wholesale accounts, while findingnew opportunities to add shelf space and expand into new locations with new Skechers categories. We became the second largest footwear brand in theUnited States, as well as the number one walking brand and number one work brand. We also focused on expanding our domestic retail distribution channelby opening 35 additional company-owned domestic stores, including our second store in Times Square.Further develop our international businesses. During 2015, we continued to focus on improving our international operations by increasing ourcustomer base within our existing subsidiary business and increasing our product offering to accounts within each country. As part of our ongoing efforts tomaximize our growth in key markets, we expanded our direct distribution base with the transition of the business of several distributors to a wholly-ownedCentral Eastern European subsidiary that encompasses 14 countries, including Hungary, the Czech Republic, Croatia and Serbia. We also transitioned ourdistributor’s business in Panama to a wholly-owned subsidiary in Latin America that will oversee 30 countries in the region, including the key markets ofPeru, Colombia, Costa Rica and Panama. With strong growth across numerous international markets, we also focused in on some key growth countries,including China, who achieved triple-digit sales growth in 2015. In our international retail distribution channel, we expanded by opening 41 additionalcompany-owned international stores, which included taking over the operations of 15 international concept stores and two international outlet stores fromour distributor in Panama. Additionally, we expanded our franchise retail base with more Skechers branded stores in countries where we directly handle thedistribution of our product.29 Develop our global infrastructure. In 2015, we completed the second and third phases of the automation upgrade and expansion of our EuropeanDistribution Center, increasing our capacity to 780,000 square feet, and completed an additional equipment upgrade in our Rancho Belago distributioncenter, further increasing our efficiencies. We continue to upgrade our distribution facilities to increase our capacity and efficiency and to better manage ourgrowth worldwide.Balance sheet and expense management. During 2015, we continued to focus on managing our inventory levels and bringing our marketingexpenses and general and administrative expenses in line with expected sales.OUTLOOK FOR 2016During 2016, we will continue to innovate our lifestyle and performance product lines by developing new styles and expanding into newcategories. The global footwear market is competitive; however, because our products are marketed at affordable prices, we believe that our styles resonatewith consumers worldwide, which translates into a brand that is in demand globally. With a growing team of brand ambassadors—including legends SugarRay Leonard and Ringo Starr for men; pop superstars Demi Lovato and Meghan Trainor for young women; and elite athletes Meb, Kara Goucher and MattKuchar for our Skechers Performance division, we believe our appeal is broad and demand for our product will continue. We will continue to broaden thetargeted demographic profile of our consumer base, increase our shelf space and open 55 to 65 company-owned retail locations, predominantly in the UnitedStates, without detracting from existing business. In addition, we will complete the last phase of expansion at our European Distribution Center by the end ofthe second quarter of 2016, which will increase the capacity to one million square feet, which will continue to increase our product distribution efficienciesand support expected future growth. DEFINITIONSComparable salesAs part of our discussion of our results of operations, we disclose comparable store sales, which exclude the impact of e-commerce sales. With respectto 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 lastday 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 isopen 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 ofcomparable full calendar months that the store was open within the reporting period. We include new stores in comparable store sales commencing with thefourteenth month of operations because we believe it provides a more meaningful comparison of operating results of months with stabilized operations, andexcludes 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 byus may not be comparable to the metrics disclosed by other companies.Cost of sales or Gross marginsOur cost of sales includes the cost of footwear purchased from our manufacturers, duties, quota costs, inbound freight (including ocean, air and freightfrom the dock to our distribution centers), broker fees and storage costs. Because we include expenses related to our distribution network in general andadministrative expenses, while some of our competitors may include expenses of this type in cost of sales, our gross margins may not be comparable and wemay report higher gross margins than some of our competitors in part for this reason.Selling expensesSelling expenses consist primarily of the following: sales representative sample costs, sales commissions, trade shows, advertising and promotionalcosts, which may include television and ad production costs, and point-of-purchase costs.General and administrative expensesGeneral and administrative expenses consist primarily of the following: salaries, wages and related taxes, various overhead costs associated with ourcorporate staff, stock-based compensation, domestic and international retail operations, non-selling related costs of our international operations, costs andexpenses related to our distribution network for our Rancho Belago, European and other foreign distribution centers, professional fees related to both legaland accounting services, insurance, depreciation and amortization, asset impairment and legal settlements, among other expenses. Our distribution network-related costs are included in general and administrative expenses and are not allocated to specific segments.30 YEAR ENDED DECEMBER 31, 2015 COMPARED TO THE YEAR ENDED DECEMBER 31, 2014Net salesNet sales for 2015 were $3.147 billion, which was an increase of $769.8 million, or 32.4%, compared to net sales of $2.378 billion for 2014. Theincrease in net sales was broad-based and attributable to higher sales in our domestic wholesale segment, international wholesale segment and our retailsegment primarily due to the introduction of new styles and lines of footwear.Our domestic wholesale net sales increased $221.8 million, or 22.2%, to $1.220 billion for 2015 compared to $998.0 million for 2014. The increase inour domestic wholesale segment’s net sales resulted from a 15.3% unit sales volume increase to 51.8 million pairs in 2015 from 44.9 million pairs in 2014.This increase was attributable to strong sales and significant growth in several key divisions including our Women’s Go, Women’s Active, Men’s andWomen’s Sport, and Men’s USA divisions during 2015. The average selling price per pair within the domestic wholesale segment also increased 6.0%, to$23.53 per pair for 2015 from $22.20 for 2014, which was primarily the result of increased selling prices for our Women’s GO, Women’s Active and Men’sSport divisions.Our international wholesale segment net sales increased $405.2 million, or 58.8%, to $1.094 billion for 2015 compared to sales of $689.2 million for2014. 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 subsidiariesincreased $271.0 million, or 54.5%, to $768.2 million for 2015 compared to sales of $497.2 million for 2014. The largest sales increases during the year camefrom our subsidiaries in the United Kingdom, Germany and Spain, and our joint ventures in China and Hong Kong. The increases are primarily attributable tosales of our Women’s and Men’s Go, Women’s Active and Men’s and Women’s Sport lines. Our distributor sales increased $134.2 million, or 69.9%, to$326.2 million for 2015, compared to sales of $192.0 million for 2014. This was primarily attributable to increased sales to our distributors in Australia andNew Zealand, South Korea, Turkey and the United Arab Emirates (“UAE”).Our retail segment sales increased $142.8 million to $833.1 million for the year ended December 31, 2015, a 20.7% increase over sales of $690.4million for 2014. The increase in retail sales was primarily attributable to increased comparable sales of 10.5%, which included increased sales within ourWomen’s Go, Women’s Active, Men’s and Women’s Sport, and Men’s USA divisions and a net increase of 28 domestic and 40 international stores comparedto 2014. For the year ended December 31, 2015, our domestic retail sales increased 17.2% compared to 2014, which was attributable to positive comparabledomestic store sales of 10.0% and increased domestic store count, and our international retail store sales increased 35.8% compared to 2014, which wasattributable to increased international store count and positive comparable international store sales of 12.5%. We believe that we have established our presence in most major domestic retail markets. We had 391 domestic stores and 128 international retailstores as of February 15, 2016, and we currently plan to open approximately 55 to 65 stores in 2016. During 2015, we opened five new domestic conceptstores, 11 domestic factory outlet stores, 19 domestic warehouse outlet stores, 16 international concept stores, six international factory outlet stores and twointernational warehouse outlet stores, which included taking over the operations of 15 international concept stores and two international outlet stores fromour distributor in Panama. During 2015, we closed six domestic concept stores, one domestic outlet store and one international concept store. Weperiodically review all of our stores for impairment. During 2015 and 2014, 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.Gross profitGross profit for 2015 increased $352.1 million to $1.424 billion from $1.072 billion for 2014. Gross profit as a percentage of net sales, or gross margin,increased slightly to 45.2% in 2015 from 45.1% for 2014. Our domestic wholesale segment gross profit increased $103.1 million, or 28.0%, to $471.1 millionfor 2015 from $368.0 million for 2014, which was attributable to increased sales volumes and selling prices. Domestic wholesale margins increased to 38.6%for 2015 from 36.9% for 2014. The increase in domestic wholesale margins was primarily attributable to higher margins in our Women’s GO, Women’sActive, Women’s Sport and Men’s USA lines.Gross profit for our international wholesale segment increased $162.0 million, or 55.3%, to $454.7 million for 2015 compared to $292.7 million for2014. Gross margins for the international wholesale segment were 41.5% for 2015 compared to 42.5% for 2014. Gross margins for our international directsubsidiary sales were 47.2% for 2015 as compared to 48.6% for 2014. The decrease in gross margins for our international wholesale segment andinternational direct subsidiary sales were primarily attributable to foreign currency fluctuations. Gross margins for our international distributor sales were28.1% for 2015 as compared to 26.5% for 2014.31 Gross profit for our retail segment increased $87.0 million, or 21.2%, to $498.2 million for 2015 as compared to $411.2 million for 2014. Grossmargins for all stores were 59.8% for 2015 compared to 59.6% for 2014. Gross margins for our domestic stores were 61.5% for 2015 as compared to 60.1% for2014. Gross margins for our international stores were 53.4% for 2015 as compared to 57.2% for 2014. The increases in domestic and overall retail marginswere primarily attributable to increased domestic sales of our newer products at higher margins.Selling expensesSelling expenses increased by $54.6 million, or 30.1%, to $235.6 million for 2015 from $181.0 million for 2014. As a percentage of net sales, sellingexpenses were 7.5% and 7.6% for 2015 and 2014, respectively. The increase in selling expenses was primarily the result of increased sales commissions of$7.7 million due to increased revenues and $43.8 million in higher advertising expenses, which slightly increased as a percentage of net sales to 5.4% in2015 from 5.3% in 2014.General and administrative expensesGeneral and administrative expenses increased by $158.4 million, or 22.9%, to $849.3 million for 2015 from $690.9 million for 2014. As a percentageof sales, general and administrative expenses were 27.0% and 29.1% for 2015 and 2014, respectively. The increase in general and administrative expenseswas primarily attributable to $68.0 million related to supporting our growing international operations, increased store operating costs of $42.7 millionprimarily attributable to an additional 68 stores, which includes 17 stores that were transitioned from our distributor in Panama to our wholly-ownedsubsidiary, increased salaries and wages of $22.9 million, including incentive compensation, and $17.9 million in professional fees. In addition, expensesrelated to our distribution network, including the functions of purchasing, receiving, inspecting, allocating, warehousing and packaging of our productsincreased $35.4 million, due to increased shipments, to $170.2 million from $134.8 million for 2015 and 2014, respectively.Other income (expense)Interest income was $0.7 million for 2015 compared to $0.8 million for 2014. Interest expense for 2015 decreased $1.8 million to $10.7 millioncompared to $12.5 million in 2014. The decrease was primarily due to decreased interest expense of $1.3 million attributable to reduced interest paid onloans for our domestic distribution center and domestic distribution center equipment. Loss on foreign currency transactions for 2015 increased $1.2 millionto $6.6 million compared to $5.4 million in 2014. This increased foreign currency exchange loss was primarily attributable to the impact of a stronger U.S.dollar on our intercompany balances in our foreign subsidiaries. Loss on disposal of assets for 2015 decreased $0.2 million to a loss of $0.7 million ascompared to a loss of $0.9 million in 2014.Income taxesOur provision for income tax expense 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 inthe U.S., ranging from 0% to 34%. Our provision for income tax expense was calculated using the applicable statutory income tax rate for each jurisdictionapplied to our pre-tax earnings (loss) in each jurisdiction, while our effective tax rate is calculated by dividing income tax expense by earnings (loss) beforeincome taxes.32 Our earnings (loss) before income taxes and income tax expense for 2015, 2014 and 2013 are as follows (in thousands): Years Ended December 31, 2015 2014 2013 Income tax jurisdiction Earnings (loss)before incometaxes Income taxexpense Earnings (loss)before incometaxes Income taxexpense Earnings (loss)before incometaxes Income taxexpense United States $136,726 $52,173 $82,778 $32,500 $38,705 $12,807 Canada 4,228 1,024 6,241 1,572 4,091 1,187 Chile 2,983 572 629 138 9,622 1,920 Peoples Republic of China (“China”) 49,027 11,084 15,201 1,179 6,148 1,646 Jersey (1) 123,721 — 77,555 — 25,348 — Non-benefited loss operations (2) (16,719) 164 (13,021) — (15,841) — Other jurisdictions (3) 33,531 7,433 21,997 3,795 14,142 3,787 Earnings before income taxes $333,497 $72,450 $191,380 $39,184 $82,215 $21,347 Effective tax rate (4) 21.7% 20.5% 26.0% (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 ofoffsetting valuation allowances: Panama, Poland, Romania, Japan, Brazil and India.(3)Consists of entities in the following tax jurisdictions, each of which comprises not more than 5% of 2015 consolidated earnings (loss) before taxes:Hungary, Serbia, Bosnia and Herzegovina, Montenegro, Macedonia, Albania, Kosovo, Vietnam, Panama, Peru, Colombia, Costa Rica, the UnitedKingdom, 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 by earnings before income taxes.For 2015, the effective tax rate was lower than the U.S. federal and state combined statutory rate of approximately 39%, primarily because of earningsfrom foreign operations in jurisdictions imposing either lower tax rates on corporate earnings or no corporate income tax. During 2015, as reflected in thetable above, earnings (loss) before income taxes in the U.S. were $136.7 million, with income tax expense of $52.2 million, which is an average rate of38.2%. Earnings (loss) before income taxes in non-U.S. jurisdictions were $196.8 million, with an aggregate income tax expense of $20.3 million, which isan average rate of 10.3%. Combined, this results in consolidated earnings before income taxes for the period of $333.5 million, and consolidated income taxexpense for the period of $72.5 million, resulting in an effective tax rate of 21.7%. We estimate our annual effective tax rate for 2016 to be between 20% and25%. The estimated effective tax rate for 2016 is subject to management’s ongoing review and revision, if necessary. For 2015, of our $196.8 million inearnings before income tax earned outside the U.S., $123.7 million was earned in Jersey, which does not impose a tax on corporate earnings. In Jersey,earnings before income taxes increased by $46.2 million, or 59.5%, to $123.7 million for 2015, from $77.6 million for 2014. This increase was primarilyattributable to us experiencing an increase of $433.7 million in net sales in the “Other international” geographic area for 2015 (see Note 17), which resultedin a significant increase in earnings before income taxes in Jersey from royalties and commissions under the terms of inter-subsidiary agreements. Due to thescalability of our operations, increases in net sales in the “Other international” geographic area from 2014 to 2015 resulted in a disproportionately greaterincrease in earnings before income taxes in Jersey. In addition, there were foreign losses of $16.7 million for which no tax benefit was recognized during theyear ended December 31, 2015 because of the provision of offsetting valuation allowances, but in which $0.2 million in nonrefundable withholding taxeswere paid. Individually, none of the other foreign jurisdictions included in “Other jurisdictions” in the table above had more than 5% of our 2015consolidated earnings (loss) before taxes. Unremitted earnings of non-U.S. subsidiaries are expected to be reinvested outside of the U.S. indefinitely. Suchearnings would become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends.As of December 31, 2015, we had approximately $508.0 million in cash and cash equivalents, of which $218.7 million, or 43.1%, was held outside theU.S. Of the $218.7 million held by our non-U.S. subsidiaries, approximately $33.4 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, 2015.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 nexttwelve 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. Undercurrent 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 amountrepatriated would be subject to U.S. income taxes and applicable non-U.S. income and withholding taxes. As of December 31, 2015 and 2014, U.S. incometaxes have not been provided on cumulative total earnings of approximately $482.7 million and $318.2 million, respectively.33 Non-controlling interest in net income and loss of consolidated subsidiariesNon-controlling interest for 2015 increased $15.7 million to $29.1 million as compared to $13.4 million for 2014 due to increased profitability of ourjoint ventures. Non-controlling interest represents the share of net earnings or loss that is attributable to our joint venture partners.YEAR ENDED DECEMBER 31, 2014 COMPARED TO THE YEAR ENDED DECEMBER 31, 2013Net salesNet 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. Theincrease in net sales was broad-based and attributable to higher sales in our domestic wholesale segment, international wholesale segment and our retailsegment which was 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 inour domestic wholesale segment’s net sales resulted from a 19.1% unit sales volume increase to 44.9 million pairs in 2014 from 37.7 million pairs in 2013.This increase was attributable to strong sales and significant growth in several key divisions including our Women’s Go, Women’s Active, Men’s andWomen’s Sport, and Men’s USA divisions, which was partially offset by reduced sales of our BOB’s products during 2014. The average selling price per pairwithin the domestic wholesale segment also increased 4.4%, to $22.20 per pair for 2014 from $21.26 for 2013, which was primarily the result of increasedselling 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 for2013. 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 andHong 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. Ourdistributor 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 attributableto 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 $538.2million for 2013. The increase in retail sales was primarily attributable to increased comparable sales of 10.6%, which included increased sales of ourWomen’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 comparedto 2013. For the year ended December 31, 2014, our domestic retail sales increased 16.2% compared to 2013, which was attributable to positive comparabledomestic store sales of 8.9% and increased domestic store count, and our international retail store sales increased 64.2% compared to 2013, which wasattributable to increased international store count and positive comparable international store sales of 20.8%. During 2014, we opened two new domesticconcept stores, 17 domestic factory outlet stores, 29 domestic warehouse outlet stores, nine international concept stores, seven international factory outletstores 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 storesas of February 15, 2015. We opened 48 domestic retail stores and 19 international retail stores in 2014, while closing seven underperforming domestic storesand one international concept store. We opened 31 domestic retail stores and 16 international retail stores in 2013, while closing 10 underperformingdomestic stores and one international store. We periodically review all of our stores for impairment. During 2014 and 2013, we did not record an impairmentcharge.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 profitGross 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 grossmargin, 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 millionfor 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 for2013. Gross margins were 42.5% for 2014 compared to 41.5% for 2013. The increase in gross margins for our34 international wholesale segment was primarily attributable to increased sales by our subsidiaries, which historically have achieved higher gross marginsattributable to direct sales to customers than our international wholesale sales through our foreign distributors. Gross margins for our international directsubsidiary 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 ourinternational 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. Grossmargins 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% for2013. Gross margins for our international stores were 57.2% for 2014 and 2013. The increases in domestic and overall retail margins were primarilyattributable to increased sales of our newer products at higher margins.Selling expensesSelling expenses increased by $27.5 million, or 17.9%, to $181.0 million for 2014 from $153.5 million for 2013, although selling expenses decreasedas 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 resultof 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 expensesGeneral 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 percentageof sales, general, administrative and legal expenses were 29.1% and 31.4% for 2014 and 2013, respectively. The increase in general, administrative and legalexpenses was primarily attributable to $41.6 million related to supporting our growing international operations, increased store operating costs of $31.6million primarily attributable to an additional 59 stores in comparison to the prior year, increased salaries and wages of $19.9 million, which includesincentive compensation, $7.5 million from bad debt write-offs and increased warehouse and distribution costs of $11.9 million. In addition, the expensesrelated to our distribution network, including the functions of purchasing, receiving, inspecting, allocating, warehousing and packaging of our productstotaled $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 $11.9million in 2013. The increase was primarily attributable to increased interest expense of $1.3 million attributable to interest incurred on purchases from ourforeign manufacturers that increased compared to the prior year, which was offset by reduced interest paid on loans for our domestic distribution centerequipment. Loss on foreign currency transactions for 2014 increased $4.6 million to $5.4 million compared to $0.8 million in 2013. This increased foreigncurrency 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 taxesOur provision for income tax expense (benefit) and our effective income tax rate are significantly impacted by the mix of our domestic and foreignearnings (loss) before income taxes. In the non-U.S. jurisdictions in which we have operations, the applicable statutory rates are generally significantly lowerthan 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 foreach 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.35 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, 2014 2013 2012 Income tax jurisdiction Earnings (loss)before incometaxes Income taxexpense Earnings (loss)before incometaxes Income taxexpense Earnings (loss)before incometaxes Income taxexpense(benefit) United States $82,778 $32,500 $38,705 $12,807 $(27,379) $(5,867)Canada 6,241 1,572 4,091 1,187 2,564 545 Chile 629 138 9,622 1,920 5,971 1,043 Peoples Republic of China (“China”) 15,201 1,179 6,148 1,646 1,278 319 Jersey (1) 77,555 — 25,348 — 25,162 — Non-benefited loss operations (2) (13,021) — (15,841) — (13,492) — Other jurisdictions (3) 21,997 3,795 14,142 3,787 16,369 3,921 Earnings before income taxes $191,380 $39,184 $82,215 $21,347 $10,473 $(39)Effective tax rate (4) 20.5% 26.0% (0.4)% (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 ofoffsetting 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.For 2014, the effective tax rate was lower than the U.S. federal and state combined statutory rate of approximately 39% primarily because of earningsfrom foreign operations in jurisdictions imposing either lower tax rates on corporate earnings or no corporate income tax. During 2014, as reflected in thetable 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 of39.3%, while earnings (loss) before income taxes in non-U.S. jurisdictions was earnings of $108.6 million, with aggregate income tax expense of $6.7million, an average rate of 6.2%. Combined, this results in consolidated earnings before income taxes for the period of $191.4 million, and consolidatedincome 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 bebetween 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 taxon 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 thetable 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 uponthe 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 theU.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 nexttwelve 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. Undercurrent 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 amountrepatriated 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. incometaxes have not been provided on cumulative total earnings of approximately $318.2 million and $226.0 million, respectively.36 Non-controlling interest in net income and loss of consolidated subsidiariesNon-controlling interest for 2014 increased $7.3 million to and 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.LIQUIDITY AND CAPITAL RESOURCESCash FlowsOur working capital at December 31, 2015 was $993.5 million, an increase of $214.2 million from working capital of $779.3 million at December 31,2014. Our cash and cash equivalents at December 31, 2015 was $508.0 million, compared to $466.7 million at December 31, 2014. This increase in cash andcash equivalents of $41.3 million, after consideration of the effect of exchange rates, was the result of our net earnings of $261.0 million, increased payablesof $130.1 million, and increased accrued expenses of $50.4 million, which was partially offset by increased inventories of $176.1 million, capitalexpenditures of $118.1 million, and increased receivables of $100.0 million. Our primary sources of operating cash are collections from customers onwholesale and retail sales. Our primary uses of cash are inventory purchases, selling, general and administrative expenses and capital expenditures.Operating ActivitiesNet cash provided by operating activities was $232.2 million for 2015 and $163.9 million for 2014. On a comparative year-to-year basis, the $68.3million increase in cash flows from operating activities in 2015 from cash used in operating activities in 2014 primarily resulted from an increase in netearnings of $108.9 million, an increase in accounts payable balances of $31.4 million primarily attributable to increased unpaid balances to our contractmanufacturers due to increased purchases at the end of the year when compared to the same period in the prior year, a decrease in prepaid expenses of $29.7million, and an increase in accrued expenses of $34.9 million. The increases were partially offset by a $75.9 million increase in inventories to supportincreased worldwide backlogs and, $29.3 million increase in accounts receivable, and a $27.3 million increase in deferred income taxes as of December 31,2015 as compared to December 31, 2014.Investing ActivitiesNet cash used in investing activities was $126.5 million for 2015, as compared to $56.9 million in 2014. The increase in cash used in investingactivities in 2015 as compared to 2014 was the result of increased capital expenditures of $61.2 million. Capital expenditures for 2015 were approximately$118.1 million, which primarily consisted of $42.2 million for new store openings and remodels, $6.2 million for the automation upgrades for our EuropeanDistribution Center equipment, $11.2 million in domestic warehouse equipment upgrades, $17.4 million for new office space for our China joint venture, and$15.0 million related to property purchases for potential future corporate development. This was compared to capital expenditures of $56.9 million in theprior year, which primarily consisted of development costs for our Rancho Belago distribution center and automation upgrades for our European DistributionCenter. We expect our ongoing capital expenditures for 2016 to be between $50.0 million and $55.0 million, which includes opening 55 to 65 retail stores,store remodels, a property purchase for potential future corporate development and investments in information technology. In addition, we are currently inthe process of completing equipment upgrades for our European Distribution Center and estimate the remaining cost of these equipment upgrades to beapproximately $10.0 million. We expect these upgrades to be substantially complete during the second quarter of 2016. 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 mayseek additional funding for all or a portion of these expenditures.Financing ActivitiesNet cash used in financing activities was $58.2 million during 2015, compared to $9.0 million during 2014. The increase in cash used by financingactivities was primarily attributable to the maturity and payoff of our first domestic equipment note, and a $39.1 million distribution to HF Logistics-SKX,LLC (the “JV”) which were offset by increased excess tax benefits from share-based compensation.Sources of LiquidityOn December 29, 2010, we entered into a master loan and security agreement (the “Master Agreement”), by and between us and Banc of AmericaLeasing & Capital, LLC, and an Equipment Security Note (together with the Master Agreement, the “Loan Documents”), by and among us, Banc of AmericaLeasing & Capital, LLC, and Bank of Utah, as agent (“Agent”). We used the proceeds to refinance certain equipment already purchased and to purchase newequipment for use in our Rancho Belago distribution center. Borrowings made pursuant to the Master Agreement may be in the form of one or moreequipment 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 Noteentered37 into on the same date as the Master Agreement represented a borrowing of approximately $39.3 million (the “First Note”). Interest accrued at a fixed rate of3.54% per annum on the First Note. We made the final payment on the First Note on December 29, 2015. On June 30, 2011, we entered into another Note forapproximately $36.3 million (“the Second Note”). Interest accrues at a fixed rate of 3.19% per annum on the Second Note. As of December 31, 2015, $13.9million was outstanding on the Second Note, which is included in current installments of long-term borrowings. We paid commitment fees of $0.8 million onthe Notes, which are being amortized to interest expense over the five-year life of the Notes.On June 30, 2015, we entered into a $250.0 million loan and security agreement, subject to increase by up to $100 million, (the “Credit Agreement”),with the following lenders: Bank of America, N.A., MUFG Union Bank, N.A. and HSBC Bank USA, National Association. The Credit Agreement matures onJune 30, 2020. The Credit Agreement replaces the credit agreement dated June 30, 2009, which expired on June 30, 2015. The Credit Agreement permits usand certain of our subsidiaries to borrow based on a percentage of eligible accounts receivable plus the sum of (a) the lesser of (i) a percentage of eligibleinventory to be sold at wholesale and (ii) a percentage of net orderly liquidation value of eligible inventory to be sold at wholesale, plus (b) the lesser of (i) apercentage of the value of eligible inventory to be sold at retail and (ii) a percentage of net orderly liquidation value of eligible inventory to be sold at retail,plus (c) the lesser of (i) a percentage of the value of eligible in-transit inventory and (ii) a percentage of the net orderly liquidation value of eligible in-transitinventory. Borrowings bear interest at our election based on (a) LIBOR or (b) the greater of (i) the Prime Rate, (ii) the Federal Funds Rate plus 0.5% and (iii)LIBOR for a 30-day period plus 1.0%, in each case, plus an applicable margin based on the average daily principal balance of revolving loans availableunder the Credit Agreement. We pay a monthly unused line of credit fee of 0.25%, payable on the first day of each month in arrears, which is based on theaverage daily principal balance of outstanding revolving loans and undrawn amounts of letters of credit outstanding during such month. The CreditAgreement further provides for a limit on the issuance of letters of credit to a maximum of $100.0 million. The Credit Agreement contains customaryaffirmative and negative covenants for secured credit facilities of this type, including covenants that will limit the ability of the Company and its subsidiariesto, among other things, incur debt, grant liens, make certain acquisitions, dispose assets, effect a change of control of the Company, make certain restrictedpayments including certain dividends and stock redemptions, make certain investments or loans, enter into certain transactions with affiliates and certainprohibited uses of proceeds. The Credit Agreement also requires compliance with a minimum fixed-charge coverage ratio if Availability drops below 10% ofthe Revolver Commitments (as such terms are defined in the Credit Agreement) until the date when no event of default has existed and Availability has beenover 10% for 30 consecutive days. We paid closing and arrangement fees of $1.1 million on this facility, which are being amortized to interest expense overthe five-year life of the facility. As of December 31, 2015, there was $0.1 million outstanding under this credit facility, which is classified as short-termborrowings in our consolidated balance sheets.On April 30, 2010, the JV, through HF Logistics-SKX T1, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the JV ("HF-T1"), entered into a construction loan agreement with Bank of America, N.A. as administrative agent and as a lender, and Raymond James Bank, FSB, as alender (collectively, the "Construction Loan Agreement"), pursuant to which the JV obtained a loan of up to $55.0 million used for construction of theProject on the Property (the "Original Loan"). On November 16, 2012, HF-T1 executed a modification to the Construction Loan Agreement (the"Modification"), which added OneWest Bank, FSB as a lender, increased the borrowings under the Original Loan to $80.0 million and extended the maturitydate of the Original Loan to October 30, 2015.On August 11, 2015, the JV through HF-T1 entered into an amended and restated loan agreement with Bank of America, N.A., as administrative agentand as a lender, and CIT Bank, N.A. (formerly known as OneWest Bank, FSB) and Raymond James Bank, N.A., as lenders (collectively, the "Amended LoanAgreement"), which amends and restates in its entirety the Construction Loan Agreement and the Modification. As of the date of the Amended LoanAgreement, the outstanding principal balance of the Original Loan was $77.3 million. In connection with this refinancing of the Original Loan, the JV, theCompany and HF agreed that we would make an additional capital contribution of $38.7 million to the JV for the JV through HF-T1 to use to make apayment on the Original Loan. The payment equaled our 50% share of the outstanding principal balance of the Original Loan. Under the Amended LoanAgreement, the parties agreed that the lenders would loan $70.0 million to HF-T1 (the "New Loan"). The New Loan is being used by the JV through HF-T1 to(i) refinance all amounts owed on the Original Loan after taking into account the payment described above, (ii) pay $0.9 million in accrued interest, loan feesand other closing costs associated with the New Loan and (iii) make a distribution of $31.3 million less the amounts described in clause (ii) to HF. Pursuant tothe Amended Loan Agreement, the interest rate on the New Loan is the LIBOR Daily Floating Rate (as defined in the Amended Loan Agreement) plus amargin of 2%. The maturity date of the New Loan is August 12, 2020, which HF-T1 has one option to extend by an additional 24 months, or until August 12,2022, upon payment of a fee and satisfaction of certain customary conditions. On August 11, 2015, HF-T1 and Bank of America, N.A. entered into an ISDAmaster agreement (together with the schedule related thereto, the "Swap Agreement") to govern derivative and/or hedging transactions that HF-T1concurrently entered into with Bank of America, N.A. Pursuant to the Swap Agreement, on August 14, 2015, HF-T1 entered into a confirmation of swaptransactions (the "Interest Rate Swap") with Bank of America, N.A. The Interest Rate Swap has an effective date of August 12, 2015 and a maturity date ofAugust 12, 2022, subject to early termination at the option of HF-T1, commencing on August 1, 2020. The Interest Rate Swap fixes the effective interest rateon the New Loan at 4.08% per annum. Pursuant to the terms of the JV, HF Logistics is responsible for the related interest expense on the New Loan, and any38 amounts related to the Swap Agreement. The full amount of interest expense related to the New Loan has been included in our consolidated statements ofequity within non-controlling interests. The Amended Loan Agreement and the Swap Agreement are subject to customary covenants and events of default.Bank of America, N.A. also acts as a lender and syndication agent under our credit agreement dated June 30, 2015. We were in compliance with all debtcovenant provisions related to the Amended Loan Agreement as of the date of this annual report. We had $69.5 million outstanding under the Amended LoanAgreement, which is included in long-term borrowings as of December 31, 2015.As of December 31, 2015, outstanding short-term and long-term borrowings were $84.6 million, of which $13.9 million relates to a note payable forwarehouse equipment in our domestic distribution center which is secured by the equipment and $70.7 million relates to loans for our domestic distributioncenter. We were in compliance with all debt covenants under the Amended Loan Agreement, the Loan Documents and the Credit Agreement as of the date ofthis annual report.We believe that anticipated cash flows from operations, available borrowings under our credit agreement, existing cash balances and current financingarrangements will be sufficient to provide us with the liquidity necessary to fund our anticipated working capital and capital requirements at least throughMarch 31, 2017. Our future capital requirements will depend on many factors, including, but not limited to, the global economy and the outlook for andpace of sustainable growth in our markets, the levels at which we maintain inventory, sale of excess inventory at discounted prices, the market acceptance ofour footwear, the success of our international operations, costs associated with upgrading the equipment in our European Distribution Center, the levels ofadvertising and marketing required to promote our footwear, the extent to which we invest in new product design and improvements to our existing productdesign, any potential acquisitions of other brands or companies, and the number and timing of new store openings. To the extent that available funds areinsufficient to fund our future activities, we may need to raise additional funds through public or private financing of debt or equity. We have been successfulin the past in raising additional funds through financing activities; however, we cannot be assured that additional financing will be available to us or that, ifavailable, it can be obtained on past terms which have been favorable to our stockholders and us. Failure to obtain such financing could delay or prevent ourcurrent business plans, which could adversely affect our business, financial condition and results of operations. In addition, if additional capital is raisedthrough the sale of additional equity or convertible securities, dilution to our stockholders could occur.DISCLOSURE ABOUT CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTSThe following table summarizes our material contractual obligations and commercial commitments as of December 31, 2015 (In thousands): Total Less thanOneYear One toThreeYears Three toFiveYears More ThanFiveYears Short-term borrowings $59 $59 $— $— $— Long-term borrowings (1) 97,518 18,721 9,084 69,713 — Operating lease obligations (2) 1,077,769 154,512 268,447 217,948 436,862 Purchase obligations (3) 738,196 738,196 — — — EDC equipment 10,000 10,000 — — — Minimum payments related to other arrangements 19,435 8,612 10,823 — — Total (4) $1,942,977 $930,100 $288,354 $287,661 $436,862 (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 internationaldistribution centers. These leases frequently include options that permit us to extend beyond the terms of the initial fixed term. We currently expect tofund 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 $120.4 million, (ii) outstanding letters ofcredit of $4.0 million and (iii) open purchase commitments with our foreign manufacturers for $613.8 million. We currently expect to fund thesecommitments with cash flows from operations and existing cash balances.(4)Our consolidated balance sheet, as of December 31, 2015, included $6.1 million in unrecognized tax benefits. Future payments related to theseunrecognized tax benefits have not been presented in the table above, due to the uncertainty of the amounts, the potential timing of cash settlementswith the tax authorities, and uncertainty whether any settlement would occur.39 OFF-BALANCE SHEET ARRANGEMENTSWe do not have any relationships with unconsolidated entities or financial partnerships such as entities often referred to as structured finance orspecial purpose entities, that would have been established for the purpose of facilitating off-balance-sheet arrangements or for other contractually narrow orlimited 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 ESTIMATESManagement’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, whichhave been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financialstatements requires us to make difficult, subjective and complex estimates and judgments that affect the reported amounts of assets, liabilities, sales andexpenses, 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 bereasonable under the circumstances, the results of which form the basis for judgments about the carrying values of assets and liabilities. In determiningwhether an estimate is critical, we consider whether the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment or thesusceptibility of such matters to change, and whether the impact of the estimates and assumptions have a material impact on our financial condition oroperating performance. 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 financialstatements: revenue recognition, allowance for bad debts, returns, sales allowances and customer chargebacks, inventory write-downs, valuation ofintangibles and 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 areshipped Free on Board (“FOB”) shipping point directly from our domestic distribution center in Rancho Belago, California. For our international wholesalecustomers 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. Werecognize revenue on wholesale sales when products are shipped and the customer takes title and assumes risk of loss, collection of the relevant receivable isreasonably 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 andvalue added taxes collected from retail customers are excluded from reported revenues. While customers do not have the right to return goods, weperiodically decide to accept returns or provide customers with credits. Allowances for estimated returns, discounts, doubtful accounts and chargebacks areprovided 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 generallycharacterized as prepaid royalties. These fees are initially deferred and recognized as revenue as earned (i.e., as licensed sales are reported to the Company oron 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 actual sales for the period, which is usedto 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 thatmay result from our customers’ inability to pay. To minimize the likelihood of uncollectibility, customers’ credit-worthiness is reviewed and adjustedperiodically in accordance with external credit reporting services, financial statements issued by the customer and our experience with the account. When acustomer’s account becomes significantly past due, we generally place a hold on the account and discontinue further shipments to that customer, minimizingfurther risk of loss. We determine the amount of the reserve by analyzing known uncollectible accounts, aged receivables, economic conditions in thecustomers’ countries or industries, historical losses and our customers’ credit-worthiness. Amounts later determined and specifically identified to beuncollectible 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 collectability percentagebased on factors such as historical trends, current economic conditions, and nature of the chargeback receivables. We also reserve for potential sales returnsand allowances based on historical trends.40 The likelihood of a material loss on an uncollectible account would be mainly dependent on deterioration in the overall economic conditions in aparticular 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 $368.2 million and $293.1 million, andthe allowance for bad debts, returns, sales allowances and customer chargebacks were $24.3 million and $21.0 million, at December 31, 2015 and 2014,respectively. Our credit losses charged to expense for the years ended December 31, 2015, 2014 and 2013 were $5.3 million, $11.8 million and $2.6 million,respectively. In addition, we recorded sales return and allowance expense for the years ended December 31, 2015, 2014 and 2013 of $2.2 million, $2.3million and $0.2 million, respectively.Inventory write-downs. Inventories are stated at the lower of cost or market. We continually review our inventory for excess and slow-movinginventory. Our review is based on inventory on hand, prior sales and expected net realizable value. Our analysis includes a review of inventory quantities onhand 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 on 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 dependsprimarily on our expectation of future consumer demand for our product. A misinterpretation or misunderstanding of future consumer demand for our productor of the economy, or other failure to estimate correctly, could result in inventory valuation changes, either favorably or unfavorably, compared to therequirement determined to be appropriate as of the balance sheet date. Our gross inventory value was $623.9 million and $457.1 million, and our inventoryreserve was $3.7 million and $3.3 million, at December 31, 2015 and 2014, respectively.Valuation of intangibles and long-lived assets. When circumstances warrant, we test for recoverability of the asset groups’ carrying value usingestimates of undiscounted future cash flows based on the existing service potential of the applicable asset group in determining the fair value of each assetgroup. We evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount based on our assessment of thefollowing events or changes in circumstances: ·macroeconomic conditions such as a deterioration in general economic conditions, limitations on accessing capital, fluctuations in foreignexchange 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 competitiveenvironment, a decline in market-dependent multiples or metrics, or a change in the market for an entity’s products or services, or a regulatoryor 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 withactual and projected results of relevant prior periods; ·other relevant entity-specific events such as changes in management, key personnel, strategy, customers, contemplation of bankruptcy, orlitigation; ·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 ofselling or disposing all, or a portion, of a reporting unit, the testing for recoverability of a significant asset group within a reporting unit, orrecognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit; and ·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 valueof 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 generaterevenues 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 fixedassets and leasehold improvements. Stores with negative cash flows which have been open in excess of twenty-four months are then reviewed in detail todetermine whether impairment exists. Management reviews both quantitative and qualitative factors to assess whether a triggering event occurred. For theyears ended December 31, 2015, 2014 and 2013, 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 consolidatedbalance sheets. The likelihood of a material change in these estimated reserves would depend on additional information or new claims as they may arise aswell as the favorable or unfavorable outcome of the particular litigation. Both the likelihood and amount (or range of loss) on a large portion of ourremaining pending litigation is uncertain. As such, we are unable to make a reasonable estimate of the liability that could result from unfavorable outcomesin our remaining pending litigation. As41 additional information becomes available, we will assess the potential liability related to our pending litigation and revise our estimates. Such revisions inour estimates of 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 morelikely 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 andthe effectiveness of our tax planning strategies amongst the various domestic and international tax jurisdictions in which we operate. We evaluate ourprojections of taxable income to determine the recoverability of our deferred tax assets and the need for a valuation allowance. As of December 31, 2015, wehad net deferred tax assets of $31.8 million reduced by a valuation allowance of $18.1 million against loss carry-forwards not expected to be utilized bycertain foreign subsidiaries.INFLATIONWe do not believe that the relatively moderate rates of inflation experienced in the United States over the last three years have had a significant effecton our sales or profitability. However, we cannot accurately predict the effect of inflation on future operating results. Although higher rates of inflation havebeen 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 oursales or profitability. While we have been able to offset our foreign product cost increases by increasing prices or changing suppliers in the past, we cannotassure you that we will be able to continue to make such increases or changes in the future.EXCHANGE RATESWe receive U.S. dollars for substantially all of our domestic and a portion of our international product sales, as well as our royalty income. Inventorypurchases from offshore contract manufacturers are primarily denominated in U.S. dollars. However, purchase prices for our products may be impacted byfluctuations in the exchange rate between the U.S. dollar and the local currencies of the contract manufacturers, which may have the effect of increasing ourcost of goods in the future. During 2015 and 2014, exchange rate fluctuations did not have a material impact on our inventory costs. We do not engage inhedging activities with respect to such exchange rate risk.RECENT ACCOUNTING PRONOUNCEMENTSIn February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, “Leases” (Topic 842),(“ASU 2016-02”). The new standard requires lessees to recognize most leases on the balance sheet. This will increase lessees reported assets andliabilities. ASU 2016-02 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018. ASU2016-02 mandates a modified retrospective transition method for all entities. We are currently evaluating the impact of ASU 2016-02 on our consolidatedfinancial statements, however, we do not know what impact the new standard will have on our financial condition or results of operations.In November 2015, the FASB issued ASU 2015‑17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17),which amends the guidance requiring companies to separate deferred income tax liabilities and assets into current and non-current amounts in a classifiedstatement of financial position. This accounting guidance simplifies the presentation of deferred income taxes, such that deferred tax liabilities and assets beclassified as non-current in a classified statement of financial position. ASU 2015-17 will be effective for our annual and interim reporting periods beginningafter December 15, 2016, and interim periods within those annual periods. Entities may adopt the guidance prospectively or retrospectively. We arecurrently evaluating the impact of ASU 2015-17. However, we do not expect that the adoption of this standard will have a material impact on ourconsolidated financial statements.In September 2015, the FASB issued ASU 2015‑16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-PeriodAdjustments” (“ASU 2015-16”). ASU 2015-16 eliminates the requirement for an acquirer in a business combination to account for measurement-periodadjustments retrospectively. ASU 2015-16 will be effective for our annual and interim reporting periods beginning January 1, 2018, although early adoptionis permitted. We do not expect that the adoption of this standard will have a material impact on our consolidated financial statements.In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11requires that inventory within the scope of this standard be measured at the lower of cost and net realizable value. Net realizable value is the estimated sellingprice in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this update do notapply to inventory that is measured using the last-in, first-out (“LIFO”) or the retail inventory method. The amendments apply to all other inventory, whichincludes inventory that is measured42 using first-in, first-out (“FIFO”) or average cost. ASU 2015-11 will be effective for our annual and interim reporting periods beginning January 1, 2017, withearly adoption permitted. We do not expect that the adoption of this standard will have a material impact on our consolidated financial statements.In April 2015, the FASB issued ASU 2015-03, “Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU2015-03”). This guidance requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction fromthe carrying amount of that debt liability, consistent with debt discounts. This guidance simplifies presentation of debt issuance costs, but does not addresspresentation or subsequent measurement of debt issue costs related to line-of-credit arrangements. In August 2015, the FASB issued ASU 2015-15, “Interest-Imputation of Interest (Subtopic 835-30) Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements,”which indicates the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs related to line-of-credit arrangements as an asset, and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement,regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 will be effective for our annual and interimreporting periods beginning January 1, 2016, and should be applied on a retrospective basis, although early adoption is permitted. The adoption of ASU2015-03 will not have any impact on our results of operations, but will result in debt issuance costs being presented as a direct reduction from the carryingamount of debt liabilities that are not line-of-credit arrangements. We do not expect that the adoption of this standard will have a material impact on ourconsolidated financial statements.In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis” (“ASU 2015-02”). ASU 2015-02 amends theconsolidation guidance for VIEs and general partners' investments in limited partnerships, and modifies the evaluation of whether limited partnerships andsimilar legal entities are VIEs or voting interest entities. The amendment will be effective for our annual and interim reporting periods beginning January 1,2016, with early adoption permitted. We will begin evaluating the impact of ASU 2015-02 based on this guidance upon adoption. We do not expect that theadoption of this standard will have a material impact on our consolidated financial statements.In August 2014, the FASB amended the FASB Accounting Standards Codification, and amended Subtopic 205-40, “Presentation of FinancialStatements – 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. Theamendments will become effective for our annual and interim reporting periods beginning January 1, 2017. We will begin evaluating going concerndisclosures based on this guidance upon adoption. We do not expect that the adoption of this standard will have a material impact on our consolidatedfinancial statements.In May 2014, the FASB issued ASU 2014-09, which amended the FASB Accounting Standards Codification (“ASC”) and created a new Topic ASC606, “Revenue from Contracts with Customers” (“ASC 606”). This amendment prescribes that an entity should recognize revenue to depict the transfer ofpromised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goodsor services. The amendment supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” and most industry-specific guidancethroughout the Industry Topics of the Codification. For annual and interim reporting periods, the mandatory adoption date of ASC 606 is January 1, 2018,and there will be two methods of adoption allowed, either a full retrospective adoption or a modified retrospective adoption. We are currently evaluating theimpact of ASC 606, but at the current time, we do not know what impact the new standard will have on revenue recognized and other accounting decisions infuture periods if any, nor what method of adoption will be selected if the impact is material.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKMarket risk is the potential loss arising from the adverse changes in market rates and prices, such as interest rates, marketable debt security prices andforeign currency exchange rates. Changes in interest rates, marketable debt security prices and changes in foreign currency exchange rates have and will havean impact on our results of operations.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 eitherof these rates of interest could have an effect on the interest charged on our outstanding balances. At December 31, 2015 we had $0.1 million and $69.5million of outstanding short-term and long-term borrowings, respectively subject to changes in interest rates. On August 12, 2015, we entered into a variable-to-fixed rate swap in connection with the refinancing of our domestic distribution center loan which effectively modifies our exposure to interest rate risk byconverting $69.5 million floating rate debt to a fixed rate debt for the next seven years. Therefore, we do not expect that any changes in interest rates willhave a material impact on our financial condition or results of operations.43 Foreign exchange rate fluctuations. We face market risk to the extent that changes in foreign currency exchange rates affect our non-U.S. dollarfunctional currency foreign subsidiary’s revenues, expenses, assets and liabilities. In addition, changes in foreign exchange rates may affect the value of ourinventory commitments. Also, inventory purchases of our products may be impacted by fluctuations in the exchange rates between the U.S. dollar and thelocal currencies of the contract manufacturers, which could have the effect of increasing the cost of goods sold in the future. We manage these risks byprimarily denominating these purchases and commitments in U.S. dollars. We do not currently engage in hedging activities with respect to such exchangerate risks. A 200 basis point reduction in the exchange rates used to calculate foreign currency translations at December 31, 2015 would have reduced thevalues of our net investments by approximately $15.5 million. 44 ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 46CONSOLIDATED BALANCE SHEETS 47CONSOLIDATED STATEMENTS OF EARNINGS 48CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 49CONSOLIDATED STATEMENTS OF EQUITY 50CONSOLIDATED STATEMENTS OF CASH FLOWS 51NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 52SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS 75 45 Report of Independent Registered Public Accounting FirmBoard of Directors and StockholdersSkechers U.S.A., Inc.Manhattan Beach, CAWe have audited the accompanying consolidated balance sheets of Skechers U.S.A., Inc. and subsidiaries as of December 31, 2015 and 2014 and the relatedconsolidated statements of earnings, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2015. Inconnection with our audits of the financial statements, we have also audited the financial statement schedule listed in the accompanying index. Thesefinancial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements 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 thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that ouraudits 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, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2015, 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, presentsfairly, 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. andsubsidiaries’ internal control over financial reporting as of December 31, 2015, 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 26, 2016 expressed anunqualified opinion thereon. /s/ BDO USA, LLP Los Angeles, CAFebruary 26, 201646 SKECHERS U.S.A., INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except par values) December 31, December 31, 2015 2014 ASSETS Current Assets: Cash and cash equivalents $507,991 $466,685 Trade accounts receivable, less allowances of $24,260 in 2015 and $21,007 in 2014 343,930 272,103 Other receivables 18,661 16,510 Total receivables 362,591 288,613 Inventories 620,247 453,837 Prepaid expenses and other current assets 57,363 57,015 Deferred tax assets 22,275 18,864 Total current assets 1,570,467 1,285,014 Property, plant and equipment, net 435,907 373,183 Other assets 41,034 16,721 Total non-current assets 476,941 389,904 TOTAL ASSETS $2,047,408 $1,674,918 LIABILITIES AND EQUITY Current Liabilities: Current installments of long-term borrowings $15,653 $101,407 Short-term borrowings 59 1,810 Accounts payable 473,983 352,815 Accrued expenses 87,318 49,705 Total current liabilities 577,013 505,737 Long-term borrowings, excluding current installments 68,942 15,081 Other long-term liabilities 25,719 19,993 Total non-current liabilities 94,661 35,074 Total liabilities 671,674 540,811 Commitments and contingencies Stockholders’ equity: Preferred Stock, $0.001 par value; 10,000 shares authorized; none issued and outstanding — — Class A Common Stock, $0.001 par value; 500,000 shares authorized; 127,324 and 120,862 shares issued and outstanding at December 31, 2015 and 2014, respectively 127 120 Class B Convertible Common Stock, $0.001 par value; 75,000 shares authorized; 26,278 and 31,410 shares issued and outstanding at December 31, 2015 and 2014, respectively 26 31 Additional paid-in capital 386,156 355,535 Accumulated other comprehensive loss (26,305) (16,077)Retained earnings 967,552 735,640 Skechers U.S.A., Inc. equity 1,327,556 1,075,249 Noncontrolling interests 48,178 58,858 Total stockholders' equity 1,375,734 1,134,107 TOTAL LIABILITIES AND EQUITY $2,047,408 $1,674,918 See accompanying notes to consolidated financial statements. 47 SKECHERS U.S.A., INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF EARNINGS(In thousands, except per share data) Year Ended December 31, 2015 2014 2013 Net sales$3,147,323 $2,377,561 $1,846,361 Cost of sales 1,723,315 1,305,656 1,027,569 Gross profit 1,424,008 1,071,905 818,792 Royalty income 11,745 9,107 7,734 1,435,753 1,081,012 826,526 Operating expenses: Selling 235,586 181,018 153,491 General and administrative 849,343 690,923 579,426 1,084,929 871,941 732,917 Earnings from operations 350,824 209,071 93,609 Other income (expense): Interest income 722 837 841 Interest expense (10,728) (12,466) (11,890)Other, net (7,321) (6,062) (345)Total other expense (17,327) (17,691) (11,394)Earnings before income tax expense 333,497 191,380 82,215 Income tax expense 72,450 39,184 21,347 Net earnings 261,047 152,196 60,868 Less: Net earnings attributable to non-controlling interests 29,135 13,385 6,080 Net earnings attributable to Skechers U.S.A., Inc.$231,912 $138,811 $54,788 Net earnings per share attributable to Skechers U.S.A., Inc.: Basic$1.52 $0.91 $0.36 Diluted$1.50 $0.91 $0.36 Weighted average shares used in calculating net earnings per share attributable to Skechers U.S.A, Inc.: Basic 152,847 151,839 151,090 Diluted 154,200 153,079 151,690 See accompanying notes to consolidated financial statements. 48 SKECHERS U.S.A., INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In thousands) Years Ended December 31, 2015 2014 2013 Net earnings $261,047 $152,196 $60,868 Other comprehensive income, net of tax: Loss on foreign currency translation adjustment (13,167) (7,954) (6,363)Comprehensive income 247,880 144,242 54,505 Less: Comprehensive income attributable to noncontrolling interests 26,196 12,807 6,018 Comprehensive income attributable to Skechers U.S.A., Inc. $221,684 $131,435 $48,487 See accompanying notes to consolidated financial statements. 49 SKECHERS U.S.A., INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF EQUITY(In thousands) SHARES AMOUNT ACCUMULATED CLASS A CLASS B CLASS A CLASS B ADDITIONAL OTHER SKECHERS NON TOTAL COMMON COMMON COMMON COMMON PAID-IN COMPREHENSIVE RETAINED U.S.A., INC. CONTROLLING STOCKHOLDERS' STOCK STOCK STOCK STOCK CAPITAL LOSS EARNINGS EQUITY INTERESTS EQUITY Balance at December 31, 2012 117,062 33,823 $118 $33 $336,177 $(2,400) $542,041 $875,969 $43,120 $919,089 Net earnings — — — — — — 54,788 54,788 6,080 60,868 Foreign currency translationadjustment — — — — — (6,301) — (6,301) (62) (6,363)Contribution fromnoncontrolling interest ofconsolidated entity — — — — — — — — 3,635 3,635 Distribution to noncontrollinginterest of consolidated entity — — — — — — — — (3,175) (3,175)Stock compensation expense — — — — 2,388 — — 2,388 — 2,388 Proceeds from issuance ofcommon stock under the employee stock purchase plan 448 — — — 2,614 — — 2,614 — 2,614 Shares issued under theIncentive Award Plan 341 — 1 — 332 — — 333 — 333 Tax benefit of stock optionsexercised — — — — 531 — — 531 — 531 Conversion of Class BCommon Stock into Class A Common Stock 1,213 (1,213) 1 (1) — — — — — — Balance at December 31, 2013 119,064 32,610 $120 $32 $342,042 $(8,701) $596,829 $930,322 $49,598 $979,920 Net earnings — — — — — — 138,811 138,811 13,385 152,196 Foreign currency translationadjustment — — — — — (7,376) — (7,376) (578) (7,954)Contribution fromnoncontrolling interest ofconsolidated entity — — — — — — — — 503 503 Distribution to noncontrollinginterest of consolidated entity — — — — — — — — (4,050) (4,050)Stock compensation expense — — — — 8,684 — — 8,684 — 8,684 Proceeds from issuance ofcommon stock under the employee stock purchase plan 306 — — — 3,363 — — 3,363 — 3,363 Shares issued under theIncentive Award Plan 292 — — — — — — — — — Tax benefit of stock optionsexercised — — — — 1,446 — — 1,446 — 1,446 Conversion of Class BCommon Stock into Class A Common Stock 1,200 (1,200) — (1) — — — (1) — (1)Balance at December 31, 2014 120,862 31,410 $120 $31 $355,535 $(16,077) $735,640 $1,075,249 $58,858 $1,134,107 Net earnings — — — — — — 231,912 231,912 29,135 261,047 Foreign currency translationadjustment — — — — — (10,228) — (10,228) (2,939) (13,167)Contribution fromnoncontrolling interest ofconsolidated entity — — — — — — — — 2,272 2,272 Distribution to noncontrollinginterest of consolidated entity — — — — — — — — (39,148) (39,148)Stock compensation expense — — — — 18,296 — — 18,296 — 18,296 Proceeds from issuance ofcommon stock under the employee stock purchase plan 224 — 1 — 4,317 — — 4,318 — 4,318 Shares issued under theIncentive Award Plan 1,106 — 1 — (1) — — — — — Tax benefit of stock optionsexercised — — — — 8,009 — — 8,009 — 8,009 Conversion of Class BCommon Stock into Class A Common Stock 5,132 (5,132) 5 (5) — — — — — — Balance at December 31, 2015 127,324 26,278 $127 $26 $386,156 $(26,305) $967,552 $1,327,556 $48,178 $1,375,734 See accompanying notes to consolidated financial statements 50 SKECHERS U.S.A., INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) Year Ended December 31, 2015 2014 2013 Cash flows from operating activities: Net earnings $261,047 $152,196 $60,868 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 52,433 47,557 42,397 Amortization of deferred financing costs 687 1,201 1,201 Amortization of intangible assets 527 747 912 Provision for bad debts and returns 7,520 14,153 2,868 Non-cash share-based compensation 18,296 8,684 2,388 Deferred income taxes (4,844) 22,411 11,583 Other 656 837 (447)(Increase) decrease in assets: Receivables (100,032) (70,695) (21,279)Inventories (176,062) (100,162) (22,589)Prepaid expenses and other current assets (2,082) (31,788) 1,205 Other assets (6,423) 4,548 (3,239)Increase in liabilities: Accounts payable 130,075 98,686 17,596 Accrued expenses and other long-term liabilities 50,416 15,507 5,714 Net cash provided by operating activities 232,214 163,882 99,178 Cash flows from investing activities: Capital expenditures (118,144) (56,905) (41,294)Intangible asset additions (55) — (87)Purchases of investments (8,428) — — Proceeds from sales of investments 144 — — Net cash used in investing activities (126,483) (56,905) (41,381)Cash flows from financing activities: Net proceeds from the issuances of common stock through employee stock purchase plan 4,318 3,363 2,947 Payments on long-term debt (32,656) (12,028) (11,667)Proceeds from long-term debt 762 — — Proceeds (payments) on short-term borrowings (1,733) 1,723 (2,382)Excess tax benefits from share-based compensation 8,009 1,446 531 Contribution from non-controlling interests of consolidated entity 2,272 503 3,635 Distributions to non-controlling interests of consolidated entity (39,148) (4,050) (3,175)Net cash used in financing activities (58,176) (9,043) (10,111)Net increase in cash and cash equivalents 47,555 97,934 47,686 Effect of exchange rates on cash and cash equivalents (6,249) (3,260) (1,501)Cash and cash equivalents at beginning of the period 466,685 372,011 325,826 Cash and cash equivalents at end of the period $507,991 $466,685 $372,011 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $9,891 $10,822 $10,624 Income taxes 63,479 29,499 5,480 See accompanying notes to consolidated financial statements. 51 SKECHERS U.S.A., INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2015, 2014 and 2013 (1)THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a)The Company and Basis of PresentationSkechers U.S.A., Inc. and subsidiaries (the “Company”) designs, develops, markets and distributes footwear. The Company operates 390 domestic and127 international retail stores and an e-commerce business as of December 31, 2015.The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States andinclude the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.On August 21, 2015, the Company’s Board of Directors approved a three-for-one stock split, effected in the form of a stock dividend, of both theCompany’s Class A and Class B common stock. The stock split was made on October 16, 2015 to stockholders of record at the close of business on October 2,2015. All share numbers and per-share amounts presented in the consolidated financial statements reflect the three-for-one stock split. (b)Use of EstimatesThe Company has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosureof contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in theUnited States. Significant areas requiring the use of estimates relate primarily to revenue recognition, allowance for bad debts, returns, sales allowances andcustomer 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. (c)Revenue RecognitionThe Company recognizes revenue on wholesale sales when products are shipped and the customer takes title and assumes risk of loss, collection of therelevant receivable is reasonably assured, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. This generally occurs attime of shipment. Wholesale sales, which include amounts billed for shipping and handling costs, are recognized net of allowances for estimated returns,sales allowances, discounts, and chargebacks. Allowances for estimated returns, discounts, doubtful accounts and chargebacks are recorded when relatedrevenue 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 aregenerally characterized as prepaid royalties. These fees are initially deferred and recognized as revenue as earned. In addition, the Company receives royaltypayments based on actual sales of the licensed products. Typically, at each quarter-end the Company receives correspondence from licensees indicating theactual sales for the period, which is used to calculate and record the related royalties based on the terms of the agreement. (d)Business Segment InformationThe Company’s operations and segments are organized along its distribution channels and consist of the following: domestic wholesale, internationalwholesale, and retail, which includes e-commerce sales. Information regarding these segments is summarized in Note 17 – Segment Information. (e)Noncontrolling InterestsThe Company has equity interests in several joint ventures that were established either to exclusively distribute the Company’s products throughoutAsia or to construct the Company’s domestic distribution facility. These joint ventures are variable interest entities (“VIE”)’s under Accounting StandardsCodification (“ASC”) 810-10-15-14. The Company’s determination of the primary beneficiary of a VIE considers all relationships between the Company andthe VIE, including management agreements, governance documents and other contractual arrangements. The Company has determined that it is the primarybeneficiary for these VIE’s because the Company has both of the following characteristics: (a) the power to direct the activities of a VIE that mostsignificantly impact the entity’s economic performance; and (b) the obligation to absorb losses of the entity that could potentially be significant to thevariable interest entity, or the right to receive benefits from the entity that could potentially be significant to the variable interest52 entity. Accordingly, the Company includes the assets and liabilities and results of operations of these entities in its consolidated financial statements, eventhough the Company may not hold a majority equity interest. There have been no changes during 2015 in the accounting treatment or characterization ofany previously identified VIE. The Company continues to reassess these relationships quarterly. The assets of these joint ventures are restricted in that theyare 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 theCompany. The Company does not have a variable interest in any unconsolidated VIEs. (f)Fair Value of Financial InstrumentsThe 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 fair value, based upon currentrates and terms available to the Company for similar debt.As of August 12, 2015, the Company entered into an interest rate swap agreement concurrent with refinancing its domestic distribution centerconstruction loan (see Note 6, Derivative Instruments). The fair value of the interest rate swap was determined using the market standard methodology ofnetting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipt was based on an expectationof future interest rates (forward curves) derived from observable market interest rate curves. To comply with accounting principles generally accepted in theUnited States of America (“U.S. GAAP”), credit valuation adjustments were incorporated to appropriately reflect both the Company’s nonperformance riskand the respective counterparty’s nonperformance risk in the fair value measurements. The majority of the inputs used to value the interest rate swap werewithin Level 2 of the fair value hierarchy. As of December 31, 2015, the interest rate swap was a Level 2 derivative and was classified as other long-termliabilities in the Company’s consolidated balance sheets. (g)Cash and Cash EquivalentsCash and cash equivalents include deposits with initial terms of less than three months. For purposes of the consolidated statements of cash flows, theCompany 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 ChargebacksThe 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 uncollectability, customers’ credit-worthiness is reviewed and adjusted periodically in accordance with external creditreporting services, financial statements issued by the customer and the Company’s experience with the account. When a customer’s account becomessignificantly past due, the Company generally places a hold on the account and discontinues further shipments to that customer, minimizing further risk ofloss. The Company determines the amount of the reserve by analyzing known uncollectible accounts, aged receivables, economic conditions in thecustomers’ countries or industries, historical losses and its customers’ credit-worthiness. Amounts later determined and specifically identified to beuncollectible are charged against this reserve.The Company also reserves for potential disputed amounts or chargebacks from its customers. The Company’s chargeback reserve is based on acollectability percentage calculated using factors such as historical trends, current economic conditions, and nature of the chargeback receivables. TheCompany 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 aparticular country or environment. Reserves are fully provided for all probable losses of this nature. For receivables that are not specifically identified ashigh-risk, the Company provides a reserve based upon its historical loss rate as a percentage of sales. (i)InventoriesInventories, principally finished goods, are stated at the lower of cost (based on the first-in, first-out method) or market (net realizable value). Costincludes shipping and handling fees and costs, which are subsequently expensed to cost of sales. The Company provides for estimated losses from obsolete orslow-moving inventories, and writes down the cost of inventory at the time such determinations are made. Reserves are estimated based on inventory onhand, historical sales activity, industry trends, the retail environment, and the expected net realizable value. The net realizable value is determined usingestimated sales prices of similar inventory through off-price or discount store channels.53 (j)Property, Plant and Equipment Depreciation and amortization of property, plant and equipment is computed using the straight-line method, which based on the following estimateduseful lives: Buildings 20 yearsBuilding improvements 10 yearsFurniture, fixtures and equipment 5 to 20 yearsLeasehold improvements 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 circumstancesindicate that the carrying amount of an asset or asset group may not be recoverable. The Company reviews both quantitative and qualitative factors to assesswhether a triggering event occurred. The Company prepares a summary of store cash flows from its retail stores to assess potential impairment of the fixedassets and leasehold improvements. Stores with negative cash flows which have been open in excess of 24 months are then reviewed in detail to determinewhether impairment exists. Recoverability of assets or asset group to be held and used is measured by a comparison of the carrying amount of an asset or assetgroup to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of an asset or asset groupexceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset or asset group exceedsthe fair value of the asset or asset group. The Company did not record impairment charges during the years ended December 31, 2015, 2014 or 2013. (k)Income TaxesThe Company accounts for income taxes in accordance with ASC 740-10, which requires that the Company recognize deferred tax liabilities fortaxable temporary differences and deferred tax assets for deductible temporary differences and operating loss carry-forwards using enacted tax rates in effectin 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 ordeferred 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. (l)Foreign Currency TranslationIn accordance with ASC 830-30, certain international operations use the respective local currencies as their functional currency, while otherinternational operations use the U.S. Dollar as their functional currency. The Company considers the U.S. dollar as its reporting currency. The Companyoperates internationally through several foreign subsidiaries. Skechers S.a.r.l. located in Switzerland, operates with a functional currency of the U.S. dollar.Translation adjustments for subsidiaries where the functional currency is its local currency are included in other comprehensive income. Foreign currencytransaction gains (losses) resulting from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are reportedin 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-terminvestment nature are included as a component of translation adjustment in other comprehensive income. (m)Comprehensive IncomeComprehensive income is presented in the consolidated statements of comprehensive income. Comprehensive income consists of net earnings, foreigncurrency translation adjustments, and income attributable to non-controlling interests. (n)Advertising CostsAdvertising costs are expensed in the period in which the advertisements are first run, or over the life of the endorsement contract. Advertising expensefor the years ended December 31, 2015, 2014 and 2013 was approximately $188.1 million, $141.7 million and $118.5 million, respectively. Prepaidadvertising costs were $11.2 million and $13.0 million at December 31, 2015 and 2014, respectively. Prepaid amounts outstanding at December 31, 2015and 2014, represent the unamortized portion of endorsement contracts, advertising in trade publications and media productions created, but had not run, as ofDecember 31, 2015 and 2014, respectively. (o)Product Design and Development CostsThe Company charges all product design and development costs to general and administrative expenses, when incurred. Product design anddevelopment costs aggregated approximately $11.2 million, $10.3 million, and $9.2 million during the years ended December 31, 2015, 2014 and 2013,respectively.54 (p)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. Theexpenses related to its distribution network, including the functions of purchasing, receiving, inspecting, allocating, warehousing and packaging of itsproducts totaled $170.2 million, $134.8 million and $122.9 million for 2015, 2014 and 2013, respectively. (q)Recent Accounting PronouncementsIn February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842),(“ASU 2016-02”). The new standard requires lessees to recognize most leases on the balance sheet. This will increase lessees reported assets and liabilities.ASU 2016-02 is effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2018. ASU 2016-02mandates a modified retrospective transition method for all entities. The Company is currently evaluating the impact of ASU 2016-02 on its consolidatedfinancial statements, however, the Company does not know what impact the new standard will have on its financial condition or results of operations.In November 2015, the FASB issued ASU 2015‑17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17),which amends the guidance requiring companies to separate deferred income tax liabilities and assets into current and non-current amounts in a classifiedstatement of financial position. This accounting guidance simplifies the presentation of deferred income taxes, such that deferred tax liabilities and assets beclassified as non-current in a classified statement of financial position. ASU 2015-17 will be effective for the Company’s annual and interim reportingperiods beginning after December 15, 2016, and interim periods within those annual periods. Entities may adopt the guidance prospectively orretrospectively. The Company is currently evaluating the impact of ASU 2015-17, however, the Company does not expect that the adoption of this standardwill have a material impact on the Company’s consolidated financial statements.In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying the Accounting for Measurement-PeriodAdjustments” (“ASU 2015-16”). ASU 2015-16 eliminates the requirement for an acquirer in a business combination to account for measurement-periodadjustments retrospectively. ASU 2015-16 will be effective for the Company’s annual and interim reporting periods beginning January 1, 2018, althoughearly adoption is permitted. The Company does not expect that the adoption of this standard will have a material impact on the Company’s consolidatedfinancial statements.In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). ASU 2015-11requires that inventory within the scope of this standard be measured at the lower of cost and net realizable value. Net realizable value is the estimated sellingprice in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in this update do notapply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, whichincludes inventory that is measured using first-in, first-out (FIFO) or average cost. ASU 2015-11 will be effective for the Company’s annual and interimreporting periods beginning January 1, 2017, with early adoption permitted. The Company does not expect that the adoption of this standard will have amaterial impact on the Company’s consolidated financial statements.In April 2015, the FASB issued ASU 2015-03, “Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU2015-03”). This guidance requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction fromthe carrying amount of that debt liability, consistent with debt discounts. This guidance simplifies presentation of debt issuance costs, but does not addresspresentation or subsequent measurement of debt issue costs related to line of credit arrangements. In August 2015, the FASB issued ASU 2015-15 “Interest-Imputation of Interest (Subtopic 835-30) Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements”which indicates the Securities and Exchange Commission staff would not object to an entity deferring and presenting debt issuance costs related to line-of-credit arrangements as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement,regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. ASU 2015-03 will be effective for the Company’s annual andinterim reporting periods beginning January 1, 2016, and should be applied on a retrospective basis, although early adoption is permitted. The adoption ofASU 2015-03 will not have any impact on the Company’s results of operations, but will result in debt issuance costs being presented as a direct reductionfrom the carrying amount of debt liabilities that are not line-of-credit arrangements. The Company does not expect that the adoption of this standard willhave a material impact on the Company’s consolidated financial statements.In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis” (“ASU 2015-02”). ASU 2015-02 amends theconsolidation guidance for variable interest entities (“VIEs”) and general partners’ investments in limited partnerships, and modifies the evaluation ofwhether limited partnerships and similar legal entities are VIEs or voting interest entities. The amendment will be effective for the Company’s annual andinterim reporting periods beginning January 1, 2016, with early adoption55 permitted. The Company will begin evaluating the impact of ASU 2015-02 based on this guidance upon adoption. The Company does not expect that theadoption of this standard will have a material impact on the Company’s consolidated financial statements.In August 2014, the FASB issued ASU 2014-15, which 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 thefinancial statements are issued. The amendments will become effective for the Company’s annual and interim reporting periods beginning January 1, 2017.The Company will begin evaluating going concern disclosures based on this guidance upon adoption. The Company does not expect that the adoption ofthis standard will have a material impact on the Company’s consolidated financial statements.In May 2014, the FASB issued ASU 2014-09, which amended the FASB Accounting Standards Codification (“ASC”) and created a new Topic ASC606, “Revenue from Contracts with Customers” (“ASC 606”). This amendment prescribes that an entity should recognize revenue to depict the transfer ofpromised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goodsor services. The amendment supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition,” and most industry-specific guidancethroughout the Industry Topics of the Codification. For annual and interim reporting periods the mandatory adoption date of ASC 606 is January 1, 2018,and there will be two methods of adoption allowed, either a full retrospective adoption or a modified retrospective adoption. The Company is currentlyevaluating the impact of ASC 606, but at the current time does not know what impact the new standard will have on revenue recognized and otheraccounting decisions in future periods, if any, nor what method of adoption will be selected if the impact is material. (2)PROPERTY, PLANT AND EQUIPMENTProperty, plant and equipment at December 31, 2015 and 2014 is summarized as follows (in thousands): 2015 2014 Land $76,163 $61,163 Buildings and improvements 200,607 177,348 Furniture, fixtures and equipment 248,684 217,271 Leasehold improvements 236,842 197,467 Total property, plant and equipment 762,296 653,249 Less accumulated depreciation and amortization 326,389 280,066 Property, plant and equipment, net $435,907 $373,183 (3)ACCRUED EXPENSESAccrued expenses at December 31, 2015 and 2014 are summarized as follows (in thousands): 2015 2014 Accrued inventory purchases $53,607 $22,553 Accrued payroll and taxes 33,711 27,152 Accrued expenses $87,318 $49,705 (4)LINE OF CREDIT AND SHORT-TERM BORROWINGSOn June 30, 2015, the Company entered into a $250.0 million loan and security agreement, subject to increase by up to $100 million, (the “CreditAgreement”), with the following lenders: Bank of America, N.A., MUFG Union Bank, N.A. and HSBC Bank USA, National Association. The CreditAgreement matures on June 30, 2020. The Credit Agreement replaces the credit agreement dated June 30, 2009, which expired on June 30, 2015. The CreditAgreement permits the Company and certain of its subsidiaries to borrow based on a percentage of eligible accounts receivable plus the sum of (a) the lesserof (i) a percentage of eligible inventory to be sold at wholesale and (ii) a percentage of net orderly liquidation value of eligible inventory to be sold atwholesale, plus (b) the lesser of (i) a percentage of the value of eligible inventory to be sold at retail and (ii) a percentage of net orderly liquidation value ofeligible inventory to be sold at retail, plus (c) the lesser of (i) a percentage of the value of eligible in-transit inventory and (ii) a percentage of the net orderlyliquidation value of eligible in-transit inventory. Borrowings bear interest at the Company’s election based on (a) LIBOR or (b) the greater of (i) the PrimeRate, (ii) the Federal Funds Rate plus 0.5% and (iii) LIBOR for a 30-day period plus 1.0%, in each case, plus an applicable margin based on the average dailyprincipal balance of revolving loans available under the Credit Agreement. The Company pays a monthly unused line of credit fee of 0.25%, payable on thefirst day of each month in arrears,56 which is based on the average daily principal balance of outstanding revolving loans and undrawn amounts of letters of credit outstanding during suchmonth. The Credit Agreement further provides for a limit on the issuance of letters of credit to a maximum of $100.0 million. The Credit Agreement containscustomary affirmative and negative covenants for secured credit facilities of this type, including covenants that will limit the ability of the Company and itssubsidiaries to, among other things, incur debt, grant liens, make certain acquisitions, dispose assets, effect a change of control of the Company, make certainrestricted payments including certain dividends and stock redemptions, make certain investments or loans, enter into certain transactions with affiliates andcertain prohibited uses of proceeds. The Credit Agreement also requires compliance with a minimum fixed-charge coverage ratio if Availability drops below10% of the Revolver Commitments (as such terms are defined in the Credit Agreement) until the date when no event of default has existed and Availabilityhas been over 10% for 30 consecutive days. The Company paid closing and arrangement fees of $1.1 million on this facility, which are being amortized tointerest expense over the five-year life of the facility. As of December 31, 2015 and December 31, 2014, there was $0.1 million outstanding under theCompany’s credit facilities, classified as short-term borrowings in the Company’s consolidated balance sheets. The remaining balance in short-termborrowings, as of December 31, 2014, is related to the Company’s joint venture in India. (5)LONG-TERM BORROWINGSLong-term borrowings at December 31, 2015 and 2014 is as follows (in thousands): 2015 2014 Note payable to banks, due in monthly installments of $261.4 (includes principal and interest), variable-rate interest at 2.42% per annum, secured by property, balloon payment of $62,843 due August 2020 $69,515 $77,900 Note payable to banks, 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 paid in December 2015 — 17,940 Note payable to banks, 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 13,886 19,159 Note payable to TCF Equipment Finance, Inc., due in monthly installments of $30.5, (includes principal and interest) fixed- rate interest at 5.24% per annum, maturity date of July 2019 1,194 1,489 Subtotal 84,595 116,488 Less current installments 15,653 101,407 Total long-term borrowings $68,942 $15,081 The aggregate maturities of long-term borrowings at December 31, 2015 are as follows (in thousands): 2016 15,653 2017 1,783 2018 1,801 2019 1,666 2020 63,692 $84,595 The Company’s long-term debt obligations contain both financial and non-financial covenants, including cross-default provisions. The Company isin compliance with its non-financial covenants, including any cross default provisions, and financial covenants of its long-term borrowings as of December31, 2015.On April 30, 2010, HF Logistics-SKX, LLC (the “JV”), through a wholly-owned subsidiary of the JV (“HF-T1”), entered into a construction loanagreement with Bank of America, N.A. as administrative agent and as a lender, and Raymond James Bank, FSB, as a lender (collectively, the "ConstructionLoan Agreement"), pursuant to which the JV obtained a loan of up to $55.0 million used for construction of the project on certain property (the "OriginalLoan"). On November 16, 2012, HF-T1 executed a modification to the Construction Loan Agreement (the "Modification"), which added OneWest Bank, FSBas a lender, increased the borrowings under the Original Loan to $80.0 million and extended the maturity date of the Original Loan to October 30, 2015.57 On August 11, 2015, the JV, through HF-T1, entered into an amended and restated loan agreement with Bank of America, N.A., as administrative agentand as a lender, and CIT Bank, N.A. (formerly known as OneWest Bank, FSB) and Raymond James Bank, N.A., as lenders (collectively, the "Amended LoanAgreement"), which amends and restates in its entirety the Construction Loan Agreement and the Modification. As of the date of the Amended LoanAgreement, the outstanding principal balance of the Original Loan was $77.3 million. In connection with this refinancing of the Original Loan, the JV, theCompany and HF Logistics (“HF”) agreed that the Company would make an additional capital contribution of $38.7 million to the JV, through HF-T1, tomake a payment on the Original Loan based on the Company’s 50% equity interest in the JV. The payment equaled the Company’s 50% share of theoutstanding principal balance of the Original Loan. Under the Amended Loan Agreement, the parties agreed that the lenders would loan $70.0 million to HF-T1 (the "New Loan"). The New Loan is being used by the JV, through HF-T1, to (i) refinance all amounts owed on the Original Loan after taking into accountthe payment described above, (ii) pay $0.9 million in accrued interest, loan fees and other closing costs associated with the New Loan and (iii) make adistribution of $31.3 million less the amounts described in clause (ii) to HF. Pursuant to the Amended Loan Agreement, the interest rate on the New Loan isthe LIBOR Daily Floating Rate (as defined in the Amended Loan Agreement) plus a margin of 2%. The maturity date of the New Loan is August 12, 2020,which HF-T1 has one option to extend by an additional 24 months, or until August 12, 2022, upon payment of a fee and satisfaction of certain customaryconditions. On August 11, 2015, HF-T1 and Bank of America, N.A. entered into an ISDA master agreement (together with the schedule related thereto, the"Swap Agreement") to govern derivative and/or hedging transactions that HF-T1 concurrently entered into with Bank of America, N.A. Pursuant to the SwapAgreement, on August 14, 2015, HF-T1 entered into a confirmation of swap transactions (the "Interest Rate Swap") with Bank of America, N.A. The InterestRate Swap has an effective date of August 12, 2015 and a maturity date of August 12, 2022, subject to early termination at the option of HF-T1, commencingon August 1, 2020. The Interest Rate Swap fixes the effective interest rate on the New Loan at 4.08% per annum. Pursuant to the terms of the JV, HF Logisticsis responsible for the related interest expense on the New Loan, and any amounts related to the Swap Agreement. The full amount of interest expense relatedto the New Loan has been included in the Company’s consolidated statements of equity within non-controlling interests. The Amended Loan Agreement andthe Swap Agreement are subject to customary covenants and events of default. Bank of America, N.A. also acts as a lender and syndication agent under theCredit Agreement dated June 30, 2015 (see Note 6, Derivative Instruments).On December 29, 2010, the Company entered into a master loan and security agreement (the “Master Agreement”), by and between the Company andBanc of America Leasing & Capital, LLC, and an Equipment Security Note (together with the Master Agreement, the “Loan Documents”), by and among theCompany, Banc of America Leasing & Capital, LLC, and Bank of Utah, as agent (“Agent”). The Company used the proceeds to refinance certain equipmentalready purchased and to purchase new equipment for use in the Rancho Belago distribution facility. Borrowings made pursuant to the Master Agreementmay 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 eachfor a term of 60 months. The First Note entered into on the same date as the Master Agreement represents a borrowing of approximately $39.3 million (“theFirst Note”). Interest accrued at a fixed rate of 3.54% per annum on the First Note. The Company made the final payment on the First Note on December 29,2015. On June 30, 2011, the Company entered into another Note agreement for approximately $36.3 million (“the Second Note”). Interest accrues at a fixedrate of 3.19% per annum on the Second Note. As of December 31, 2015, the Company had $13.9 million outstanding on the Second Note, which is includedin current installments of long-term borrowings. As of December 31, 2014, there was $37.1 million outstanding on the Notes, of which $23.2 was included incurrent installments of long-term borrowings and $13.9 million was included in long-term borrowings. The Company paid commitment fees of $0.8 millionon the Notes, which are being amortized to interest expense over the five-year life of the Notes. (6)DERIVATIVE INSTRUMENTSThe Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage exposure to interest rate movements.To accomplish this objective, the Company used an interest rate swap as part of its interest rate risk management strategy. The Company’s interest rate swapinvolves the receipt of variable amounts from a counterparty in exchange for making fixed-rate payments over the life of the agreements without exchange ofthe underlying notional amount. On August 12, 2015, in connection with refinancing its domestic distribution center loan, described in Note 5 above, theCompany entered into a variable-to-fixed interest rate swap agreement with Bank of America, N.A., to hedge the cash flows on the Company’s $70.0 millionvariable rate debt. As of December 31, 2015, the swap agreement has an aggregate notional amount of $69.5 million and a maturity date of August 12, 2022,subject to early termination commencing on August 1, 2020 at the option of HF Logistics-SKX T1, LLC (“HF-T1”), a wholly-owned subsidiary of theCompany’s joint venture HF Logistics-SKX, LLC (the “JV”), Under the terms of the swap agreement, the Company will pay a weighted-average fixed rate of2.08% on the $69.5 million notional amount and receive payments from the counterparty based on the 30-day LIBOR rate. The rate swap agreement utilizedby the Company effectively modifies its exposure to interest rate risk by converting the Company’s floating-rate debt to a fixed-rate of 4.08% for the nextseven years, thus reducing the impact of interest-rate changes on future interest expense.By utilizing an interest rate swap, the Company is exposed to credit-related losses in the event that the counterparty fails to perform under the terms ofthe derivative contract. To mitigate this risk, the Company enters into derivative contracts with major58 financial institutions based upon credit ratings and other factors. The Company continually assesses the creditworthiness of its counterparties. As ofDecember 31, 2015, all counterparties to the interest rate swap had performed in accordance with their contractual obligations. (7)COMMITMENTS AND CONTINGENCIES (a)LeasesThe Company leases facilities under operating lease agreements expiring through May 2032. The Company pays taxes, maintenance and insurance inaddition to the lease obligations. The leases provide for rent escalations tied to either increases in the lessor’s operating expenses, fluctuations in theconsumer price index in the relevant geographical area, or a percentage of gross sales in excess of a base annual rent. The Company also leases certainequipment and automobiles under operating lease agreements expiring at various dates through January 2019. Rent expense for the years ended December31, 2015, 2014 and 2013 approximated $137.8 million, $107.0 million and $94.0 million, respectively.Minimum lease payments, which take into account escalation clauses, are recognized on a straight-line basis over the minimum lease term.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, 2015 are as follows (in thousands): OPERATINGLEASES Year ending December 31: 2016 $154,512 2017 141,136 2018 127,311 2019 110,379 2020 107,569 Thereafter 436,862 $1,077,769 (b)LitigationThe Company recognizes legal expense in connection with loss contingencies as incurred.Personal Injury Lawsuits Involving Shape-ups — As previously reported, on February 20, 2011, Skechers U.S.A., Inc., Skechers U.S.A., Inc. II andSkechers 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 the Company, and that the Company failed to provide adequatewarnings of alleged risks associated with Shape-ups. In total, the Company is named as a defendant in 1,141 currently pending cases (some on behalf ofmultiple plaintiffs) filed in various courts that assert further varying injuries but employ similar legal theories and assert similar claims to the first case, as wellas claims for breach of express and implied warranties, loss of consortium, and fraud. Although there are some variations in the relief sought, the plaintiffsgenerally 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 theUnited 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 1,235 personal injury cases have been filed in or transferred to the MDL proceeding and 414 additional individuals havesubmitted claims by plaintiff fact sheets. The Company has resolved 481 personal injury claims in the MDL proceedings, comprised of 90 that were filed asformal actions and 391 that were submitted by plaintiff fact sheets. The Company has also settled 1,332 claims in principle—1,101 filed cases and 231 claimssubmitted by plaintiff fact sheets— either directly or pursuant to a global settlement program that has been approved by the claimants’ attorneys (describedin greater detail below). Further, 42 cases in the MDL proceeding have been dismissed either voluntarily or on motions by the Company and 38 unfiledclaims submitted by plaintiff fact sheet have been abandoned. Between the consummated settlements and cases subject to the settlement program, all but twopersonal injury cases pending in the MDL have been or are expected to soon be resolved. On August 6, 2015, the Court entered an order staying alldeadlines, including trial, pending further order of the Court.59 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 72 personal injury actionsfiled in various Superior Courts of the State of California that were brought on behalf of 920 individual plaintiffs (360 of whom also submitted MDL court-approved questionnaires for mediation purposes in the MDL proceeding). Of those cases, 68 were originally filed in the Superior Court for the County of LosAngeles (the “LASC cases”). On August 20, 2014, the Judicial Council of California granted a petition by the Company to coordinate all personal injuryactions filed in California that relate to Shape-ups with the LASC cases (collectively, the “LASC Coordinated Cases”). On October 6, 2014, three cases thathad been pending in other counties were transferred to and coordinated with the LASC Coordinated Cases. On April 17, 2015, an additional case wastransferred to and coordinated with the LASC Coordinated Cases. Thirty-five actions brought on behalf of a total of 476 plaintiffs, have been settled anddismissed. The Company has also settled in principle an additional 31 actions brought on behalf of 405 plaintiffs pursuant to a global settlement programthat has been approved by the plaintiffs’ attorneys (described in greater detail below). One single plaintiff lawsuit and the claims of 28 additional plaintiffs inmulti-plaintiff lawsuits have been dismissed entirely either voluntarily or on motion by the Company. The claims of 21 additional persons have beendismissed in part, either voluntarily or on motions by the Company. Thus, taking into account both consummated settlements and cases subject to thesettlement program, only five lawsuits on behalf of a total of ten plaintiffs are expected to remain in the LASC Coordinated Cases. Discover is continuing inthose five remaining cases. No trial dates have been set.In other state courts, a total of 12 personal injury actions (some on behalf of numerous plaintiffs) have been filed that have not been removed to federalcourt and transferred to the MDL. Ten of those actions have been resolved and dismissed. One of the remaining actions that includes the claims of 65plaintiffs, has been settled in principle pursuant to a global settlement program that has been approved by the plaintiffs’ attorneys (described in greater detailbelow). The last remaining action in a state court other than California was recently filed in Missouri on January 4, 2016 on behalf of a single plaintiff. TheCompany has not yet been served in that action.With respect to the global settlement programs referenced above, the personal injury cases in the MDL and LASC Coordinated Cases and in other statecourts were largely solicited and handled by the same plaintiffs law firms. Accordingly, mediations to discuss potential resolution of the various lawsuitsbrought by these firms were held on May 18, June 18, and July 24, 2015. At the conclusion of those mediations, the parties reached an agreement in principleon a global settlement program that is expected to resolve all or substantially all of the claims by persons represented by those firms. The global settlementprogram involves complex monetary and non-monetary terms that are in the final stages of being documented. If the group settlements are not finalized andthe litigation proceeds, it is too early to predict the outcome of any case, whether adverse results in any single case or in the aggregate would have a materialadverse impact on our operations or financial position, and whether insurance coverage will be adequate to cover any losses. The settlements have beenreached for business purposes in order to end the distraction of litigation, and the Company continues to believe it has meritorious defenses and intend todefend any remaining cases vigorously. In addition, even if the global settlement is finalized, it is too early to predict whether there will be future personalinjury cases filed which are not covered by the settlement, whether adverse results in any single case or in the aggregate would have a material adverse impacton our operations or financial position, and whether insurance coverage will be available and/or adequate to cover any losses.Converse, Inc. v. Skechers U.S.A., Inc. — On October 14, 2014, Converse filed an action against the Company in the United States District Court forthe Eastern District of New York, Brooklyn Division, Case 1:14-cv-05977-DLI-MDG, alleging trademark infringement, false designation of origin, unfaircompetition, trademark dilution and deceptive practices arising out of the Company’s alleged use of certain design elements on footwear. The complaintseeks, 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 the Company with the U.S. International Trade Commission (the “ITC” or “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. OnDecember 8, 2014, the District Court stayed the proceedings before it. On December 19, 2014, The Company responded to the ITC complaint, denying thematerial allegations and asserting affirmative defenses. A trial before an administrative law judge of the ITC was held in August 2015. On November 15,2015, the ITC judge issued his interim decision finding that certain discontinued products (Daddy’$ Money and HyDee HyTops) infringed on Converse’sintellectual property, but that other, still active product lines (Twinkle Toes and BOBS Utopia) did not. On February 3, 2016, the ITC decided that it wouldreview in part certain matters that were decided by the ITC judge. While it is too early to predict the outcome of these legal proceedings or whether anadverse result in either or both of them would have a material adverse impact on the Company’s operations or financial position, the Company believes it hasmeritorious defenses and intend to defend these legal matters vigorously.The Company has reserved $4.0 million for costs and potential exposure related to the settlement of the foregoing personal injury lawsuits. Althoughthe Company’s reserve of $4.0 million appropriately reflects the current estimated range of loss, it is not possible to predict the final outcome of the relatedproceedings or any other pending legal proceedings and, consequently, the final exposure and costs associated with pending legal proceedings could have afurther material adverse impact on the Company’s result of operations or financial position.60 In accordance with U.S. GAAP, the Company records a liability in its consolidated financial statements for loss contingencies when a loss is known orconsidered probable and the amount can be reasonably estimated. When determining the estimated loss or range of loss, significant judgment is required toestimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings are inherentlydifficult to predict, particularly when the matters are in the procedural stages or with unspecified or indeterminate claims for damages, potential penalties, orfines. Accordingly, the Company cannot determine the final amount, if any, of its liability beyond the amount accrued in the consolidated financialstatements as of December 31, 2015, nor is it possible to estimate what litigation-related costs will be in the future. (c)Product and Other FinancingThe Company finances production activities in part through the use of interest-bearing open purchase arrangements with certain of its internationalmanufacturers. These arrangements currently bear interest at rates between 0.3% and 0.5% for 30- to 60-day financing. The amounts outstanding under thesearrangements at December 31, 2015 and 2014 were $120.4 million and $171.4 million, respectively, which are included in accounts payable in theaccompanying consolidated balance sheets. Interest expense incurred by the Company under these arrangements amounted to $5.4 million in 2015, $5.1million in 2014, and $3.9 million in 2013. The Company has open purchase commitments with its foreign manufacturers at December 31, 2015 of $613.8million, which are not included in the accompanying 2015 consolidated balance sheets. (8)STOCKHOLDERS’ EQUITYThe authorized capital stock of the Company consists of 500 million shares of Class A Common Stock, par value $.001 per share, 75 million shares ofClass B Common Stock, par value $.001 per share, and 10 million shares of preferred stock, $.001 par value per share.During 2015, 2014 and 2013, certain Class B stockholders converted 5,131,296 shares, 1,199,328 shares and 1,213,188 shares, respectively, of ClassB Common Stock to Class A Common Stock. (9)NONCONTROLLING INTERESTS The following VIE’s are consolidated into the Company’s consolidated financial statements and the carrying amounts and classification of assets andliabilities were as follows (in thousands): HF Logistics-SKX, LLC December 31, 2015 December 31, 2014 Current assets $2,111 $6,812 Noncurrent assets 113,928 118,837 Total assets $116,039 $125,649 Current liabilities $2,461 $78,668 Noncurrent liabilities 69,951 1,194 Total liabilities $72,412 $79,862 Distribution joint ventures (1) December 31, 2015 December 31, 2014 Current assets $154,060 $94,819 Noncurrent assets 34,782 10,322 Total assets $188,842 $105,141 Current liabilities $68,198 $38,470 Noncurrent liabilities 62 66 Total liabilities $68,260 $38,536 (1)Distribution joint ventures include Skechers China Limited, Skechers Southeast Asia Limited,Skechers Thailand Limited, Skechers Retail India Private Limited, and Skechers South Asia PrivateLimited. Noncontrolling interest earnings were $29.1 million, $13.4 million and $6.1 million for the years ended December 31, 2015, 2014 and 2013,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 cashcapital distributions of $38.6 million, $3.7 million, and $3.2 million during the years ended December 31, 2015, 2014, and 2013 respectively. SkechersChina Limited made capital distributions of $0.5 million and $0.461 million during the years ended December 31, 2015 and 2014. The distribution joint venture partners made cash capital contributions of $2.3 million, $0.5million and $3.6 million during the years ended December 31, 2015, 2014 and 2013, respectively. (10)EARNINGS PER SHAREBasic earnings per share represents net earnings divided by the weighted average number of common shares outstanding for the period. Dilutedearnings per share, in addition to the weighted average determined for basic earnings per share, includes potential dilutive common shares using the treasurystock method.The Company has two classes of issued and outstanding common stock; Class A Common Stock and Class B Common Stock. Holders of Class ACommon Stock and holders of Class B Common Stock have substantially identical rights, including rights with respect to any declared dividends ordistributions of cash or property, and the right to receive proceeds on liquidation or dissolution of the Company after payment of the Company’sindebtedness. The two classes have different voting rights, with holders of Class A Common Stock entitled to one vote per share while holders of Class BCommon 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 calculatingnet 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 BCommon 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 ofClass B Common Stock will be automatically converted into a like number of shares of Class A Common Stock upon transfer to any person or entity who isnot a permitted transferee.The following is a reconciliation of net earnings and weighted average common shares outstanding for purposes of calculating earnings per share (inthousands): Basic earnings per share 2015 2014 2013 Net earnings attributable to Skechers U.S.A., Inc. $231,912 $138,811 $54,788 Weighted average common shares outstanding 152,847 151,839 151,090 Basic earnings per share attributable to Skechers U.S.A., Inc. $1.52 $0.91 $0.36 Diluted earnings per share 2015 2014 2013 Net earnings attributable to Skechers U.S.A., Inc. $231,912 $138,811 $54,788 Weighted average common shares outstanding 152,847 151,839 151,090 Dilutive effect of nonvested shares 1,353 1,240 600 Weighted average common shares outstanding 154,200 153,079 151,690 Diluted earnings per share attributable to Skechers U.S.A., Inc. $1.50 $0.91 $0.36 There were no shares excluded from the computation of diluted earnings per share for the years ended December 31, 2015, 2014 or 2013. (11)STOCK COMPENSATION (a)Incentive Award PlanOn April 16, 2007, the Company’s Board of Directors adopted the 2007 Incentive Award Plan (the “2007 Plan”), which became effective uponapproval by the Company’s stockholders on May 24, 2007. Also on May 24, 2007, the Company’s Board of Directors terminated the Company’s previous1998 Stock Option, Deferred Stock and Restricted Stock Plan, with no further granting of awards being permitted thereafter. A total of 22,500,000 shares ofClass A Common Stock are reserved for issuance under the 2007 Plan, which provides for grants of ISOs, non-qualified stock options, restricted stock andvarious other types of equity awards as described in the plan to the employees, consultants and directors of the Company and its subsidiaries. The 2007 Planis administered by the Compensation Committee of the Company’s Board of Directors.62 A summary of the status and changes of nonvested shares related to the 2007 Plan as of and for the period ended December 31, 2015 is presentedbelow: SHARES WEIGHTED-AVERAGEGRANT-DATEFAIR VALUE Nonvested at December 31, 2012 852,999 $5.90 Granted 202,500 9.23 Vested/Released (227,001) 6.01 Nonvested at December 31, 2013 828,498 6.68 Granted 3,277,500 15.67 Vested/Released (291,999) 6.66 Cancelled (22,500) 6.25 Nonvested at December 31, 2014 3,791,499 14.46 Granted 40,500 29.83 Vested/Released (1,106,499) 11.81 Nonvested at December 31, 2015 2,725,500 15.77 As of December 31, 2015, a total of 11,108,643 shares remain available for grant as equity awards under the 2007 Plan.The Company recognized in the consolidated statements of earnings compensation expense of $18.3 million, $8.7 million and $2.4 million andrelated excess income tax benefits of $8.0 million, $1.4 million, and $0.5 million in the consolidated balance sheets for grants under its stock-basedcompensation plans for the years ended December 31, 2015, 2014, and 2013, respectively. Nonvested shares generally vest over a graded vesting schedulefrom one to four years from the date of grant. There was $33.0 million of unrecognized compensation cost related to nonvested common shares as ofDecember 31, 2015, which is expected to be recognized over a weighted average period of 1.9 years. The total fair value of shares vested during the periodended December 31, 2015 and 2014 was $13.1 million and $1.9 million, respectively. (b)Stock Purchase PlanOn April 16, 2007, the Company’s Board of Directors adopted the 2008 Employee Stock Purchase Plan (the “2008 ESPP”), and the Company’sstockholders approved the 2008 ESPP on May 24, 2007. The 2008 ESPP became effective on January 1, 2008, and the Company’s Board of Directorsterminated 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 of9,000,000 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 toautomatic 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 eligibleemployees to purchase Class A Common Stock at six-month intervals through payroll deductions, which may not exceed 15% of an employee’scompensation. 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 CommonStock 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 timeduring the offering period. The 2008 ESPP is administered by the Compensation Committee of the Company’s Board of Directors.During 2015, 2014 and 2013, 223,892 shares, 306,459 shares and 447,771 shares were issued under the 2008 ESPP for which the Company receivedapproximately $4.3 million, $3.4 million and $2.6 million, respectively.63 (12)INCOME TAXES The provisions for income tax expense were as follows (in thousands): 2015 2014 2013 Federal: Current $45,095 $7,677 $632 Deferred 2,774 23,659 11,537 Total federal 47,869 31,336 12,169 State: Current 2,506 2,060 519 Deferred 1,798 529 119 Total state 4,304 2,589 638 Foreign: Current 21,204 5,399 8,228 Deferred (927) (140) 312 Total foreign 20,277 5,259 8,540 Total income taxes $72,450 $39,184 $21,347 The Company’s provision for income tax expense and effective income tax rate are significantly impacted by the mix of the Company’s domestic andforeign earnings (loss) before income taxes. In the non-U.S. jurisdictions in which the Company has operations, the applicable statutory rates are generallysignificantly lower than in the U.S., ranging from 0% to 34%. The Company’s provision for income tax expense was calculated using the applicable statutoryrate for each jurisdiction applied to the Company’s pre-tax earnings (loss) in each jurisdiction, while the Company’s effective tax rate is calculated bydividing income tax expense by earnings before income taxes.The Company’s earnings (loss) before income taxes and income tax expense for 2015, 2014 and 2013 are as follows (in thousands): Years Ended December 31, 2015 2014 2013 Income tax jurisdiction Earnings (loss)before incometaxes Income taxexpense Earnings (loss)before incometaxes Income taxexpense Earnings (loss)before incometaxes Income taxexpense United States $136,725 $52,173 $82,778 $32,500 $38,705 $12,807 Canada 4,228 1,024 6,241 1,572 4,091 1,187 Chile 2,983 572 629 138 9,622 1,920 Peoples Republic of China (“China”) 49,028 11,084 15,201 1,179 6,148 1,646 Jersey (1) 123,721 — 77,555 — 25,348 — Non-benefited loss operations (2) (16,719) 164 (13,021) — (15,841) — Other jurisdictions (3) 33,531 7,433 21,997 3,795 14,142 3,787 Earnings before income taxes $333,497 $72,450 $191,380 $39,184 $82,215 $21,347 Effective tax rate (4) 21.7% 20.5% 26.0% (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 ofoffsetting valuation allowances: Panama, Poland, Romania, Japan, Brazil and India.(3)Consists of entities in the following tax jurisdictions, each of which comprises not more than 5% of 2015 consolidated earnings (loss) before taxes:Hungary, Serbia, Bosnia, Herzegovina, Montenegro, Macedonia, Albania, Kosovo, Vietnam, Panama, Peru, Colombia, Costa Rica, 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.For 2015, the effective tax rate was lower than the U.S. federal and state combined statutory rate of approximately 39% primarily because of earningsfrom foreign operations in jurisdictions imposing either lower tax rates on corporate earnings or no corporate income tax. During 2015, as reflected in thetable above, earnings (loss) before income taxes in the U.S. were earnings of $136.7 million, with income tax expense of $52.2 million, which is an averagerate of 38.2%. Earnings (loss) before income taxes in non-U.S. jurisdictions were earnings of $196.8 million, with aggregate income tax expense of $20.3million, which is an average rate64 of 10.3%. Combined, this results in consolidated earnings before income taxes for the period of $333.5 million, and consolidated income tax expense for theperiod of $72.5 million, resulting in an effective tax rate of 21.7%. For 2015, of the Company’s $196.8 million in earnings before income tax earned outsidethe U.S., $123.7 million was earned in Jersey, which does not impose a tax on corporate earnings. In Jersey, earnings before income taxes increased by $46.1million, or 59%, to $123.7 million for 2015 from $77.6 million for 2014. This increase was primarily attributable to the Company experiencing an increase of$433.7 million in net sales in the “Other international” geographic area for 2015 (see Note 17 – Segment Information), which resulted in a significantincrease in earnings before income taxes in Jersey from royalties and commissions under the terms of inter-subsidiary agreements. Increases in net sales in the“Other international” geographic area from 2014 to 2015 resulted in a disproportionately greater increase in earnings before income taxes in Jersey. Inaddition, there were foreign losses of $16.7 million for which no tax benefit was recognized during the year ended December 31, 2015 because of theprovision of offsetting valuation allowances, but in which $0.2 million in nonrefundable withholding taxes were paid. Individually, none of the other foreignjurisdictions included in “Other jurisdictions” in the table above had more than 5% of our 2015 consolidated earnings (loss) before taxes. Unremittedearnings of non-U.S. subsidiaries are expected to be reinvested outside of the U.S. indefinitely. Such earnings would become taxable upon the sale orliquidation of these subsidiaries or upon the remittance of dividends.As of December 31, 2015, the Company had approximately $508.0 million in cash and cash equivalents, of which $218.7 million, or 43.1%, was heldoutside the U.S. Of the $218.7 million held by the Company’s non-U.S. subsidiaries, approximately $33.4 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 financialstatements as of December 31, 2015. The Company’s cash and cash equivalents held in the U.S. and cash provided from operations are sufficient to meet theCompany’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 asindefinitely reinvested outside the U.S. Because of the need for cash for operating capital and continued overseas expansion, the Company also does notforesee the need for any of its foreign subsidiaries to distribute funds up to an intermediate foreign parent company in any form of taxable dividend. Undercurrent applicable tax laws, if the Company chooses to repatriate some or all of the funds designated as indefinitely reinvested outside the U.S., the amountrepatriated would be subject to U.S. income taxes and applicable non-U.S. income and withholding taxes. As of December 31, 2015 and 2014, U.S. incometaxes have not been provided on cumulative total earnings of $482.7 million and $318.2 million, respectively.Income taxes differ from the statutory tax rates as applied to earnings before income taxes as follows (in thousands): 2015 2014 2013 Expected income tax expense $116,724 $66,981 $28,775 State income tax, net of federal benefit 2,011 1,032 255 Rate differential on foreign income (44,541) (27,364) (11,897)Change in unrecognized tax benefits (2,233) (2,717) 740 Non-deductible expenses (350) 288 (150)Prior year R&D credit claims — — (493)Other 285 3,333 (1,187)Change in valuation allowance 554 (2,369) 5,304 Total provision for income taxes $72,450 $39,184 $21,347 Effective tax rate 21.7% 20.5% 26.0% 65 The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities at December 31, 2015and 2014 are presented below (in thousands): 2015 2014 Deferred tax assets: Inventory adjustments $6,249 $4,942 Accrued expenses 17,619 15,103 Allowances for bad debts and chargebacks 6,972 6,407 Loss carryforwards 23,073 23,247 Business credit carryforward 5,214 4,042 Share-based compensation 3,628 2,282 Valuation allowance (18,088) (17,534)Total deferred tax assets 44,667 38,489 Deferred tax liabilities: Prepaid expenses 8,566 7,588 Depreciation on property, plant and equipment 22,406 22,050 Total deferred tax liabilities 30,972 29,638 Net deferred tax assets $13,695 $8,851 The Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferredtax assets.State tax credit and net operating loss carry-forward amounts remaining as of December 31, 2015 were $8.8 million and $33.3 million, respectively.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. These taxcredit and net operating loss carry-forward amounts don’t begin to expire until 2028 and 2021, respectively. As of December 31, 2015 and 2014, novaluation 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 befully utilized in reducing future taxable income.As of December 31, 2015 and 2014, the Company had combined foreign net operating loss carry-forwards available to reduce future taxable income ofapproximately $66.8 million and $56.9 million, respectively. Some of these net operating losses expire beginning in 2016; however others can be carriedforward indefinitely. As of December 31, 2015 and 2014, valuation allowances of $16.5 million and $15.9 million, respectively, had been set up against therelated 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 prepaid expenses in the consolidated balance sheets, decreased by $1.8 million during the year.A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): 2015 2014 Beginning balance $7,936 $10,816 Additions for current year tax positions 888 773 Reductions for prior year tax positions (1,099) (2,227)Reductions related to lapse of statute of limitations (1,582) (1,426)Ending balance $6,143 $7,936 If recognized, $6.1 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) andtotaled $(0.6) million for the year ended December 31, 2015, $(0.2) million for the year ended December 31, 2014, and $0.1 million for the year endedDecember 31, 2013. Accrued interest and penalties were $1.5 million and $1.7 million as of December 31, 2015 and 2014, 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 thepotential outcome of any uncertain tax position is subject to its assessment of relevant risks, facts, and circumstances existing at that time. The Companybelieves that it has adequately provided for these matters. However, the Company’s future results may include favorable or unfavorable adjustments to itsestimates in the period the audits are resolved, which may impact the Company’s effective tax rate.66 As of December 31, 2015, the Company’s tax filings are generally subject to examination in the U.S. and several Asian and European tax jurisdictionsfor years ending on or after December 31, 2010. During the year, the Company reduced the balance of 2015 and prior year unrecognized tax benefits by $1.6million as a result of expiring statutes.The Company is currently under examination by a number of states and certain foreign jurisdictions. During the year ended December 31, 2015, therewas no reduction in the balance of 2015 and prior year unrecognized tax benefits due to any settlement of an examination. It is reasonably possible thatcertain state and foreign examinations could be settled during the next twelve months which would reduce the balance of 2015 and prior year unrecognizedtax benefits by $1.5 million. (13)EMPLOYEE BENEFIT PLANThe Company has a 401(k) profit sharing plan covering all employees who are 21 years of age and have completed six months of service. Employeesmay contribute up to 15.0% of annual compensation. Company contributions to the plan are discretionary and vest over a six year period. The Company didnot make a contribution to the plan for the years ended December 31, 2015, 2014 and 2013, respectively.In May 2013, the Company established the Skechers U.S.A., Inc. Deferred Compensation Plan (the “Plan”), which allows eligible employees to defercompensation up to a maximum amount to a future date on a nonqualified basis. The Plan provides for the Company to make discretionary contributions toparticipating employees, which will be determined by the Company’s Compensation Committee. The Company did not make a contribution to the plan forthe year ended December 31, 2015 or 2014. The value of the deferred compensation is recognized based on the fair value of the participants’ accounts asdetermined 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 anddeferred liabilities are presented in the Company’s consolidated balance sheets. (14)BUSINESS AND CREDIT CONCENTRATIONSThe Company generates a significant portion 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 thegeneral economy, and its business depends on the general economic environment and levels of consumer spending. Changes in the marketplace maysignificantly affect the Company’s estimates and its performance. The Company performs regular evaluations concerning the ability of customers to satisfytheir obligations and provides for estimated doubtful accounts. Domestic accounts receivable, which generally do not require collateral from customers,amounted to $180.2 million and $166.9 million before allowances for bad debts and sales returns, and chargebacks at December 31, 2015 and 2014,respectively. Foreign accounts receivable, which are generally collateralized by letters of credit, amounted to $188.0 million and $126.2 million beforeallowance for bad debts, sales returns, and chargebacks at December 31, 2015 and 2014, respectively. International net sales amounted to $1.271 billion,$819.3 million and $558.1 million for the years ended December 31, 2015, 2014 and 2013, respectively. The Company’s credit losses charged to expense forthe years ended December 31, 2015, 2014 and 2013 were $5.3 million, $11.8 million and $2.6 million, respectively. In addition, the Company’s recordedsales return and allowance expense for the years ended December 31, 2015, 2014 and 2013 were $2.2 million, $2.3 million and $0.2 million, respectively.Assets located outside the United States consist primarily of cash, accounts receivable, inventory, property, plant and equipment, and other assets. Netassets held outside the United States were $773.5 million and $548.9 million at December 31, 2015 and 2014, respectively.During 2015, 2014 and 2013, no customer accounted for 10.0% or more of net sales. As of December 31, 2015, one customer accounted for 10.6% ofgross trade receivables. No other customer accounted for more than 10% of net trade receivables at December 31, 2015 or 2014. During 2015, 2014 and 2013,net sales to the five largest customers were approximately 14.6%, 15.7% and 18.1%, respectively.67 The Company’s top five manufacturers produced the following for the years ended December 31, 2015, 2014 and 2013, respectively: Percentage of Total ProductionYears Ended December 31, 2015 2014 2013 Manufacturer #1 31.5% 37.5% 37.8%Manufacturer #2 9.1% 6.1% 7.1%Manufacturer #3 7.3% 5.7% 6.1%Manufacturer #4 5.0% 4.9% 4.8%Manufacturer #5 3.6% 4.7% 4.1% 56.5% 58.9% 59.9% The majority of the Company’s products are produced in China. The Company’s operations are subject to the customary risks of doing businessabroad, including but not limited to currency fluctuations and revaluations, custom duties and related fees, various import controls and other monetarybarriers, restrictions on the transfer of funds, labor unrest and strikes and, in certain parts of the world, political instability. The Company believes it has actedto reduce these risks by diversifying manufacturing among various factories. To date, these business risks have not had a material adverse impact on theCompany’s operations. (15)RELATED PARTY TRANSACTIONSThe Company paid approximately $180,000, $160,000, and $178,000 during 2015, 2014 and 2013, respectively, to the Manhattan Inn OperatingCompany, 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 seniorvice presidents of the Company own in aggregate an additional 5% beneficial ownership in MIOC. The Company had no outstanding accounts receivable orpayable with MIOC or the Shade Hotel at December 31, 2015 and 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 anyshareholders or members. The Foundation is not a subsidiary of, and is not otherwise affiliated with the Company, and the Company does not have a financialinterest in the Foundation. However, two officers and directors of the Company, Michael Greenberg, the Company’s President, and David Weinberg, theCompany’s Chief Operating Officer and Chief Financial Officer, are also officers and directors of the Foundation. During the years ended December 31, 2015and 2014, the Company did not make any contributions to the Foundation.The Company had receivables from officers and employees of $1.3 million and $0.6 million at December 31, 2015 and 2014, respectively. Theseamounts relate to travel advances, incidental personal purchases on Company-issued credit cards and employee loans, These receivables are short-term andare expected to be repaid within a reasonable period of time. The Company had no other significant transactions with or payables to officers, directors orsignificant shareholders of the Company. (16)SUBSEQUENT EVENTSThe Company has evaluated events subsequent to December 31, 2015, to assess the need for potential recognition or disclosure in this filing. Basedon this evaluation, it was determined that no subsequent events occurred that require recognition in the consolidated financial statements.68 (17)SEGMENT INFORMATION The Company has three reportable segments–domestic wholesale sales, international wholesale sales, and retail sales, which includes e-commercesales. The Company evaluates segment performance based primarily on net sales and gross margins. All other costs and expenses of the Company areanalyzed on an aggregate basis, and these costs are not allocated to the Company’s segments. Net sales, gross margins and identifiable assets for the domesticwholesale, international wholesale, and retail segments on a combined basis were as follows (in thousands): 2015 2014 2013 Net sales Domestic wholesale $1,219,779 $997,994 $802,163 International wholesale 1,094,395 689,195 478,799 Retail 833,149 690,372 565,399 Total $3,147,323 $2,377,561 $1,846,361 2015 2014 2013 Gross profit Domestic wholesale $471,104 $367,980 $288,818 International wholesale 454,665 292,722 198,853 Retail 498,239 411,203 331,121 Total $1,424,008 $1,071,905 $818,792 2015 2014 Identifiable assets Domestic wholesale $1,094,084 $979,582 International wholesale 713,424 510,063 Retail 239,900 185,273 Total $2,047,408 $1,674,918 2015 2014 2013 Additions to property, plant and equipment Domestic wholesale $38,080 $9,655 $9,652 International wholesale 37,909 18,899 4,828 Retail 42,155 28,351 26,814 Total $118,144 $56,905 $41,294 69 Geographic InformationThe following summarizes the Company’s operations in different geographic areas as of and for the years ended December 31: 2015 2014 2013 Net Sales (1) United States $1,876,201 $1,558,226 $1,288,302 Canada 103,268 85,139 63,665 Other international (2) 1,167,854 734,196 494,394 Total $3,147,323 $2,377,561 $1,846,361 2015 2014 Property, plant and equipment, net United States $356,704 $332,383 Canada 8,447 7,203 Other international (2) 70,756 33,597 Total $435,907 $373,183 (1)The Company has subsidiaries in Asia, Central America, Europe, North America, and South America that generate net sales within those respectivecountries and in some cases the neighboring regions. The Company has joint ventures in Asia that generate net sales from those countries. TheCompany also has a subsidiary in Switzerland that generates net sales from that country in addition to net sales to distributors located in numerousnon-European countries. External net sales are attributable to geographic regions based on the location of each of the Company’s subsidiaries. Asubsidiary may earn revenue from external net sales and external royalties, or from inter-subsidiary net sales, royalties, fees and commissionsprovided in accordance with certain inter-subsidiary agreements. The resulting earnings of each subsidiary in its respective country are recognizedunder each respective country’s tax code. Inter-subsidiary revenues and expenses subsequently are eliminated in the Company’s consolidatedfinancial statements and are not included as part of the external net sales reported in different geographic areas.(2)Other international consists of Asia, Central America, Europe, North America, and South America. (18)SUMMARY OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED)Summarized unaudited financial data are as follows (in thousands): 2015 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 Net sales $767,997 $800,464 $856,179 $722,683 Gross profit 332,540 374,608 387,006 329,854 Net earnings attributable to Skechers U.S.A., Inc. 56,080 79,782 66,602 29,448 Net earnings per share: Basic 0.37 0.52 0.44 0.19 Diluted 0.37 0.52 0.43 0.19 2014 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 Net sales $546,518 $587,051 $674,270 $569,722 Gross profit 240,403 269,375 304,498 257,629 Net earnings attributable to Skechers U.S.A., Inc. 30,965 34,802 51,123 21,921 Net earnings per share: Basic 0.20 0.23 0.34 0.14 Diluted 0.20 0.23 0.33 0.14 70 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.ITEM 9A.CONTROLS AND PROCEDURESAttached 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 andProcedures” section includes information concerning the controls and controls evaluation referred to in the certifications.EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURESWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports thatit files under the Exchange Act is recorded, processed, summarized and reported within required time periods and that such information is accumulated andcommunicated to allow timely decisions regarding required disclosures. As of the end of the period covered by this annual report on Form 10-K, we carriedout an evaluation under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design andoperation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, our CEO and CFO concludedthat our disclosure controls and procedures are effective, at the reasonable assurance level as of such time.MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTINGOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule13a-15(f) of the Exchange Act. Internal control over financial reporting includes those policies and procedures that: (i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of ourmanagement and directors; and (iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that couldhave 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 theframework in Internal Control – Integrated Framework (2013), our management has concluded that as of December 31, 2015, our internal control overfinancial reporting is effective.Our independent registered public accountants, BDO USA, LLP, audited the consolidated financial statements included in this annual report on Form10-K and have issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2015, which is set forthbelow.71 INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLSOur management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures orour internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, canprovide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact thatthere are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all controlsystems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues andinstances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can befaulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, bycollusion 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 assumptionsabout the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential futureconditions. Projections of any evaluation of controls’ effectiveness to future periods are subject to risks. Over time, controls may become inadequate becauseof changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effectivecontrol system, misstatements as a result of error or fraud may occur and not be detected.CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTINGThere were no changes to our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, ourinternal controls over financial reporting during the fourth quarter of 2015. The results of our evaluation are discussed above in Management’s Report onInternal Control Over Financial Reporting. 72 Report of Independent Registered Public Accounting FirmBoard of Directors and StockholdersSkechers U.S.A., Inc.Manhattan Beach, CAWe have audited Skechers U.S.A., Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria established inInternal 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 ofthe effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control OverFinancial 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 thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures 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 reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely 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 ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith 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 ofDecember 31, 2015, 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 sheetsof Skechers U.S.A., Inc. and subsidiaries as of December 31, 2015 and 2014, 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, 2015, and our report dated February 26, 2016 expressed anunqualified opinion thereon./s/ BDO USA, LLP Los Angeles, CAFebruary 26, 2016 73 ITEM 9B.OTHER INFORMATION None. PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by this Item 10 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation14A within 120 days after the end of our 2015 fiscal year.ITEM 11.EXECUTIVE COMPENSATIONThe information required by this Item 11 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation14A within 120 days after the end of our 2015 fiscal year.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSThe information required by this Item 12 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation14A within 120 days after the end of our 2015 fiscal year.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by this Item 13 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation14A within 120 days after the end of our 2015 fiscal year.ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by this Item 14 is hereby incorporated by reference from our definitive proxy statement, to be filed pursuant to Regulation14A within 120 days after the end of our 2015 fiscal year. PART IVITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES1.Financial Statements: See “Index to Consolidated Financial Statements and Financial Statement Schedule” in Part II, Item 8 on page 45 of this annualreport on Form 10-K.2.Financial Statement Schedule: See “Schedule II—Valuation and Qualifying Accounts” on page 75 of this annual report on Form 10-K.3.Exhibits: The exhibits listed in the accompanying “Index to Exhibits” are filed or incorporated by reference as part of this Form 10-K. 74 SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS(in thousands)Years Ended December 31, 2015, 2014, and 2013 DESCRIPTION BALANCE ATBEGINNING OFPERIOD CHARGED TOREVENUECOSTS ANDEXPENSES DEDUCTIONSANDWRITE-OFFS BALANCEAT ENDOF PERIOD Year-ended December 31, 2013 Allowance for chargebacks $2,801 $1,514 $(1,825) $2,490 Allowance for doubtful accounts 7,167 1,105 (2,292) 5,980 Reserve for sales returns and allowances 6,954 249 253 7,456 Reserve for shrinkage 300 1,166 (1,200) 266 Reserve for obsolescence 8,849 1,333 (6,697) 3,485 Year-ended December 31, 2014 Allowance for chargebacks $2,490 $5,530 $(1,469) $6,551 Allowance for doubtful accounts 5,980 6,284 (6,823) 5,441 Reserve for sales returns and allowances 7,456 2,339 (780) 9,015 Reserve for shrinkage 266 1,292 (1,220) 338 Reserve for obsolescence 3,485 5,656 (6,140) 3,001 Year-ended December 31, 2015 Allowance for chargebacks $6,551 $3,703 $(3,189) $7,065 Allowance for doubtful accounts 5,441 1,538 (1,026) 5,953 Reserve for sales returns and allowances 9,015 2,279 (52) 11,242 Reserve for shrinkage 338 2,014 (1,945) 407 Reserve for obsolescence 3,001 10,321 (10,041) 3,281 See accompanying report of independent registered public accounting firm 75 INDEX TO EXHIBITS EXHIBITNUMBER DESCRIPTION OF EXHIBIT 3.1 Amended and Restated Certificate of Incorporation dated April 29, 1999 (incorporated by reference to exhibit number 3.1 of theRegistrant’s Form 10-Q for the quarter ended September 30, 2015). 3.1(a) Amendment to Amended and Restated Certificate of Incorporation dated September 24, 2015 (incorporated by reference to exhibit number3.2 of the Registrant’s Form 10-Q for the quarter ended September 30, 2015). 3.2 Bylaws dated May 28, 1998 (incorporated by reference to exhibit number 3.2 of the Registrant’s Registration Statement on Form S-1 (FileNo. 333-60065) filed with the Securities and Exchange Commission on July 29, 1998). 3.2(a) 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 theyear ended December 31, 2005). 3.2(b) Second Amendment to Bylaws dated as of December 18, 2007 (incorporated by reference to exhibit number 3.1 of the Registrant’s Form 8-Kfiled with the Securities and Exchange Commission on December 20, 2007). 4.1 Form of Specimen Class A Common Stock Certificate (incorporated by reference to exhibit number 4.1 of the Registrant’s RegistrationStatement on Form S-1, as amended (File No. 333-60065), filed with the Securities and Exchange Commission on May 12, 1999). 10.1** Skechers U.S.A., Inc. Deferred Compensation Plan (incorporated by reference to exhibit number 10.1 of the Registrant’s Form 8-K filed withthe Securities and Exchange Commission on May 3, 2013). 10.2** 2006 Annual Incentive Compensation Plan (incorporated by reference to Appendix A of the Registrant’s Definitive Proxy Statement filedwith 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 andExchange 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’sForm 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 theSecurities 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-Qfor the quarter ended June 30, 2010). 10.5(b)** Amendment No. 2 to 2008 Employee Stock Purchase Plan (incorporated by reference to exhibit number 3.3 of the Registrant’s Form 10-Qfor the quarter ended September 30, 2015). 10.6** Indemnification Agreement dated June 7, 1999 between the Registrant and its directors and executive officers (incorporated by reference toexhibit 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 theRegistrant (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 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). 10.8 Tax Indemnification Agreement dated June 8, 1999, between the Registrant and certain shareholders (incorporated by reference to exhibitnumber 10.8 of the Registrant’s Form 10-Q for the quarter ended June 30, 1999). 10.9** Employment Agreement, executed August 7, 2015, effective as of January 1, 2015, between the Registrant and Michael Greenberg(incorporated by reference to exhibit number 10.5 of the Registrant’s Form 10-Q for the quarter ended June 30, 2015).76 EXHIBITNUMBER DESCRIPTION OF EXHIBIT 10.10 Credit Agreement dated June 30, 2015, by and among the Registrant, certain of its subsidiaries who are also borrowers under the Agreement,certain of its subsidiaries who are guarantors under the Agreement, and Bank of America, N.A., MUFG Union Bank, N.A. and HSBC BankUSA, National Association (incorporated by reference to exhibit number 10.1 of the Registrant’s Form 8-K filed with the Securities andExchange Commission on July 7, 2015). 10.11 Amended and Restated Limited Liability Company Agreement dated April 12, 2010 between Skechers R.B., LLC, a Delaware limitedliability company and wholly owned subsidiary of the Registrant, and HF Logistics I, LLC, regarding the ownership and management of thejoint venture, HF Logistics-SKX, LLC, a Delaware limited liability company (incorporated by reference to exhibit number 10.11 of theRegistrant’s Form 10-K for the year ended December 31, 2011). 10.11(a) First Amendment to Amended and Restated Limited Liability Company Agreement dated August 11, 2015 by and between Skechers R.B.,LLC, a Delaware limited liability company and wholly owned subsidiary of the Registrant, and HF Logistics I, LLC, regarding theownership and management of the joint venture, HF Logistics-SKX, LLC, a Delaware limited liability company (incorporated by referenceto exhibit number 10.1 of the Registrant’s Form 8-K filed with the Securities and Exchange Commission on August 17, 2015). 10.12 Amended and Restated Loan Agreement dated as of August 12, 2015, by and among HF Logistics-SKX T1, LLC, which is a wholly ownedsubsidiary of a joint venture entered into between HF Logistics I, LLC, and Skechers R.B., LLC, a Delaware limited liability company andwholly owned subsidiary of the Registrant, Bank of America, N.A., as administrative agent and as a lender, and CIT Bank, N.A. andRaymond James Bank, N.A., as lenders (incorporated by reference to exhibit number 10.2 of the Registrant’s Form 8-K filed with theSecurities and Exchange Commission on August 17, 2015). 10.13 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 onJanuary 4, 2011). 10.14 Equipment Security Note, dated December 29, 2010, by and among the Registrant, Banc of America Leasing & Capital, LLC, and Bank ofUtah, as agent (incorporated by reference to exhibit number 10.2 of the Registrant’s Form 8-K filed with the Securities and ExchangeCommission on January 4, 2011). 10.15 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 Commissionon July 1, 2011). 10.16 Lease Agreement dated September 25, 2007 between the Registrant and HF Logistics I, LLC, regarding distribution facility in RanchoBelago, California (incorporated by reference to exhibit number 10.1 of the Registrant’s Form 8-K filed with the Securities and ExchangeCommission on September 27, 2007). 10.16(a) First Amendment to Lease Agreement, dated December 18, 2009, between the Registrant and HF Logistics I, LLC, regarding distributionfacility in Rancho Belago, California (incorporated by reference to exhibit number 10.6 of the Registrant’s Form 10-Q for the quarter endedMarch 31, 2010). 10.16(b) Second Amendment to Lease Agreement, dated April 12, 2010, between the Registrant and HF Logistics I, LLC, regarding distributionfacility in Rancho Belago, California (incorporated by reference to exhibit number 10.4 of the Registrant’s Form 10-Q for the quarter endedSeptember 30, 2010). 10.16(c) Assignment of Lease Agreement, dated April 12, 2010, between HF Logistics I, LLC and HF Logistics-SKX T1, LLC, regarding distributionfacility in Rancho Belago, California (incorporated by reference to exhibit number 10.5 of the Registrant’s Form 10-Q for the quarter endedSeptember 30, 2010). 10.16(d) Third Amendment to Lease Agreement, dated August 18, 2010, between the Registrant and HF Logistics-SKX T1, LLC, regardingdistribution facility in Rancho Belago, California (incorporated by reference to exhibit number 10.6 of the Registrant’s Form 10-Q for thequarter ended September 30, 2010). 10.17 Lease Agreement, dated August 12, 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 theRegistrant’s Form 10-K for the year ended December 31, 2002). 10.17(a) Addendum to Lease Agreement, dated January 19, 2006, between Skechers EDC SPRL, a subsidiary of the Registrant, and ProLogisBelgium II SPRL, regarding ProLogis Park Liege Distribution Center I in Liege, Belgium.77 EXHIBITNUMBER DESCRIPTION OF EXHIBIT 10.17(b) Addendum 2 to Lease Agreement dated May 20, 2008 between Skechers EDC SPRL, a subsidiary of the Registrant, and ProLogis BelgiumII SPRL, regarding ProLogis Park Liege Distribution Center I in Liege, Belgium (incorporated by reference to exhibit number 10.2 of theRegistrant’s Form 8-K filed with Securities and Exchange Commission on May 27, 2008). 10.17(c) Addendum 3 to Agreement dated June 11, 2013 and among the Registrant, Skechers EDC SPRL, a subsidiary of the Registrant, ProLogisBelgium II BVBA regarding ProLogis Park Liege Distribution Center I in Liege, Belgium. 10.17(d) Addendum 4 to Agreement dated October 17, 2014 by and among the Registrant, Skechers EDC SPRL, a subsidiary of the Registrant,ProLogis Belgium II BVBA regarding ProLogis Park Liege Distribution Center I in Liege, Belgium. 10.18 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 10.1 of theRegistrant’s Form 8-K filed with the Securities and Exchange Commission on May 27, 2008). 10.18(a) Addendum 1 to Lease Agreement, dated March 10, 2009, between Skechers EDC SPRL, a subsidiary of the Registrant, and ProLogisBelgium III BVBA, regarding ProLogis Park Liege Distribution Center I in Liege, Belgium. 10.18(b) Addendum 2 to Lease Agreement dated December 22, 2009 between Skechers EDC SPRL, a subsidiary of the Registrant, and ProLogisBelgium III BVBA, regarding ProLogis Park Liege Distribution Center II in Liege, Belgium. 10.18(c) Addendum 3 to Agreement dated June 11, 2013 by and among the Registrant, Skechers EDC SPRL, a subsidiary of the Registrant, ProLogisBelgium III BVBA regarding ProLogis Park Liege Distribution Center II in Liege, Belgium. 10.18(d) Addendum 4 to Agreement dated October 17, 2014 by and among the Registrant, Skechers EDC SPRL, a subsidiary of the Registrant,ProLogis Belgium III BVBA regarding ProLogis Park Liege Distribution Center II in Liege, Belgium. 10.19 Lease Agreement dated October 17, 2014 by and among the Registrant, Skechers EDC SPRL, a subsidiary of the Registrant, and ProLogisBelgium II BVBA, regarding ProLogis Park Liege Distribution Center III in Liege, Belgium (incorporated by reference to exhibit number10.1 of the Registrant’s Form 10-Q for the quarter ended March 31, 2015). 10.19(a) Addendum to Agreement dated August 3, 2015 by and among the Registrant, Skechers EDC SPRL, a subsidiary of the Registrant, ProLogisBelgium II BVBA, and ProLogis Belgium III BVBA regarding ProLogis Park Liege Distribution Centers I, II and III in Liege, Belgium(incorporated by reference to exhibit number 10.3 of the Registrant’s Form 10-Q for the quarter ended June 30, 2015). 10.20 Lease Agreement dated July 10, 2015 by and among the Registrant, Skechers EDC SPRL, a subsidiary of the Registrant, and ProLogisBelgium II BVBA, regarding ProLogis Park Liege Distribution Center IV in Liege, Belgium (incorporated by reference to exhibit number10.2 of the Registrant’s Form 10-Q for the quarter ended June 30, 2015). 10.20(a) Addendum to Agreement dated August 3, 2015 by and among the Registrant, Skechers EDC SPRL, a subsidiary of the Registrant, ProLogisBelgium II BVBA, and ProLogis Belgium III BVBA regarding ProLogis Park Liege Distribution Center IV in Liege, Belgium (incorporatedby reference to exhibit number 10.4 of the Registrant’s Form 10-Q for the quarter ended June 30, 2015).78 EXHIBITNUMBER DESCRIPTION OF EXHIBIT 21.1 Subsidiaries of the Registrant. 23.1 Consent of Independent Registered Public Accounting Firm. 31.1 Certification of the Chief Executive Officer pursuant Securities Exchange Act Rule 13a-14(a). 31.2 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. **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 Actor 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, asamended, or the Exchange Act. 79 SIGNATURESPursuant 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 onits behalf by the undersigned, thereunto duly authorized, in the City of Manhattan Beach, State of California on the 26th day of February 2016. SKECHERS U.S.A., INC. By: /s/ Robert Greenberg Robert Greenberg Chairman of the Board andChief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrantand in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ Robert Greenberg Chairman of the Board and Chief Executive Officer February 26, 2016Robert Greenberg (Principal Executive Officer) /s/ Michael Greenberg President and Director February 26, 2016Michael Greenberg /s/ David Weinberg Executive Vice President, Chief Operating Officer, February 26, 2016David Weinberg Chief Financial Officer and Director (Principal Financial and Accounting Officer) /s/ Jeffrey Greenberg Director February 26, 2016Jeffrey Greenberg /s/ Geyer Kosinski Director February 26, 2016Geyer Kosinski /s/ Morton D. Erlich Director February 26, 2016Morton D. Erlich /s/ Richard Siskind Director February 26, 2016Richard Siskind /s/ Thomas Walsh Director February 26, 2016Thomas Walsh /s/ Rick Rappaport Director February 26, 2016Rick Rappaport 80Exhibit 10.17(a) Addendum to the Availability Agreement of 12 August 2002 andthe Transfer Agreement of 27 August 2003The undersignedPrologis Belgium II SPRL, with its registered office in Regus Pegasus Park, Pegasuslaan, 5, B-1831 Diegem, registered with the register of Commerce ofBrussels under number 642.799 and with VAT registration number BE 472.435.431, hereby represented by Mr. Jacobus C.J. Nuijten, Director, hereafterreferred to as "Prologis";AndSkechers EDC SPRL, with its registered office in Parc Industriel Hauts-Sarts, Zone 3, avenue du Parc lndustriel, B- 4041 Milmort, registered with the registerof Commerce of Liege under number 211.660 and with VAT registration number BE 478.543.758, hereby represented by Mr. David Weinberg, Director,hereafter referred to as "Skechers EDC";After having considered the following:1. On 12 August 2002 ProLogis and Skechers International have signed an "Agreement for the availability of space for the storage of goods and offices for themanagement of this" (hereafter "the Availability Agreement") concerning the following real estate: Prologis Park Liege Distribution Center I with a totalsurface area of approximately 22.458m2 and approximately 100 car parking spaces on the land located in the Industrial Park Hauts-Sarts, Milmort, Liege,Avenue du Parc Industriel, recorded in the land register as Herstal 6th department, section A, part of no. 621/B, Herstal 7th department, section A, part of no.450/T and part of 450/Y, and Herstal 8th department, section A, part of no. 288/D (hereafter "DC 1").2. On 11 October 2002 Skechers International has transferred all its rights and obligations under the Availability Agreement to Skechers EDC, as set forth inthe Agreement to Transfer the Agreement for the availability of space for the storage of goods and offices for the management of this dated 27 August 2003(hereafter the “Transfer Agreement”).3. In Article 20.1 of the Availability Agreement, ProLogis has granted Skechers International an option right on the use of Distribution Center II (hereafter"DC II").4. ProLogis granted to Skechers EDC until 31 December 2005 an option on DC II with certain charges. ProLogis now wishes to grant Skechers EDC as ofJanuary 1, 2006 an extension to the option on DC II free of charge. Skechers on its turn wishes to renounce to its right of termination after five (5) years of theDate of Commencement as set forth in Article 5 of the Availability Agreement. 1  Have agreed the following:1Amendments Extension of Option Right on DC II1.1Extension of Option Right on DC IIArticle 20.1 of the Availability Agreement is replaced as follows :"ProLogis grants Skechers as of January 1, 2006 until December 31, 2007 free of charge an extension to the option right on the use of DistributionCenter II (hereinafter "DC II') (hereinafter the “Option”).Skechers will have to notify via registered letter to ProLogis its intention to use DC II prior to that date, in the absence whereof ProLogis shall befree in this respect, except as set forth in Article 20. 2. DC II is more closely described in Appendix 6.In case Skechers wants to use DC II, this will be on similar price levels as the Premises (price level July 1, 2002), as adjusted in accordance withArticle 4. On the commencement date for DC II, this Agreement will be synchronized with the agreement for DC II via an addendum to thisAgreement. The initial term will be five (5) years during which Skechers can not terminate for both the Premises and DC II, as of the date ofcommencement for DC II.In case the construction cost index exceeds the consumer price index (hereinafter “CPI”), the price for DC II will be adjusted and consequentlyincreased with the difference between the CPI and the construction cost index. The Price will be the basis price for DC II (price level July 1, 2002),increased by the annual indexation.In the event Skechers will execute its Option, to use DC II, Skechers will be given a "Use free"-period for DC II of four (4) months for which nopayments are due, except applicable service charges and VAT."1.2DurationThe second paragraph of Article 5 of the Availability Agreement is replaced as follows :"Skechers is only entitled to terminate the Agreement after ten (10), fifteen (15) and twenty (20) years after the Date of Commencement, being July17, 2002, subject to a notice period of twelve (12) months, without prejudice to Article 20 and without any compensation nor VAT adjustment to bepaid, except as set forth in article 2, 6th §, of this Agreement, to ProLogis."2Various clauses2.1The other terms and conditions of the Availability Agreement and the Transfer Agreement remain fully applicable between parties.No amendment or modification of this Addendum shall take effect unless it is in writing and is executed by duly authorized representatives of theparties.2.2If one or more of the provisions of this Addendum is declared to be invalid, illegal or unenforceable in any respect under the applicable law, thevalidity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected. In the case whereby such invalid,illegal or unenforceable clause affects the entire nature of this Addendum, each of the parties shall use its best efforts to immediately and in goodfaith negotiate a legally valid replacement provision. 2  3Applicable law and competent courts This Addendum shall be governed by and construed in accordance with Belgian law. In the event of any dispute relating to the conclusion, validity, theimplementation or the interpretation of this Addendum, the courts of Liege will have sole and exclusive jurisdiction.This Addendum was made out in quadruplicate in Brussels on January 19, 2006. Each party acknowledges to have received its original copy. /s/ Jacobus C.J. Nuijten /s/ David WeinbergFor ProLogis Belgium II SPRL For Skechers EDC SPRLMr. Jacobus C.J. Nuijten Mr. David Weinberg Read and approved for guarantee,/s/ David WeinbergFor Skechers USA Inc.Mr. David WeinbergDirector and CFO Skechers USA Inc. 3  Exhibit 10.17(c)Addendum 3 to Agreement for the availability of space for the storage of goods and offices forthe management of this dated August 12, 2002The undersigned:Prologis Belgium II BVBA, registered with the RPR under number 0472.435.431, with its offices in Park Hill, Building A, 3rd Floor, Jan EmileMommaertslaan 18, B-1831 Diegem and hereby represented by A.D. TOL,hereafter referred to as ‘Prologis’andSkechers EDC sprl, with its registered office in 4041 Milmort, Parc Industriel Hauts-Sarts, Zone 3, avenue du Parc Industriel, registered with the RPR0478.543.758, hereby represented by Mr. David Weinberg.hereafter referred to as ‘Skechers EDC’ or as ‘Customer’together referred to as the "Parties".Whereas:(A)On August 12, 2002 Prologis and Skechers International have signed an “ Agreement for the availability of space for the storage of goods and officesfor the management of this" concerning the following real estate: Prologis Park Liege Distribution Center I with a total surface area of approximately22,458 m2 and approximately 100 car parking space located in the Industrial Park Hauts-Sarts, Milmort, Liege, Avenue Parc Industriel (hereafterreferred to as ‘the Availability Agreement DC I’);(B)On August 27, 2003 Skechers International transferred all its rights and obligations under the Availability Agreement DC I to Skechers EDC in fullaccordance with the terms and conditions thereof.(C)On May 20, 2008, pursuant to an "Addendum 2" to the Availability Agreement DC I, Prologis and Skechers agreed to align the duration of theAvailability Agreement DC I with the commencement and duration of the Availability Agreement DC II (as further described below, sub (F).(D)Early 2013, as the current 5 year lease period (expiring on March 31, 2014) was approaching its expiry date, Prologis and Skechers startednegotiations on the possible early termination of the Availability Agreement DC I by Skechers and on possible amendments to the provisions of theAvailability Agreement DC I dealing with price and price indexation.(E)The abovementioned negotiations have resulted in an agreement whereby (i) Skechers has agreed not to terminate the Availability Agreement DC I byMarch 31, 2014; whereby (ii) Skechers and Prologis have agreed to extend the Availability Agreement DC I (on the terms and conditions set outbelow) with a period of at least ten (10) years: and whereby (iii) Skechers and Prologis have agreed to amend the price and price indexationmechanism, as further set out below.(F)Skechers and Prologis Belgium Ill BVBA also entered into an Availability Agreement for the adjoining premises "Prologis Park Liege DistributionCenter II with a total surface area of approximately 22,945 m2 and approximately 118 car parking space located in the Industrial Park Hauts-Sarts,Milmort, Liege, Avenue Parc Industriel (hereinafter : "the Availability Agreement DC II"). The Availability Agreement DC II is extended and amendedunder the same conditions as recorded in this Addendum and these Agreements are indissolubly connected to each other. 1Commencement and Duration of the Agreement Article 5 of the Availability Agreement DCI end Article 1 of Addendum 2 are replaced as follows:After the lease period which will end on March 31, 2014, the Availability Agreement DC I will be extended for a period of ten (10) years until March31, 2024 (hereafter: "the Extended Period").If either party does not terminate the Availability Agreement DC I by registered mail not later than (12) months prior to the end of the ExtendedPeriod, this Availability Agreement DC I will be extended with an additional period of five (5) years. Unless a party terminates the AvailabilityAgreement DC I by registered mail not later than (12) months prior to the end of that five (5) year period, the Availability Agreement DC I will eachtime be extended with consecutive periods of five (5) years.Notice needs to be given by bailiff's writ or by registered letter. Notices hereunder shall be deemed given and effective (i)if delivered by a bailiff, upon delivery, or (ii)if sent by certified or registered mail, within five (5) days of deposit in the post office.Skechers has a one-time option to terminate the Availability Agreement DC I at the fifth (5th) anniversary of the Extended Period (i.e. on March 31,2019), subject to a notice period of 12 months in advance.Termination of the Availability Agreement DC I can only take place in combination with termination of the Availability Agreement DC II.If Skechers terminates both Availability Agreements DC II and DC I, a lump sum compensation payment (for the termination of both AvailabilityAgreements DC II and DC I combined) in the amount of € 200,000 (two hundred thousand Euro) excluding VAT will be due by Skechers to Prologis(and whereby, unless otherwise instructed by Prologis, 50% of this amount shall be paid to Prologis Belgium III BVBA and the remaining 50% toPrologis Belgium II BVBA).2Price and DepositArticle 3, paragraphs 1 until 6 included of the Availability Agreement DC I is replaced as follows:As from April 1, 2014, the annual price will be € 1,013,222 (one million thirteen thousand two hundred and twenty-two Euro zero Eurocent) +VAT: €212,776.62 (two hundred twelve thousand seven hundred seventy-six Euro and sixty-two Eurocent);hereafter referred to as the 'Price', payable per quarter and in advance in four (4) equal parts of € 253,305.50 (two hundred fifty-three thousand threehundred and five Euro and fifty Eurocent + VAT: € 53,194.16 (fifty-three thousand one hundred ninety four Euro and sixteen Eurocent) to be made bydirect bank transfer to the bank account of Prologis.The Price excluding VAT is broken down into: Warehouse: € 45.00 (forty-five Euro zero Eurocent). + VAT per sqm per annum Office: € 85.00 (eighty-five Euro zero Eurocent) + VAT per sqm per annum Mezzanine storage: € 23.00 (twenty-three Euro zero Eurocent) + VAT per sqm per annum The new Price will be applicable as from April 1, 2014. The first payment will be related to the period from April1, 2014 up and including 30 June2014.All other paragraphs of this Article 3 (starting with "The Price must be paid in Euro and is payable to Prologis Belgium II SPRL (...)") will remain inforce.2 3Price Indexation The second and third paragraph of article 4 of the Availability Agreement DC I will be replaced as follows:The Price will be annually indexed according to the following formula: New Price = Price x new Index Basic index Indexation will take place for the first time at the expiry of the first year of the Extended Period, i.e., April 1, 2015. The basic index is that of the monthprior to the commencement date of the Extended Period, i.e., the month March 2014, and the new index is that of the month prior to the anniversary ofthe Extended Period.All other paragraphs of this Article 4 of the Availability Agreement DC I will remain in force.4Market Rent review of PriceArticle 6 of the Availability Agreement DC I with regard to the market review of price will no longer be applicable.5Availability AgreementSave as hereby amended, the Availability Agreement DC I shall continue in full force and effect until the Premises have been returned in accordancewith the provisions of the Availability Agreement DC I.Agreed and signed two copies: ProLogis Belgium II BVBA, Skechers EDC sprl, Place: Place:Date: Date: /s/ A.C. TOL /s/ David Weinberg Mr. A.C. TOL Mr. David Weinberg 3Exhibit 10.17(d)Addendum 4 to VAT Lease DC 1Addendum 4 to the "Agreement for the availability of space for the storageof goods and offices for the management of this", dated August 12, 2002Between the undersigned:1.The limited liability company Prologis Belgium II BVBA, having its registered office at 2850 Boom, Scheldeweg 1, registered with the CrossroadsBank for Enterprises under the number 0472.435.431 (RLE Antwerp) and with VAT number 0472.435.431,represented by Mr. Bram Verhoeven, holder of a special proxy,Hereafter referred to as "Prologis"AND2.The limited liability company Skechers EDC Sprl, having its registered office at [4041 Milmort (Liege), avenue du Parc Industriel 3], registered withthe Crossroads Bank for Enterprises under the number 0478.543.758 (RLE Liege) and with VAT number 0478.543.758,represented by David Weinberg,Hereafter referred to as "Skechers"Prologis and Skechers hereinafter jointly referred to as "Parties" or individually as "Party";AND3.The limited liability company under the laws of the State of Delaware (USA) Skechers USA Inc., having its registered office at CA 90266 ManhattanBeach (USA), Manhattan Beach Blvd. 228, and registered under the Commision File Number 001-1429 with I.R.S. Employer Identification No. 95-437615,represented by Mr. David Weinberg,hereinafter referred to as "Guarantor",WHEREAS:A.Prologis and Skechers International entered into an agreement dated 12 August 2002 and named "Agreement for the availability of space for thestorage of goods and offices for the management of this", with respect to Prologis Park Liege Distribution Center I located in the Industrial ParkHauts-Sarts, Milmort, Liege, avenue du Parc Industriel (hereinafter referred to as the "Agreement DC I");B.Prologis, Skechers International and Skechers entered into an agreement dated 27 August 2003 and named "Agreement to transfer the Agreement forthe availability of space for the storage of goods and offices for the management thereof” by which Skechers International has transferred its rightsunder the Agreement DC I to Skechers.C.Skechers has also entered into an agreement dated 20 May 2008 and named "Agreement for the availability of space for the storage of goods andoffices for the management of this", as amended, with respect to the adjoining premises Prologis Park Liege Distribution Center II located in theIndustrial Park Hauts-Sarts, Milmort, Liege, avenue du Parc Industriel (hereinafter referred to as the "Agreement DC II").D.On the same date, i.e. 20 May 2008, Prologis and Skechers entered into an "Addendum 2" to the Agreement DC I in which they agreed to align theduration of the Agreement DC I with the commencement and duration of the Agreement DC II. Addendum 4 to VAT Lease DC 1 E.In 2013, Prologis and Skechers entered into an "Addendum 3" to the Agreement DC I in which they further agreed to extend the Agreement DC I witha period of ten years and to amend the price and price indexation mechanism. F.Skechers has now entered into an agreement named "Warehouse Agreement" with respect to the adjoining premises Prologis Park Liege DistributionCenter Ill located in the Industrial Park Hauts-Sarts, Milmort, Liege, Avenue Parc Industriel" (hereinafter referred to as the "Agreement DC III").G.By way of present Agreement, Parties now wish to extend and amend the Agreement DC I in order to, among others, align the duration of theAgreement DC I with the Agreement DC III.THE FOLLOWING HAS BEEN AGREED:Article 1 - Application of Agreement DC I - Condition Precedent1.1.Current Addendum 4 is an addendum to Agreement DC I as amended. The clauses of Agreement DC I as amended, which are not expressly waived ormodified by this Addendum 4, remain unchanged. The defined terms and concepts of the Agreement DC I as amended, which are used in thisAddendum 4 will therefore have the same meaning as in Agreement DC I as amended, except when this Addendum 4 expressly provides otherwise.1.2.The effectiveness and entry into force of the present Addendum 4 is conditional upon, cumulatively:(i)the cumulative fulfilment of the Conditions Precedent under Article 1.1. and 1.2. of the Preliminary Part of Agreement DC III; and(ii)the actual occupation of Prologis Park Liege Distribution Center III by Skechers as from the Commencement Date under Agreement DC III.Article 2 - DurationArticle 5 of Agreement DC I, as amended by Article 1 of its Addendum 2 and by Article I of its Addendum 3 is replaced as follows:"The present Agreement is extended for an additional unreducible period of 15 consecutive years following the Commencement Date under Agreement DCIII (hereinafter the "Extended Period").Following the expiry of the Extended Period, this Agreement will be automatically extended for subsequent periods of 5 years, unless one of the Partiesexpressly terminates present Agreement by registered mail or bailiff's writ served not less than (i) 12 months prior to the end of the Extended Period or (ii)12 months prior to the end of the applicable five year extension period.Notices hereunder shall be deemed given and effective (i) if delivered by a bailiff, upon delivery, or (ii) if sent by registered mail within two (2) business daysat the date of deposit in the post office. "Article 3 - PriceAs from the Commencement Date under Agreement DC III, Article 3, paragraphs 1-3, of the Agreement DC I, as amended by Article 2 of its Addendum 3 willbe replaced as follows:"3.1. The Parties agree that as from the Commencement Date under Agreement DC III, the annual base compensation consists of -€ 40.00 / m2 / year for the Warehouse, i.e. a total amount of € 794,400.00 / year; -€ 23.00 / m2 / year for the Mezzanine, i.e. a total amount of € 37,5821 / year; -€ 85.00 / m2 / year for the Office Space, i.e. a total amount of € 81,940 / year;and has been determined at an amount of € 913,922.00 per year or € 228,480.50 per quarter, always to be increased with VAT, and excluding Services asdefined in Article 9 and other expenses, and subject to yearly adjustment as described in Article 4 (hereinafter referred to as the "Price'').3.2. Skechers shall be granted a Price free period of 2 months equal to f 152,320.33 (VAT excluded), starting from the Commencement Date under AgreementDC III.. Individual charges (as the case may be increased with VAT) and taxes are not included in the Price free period and will remain payable."2Addendum 4 to VAT Lease DC 1 In addition, as from the Commencement Date under Agreement DC III, Article 3, paragraph 5, of the Agreement DC I will be replaced as follows:"If Skechers, either in part of in its entirety, is in default with the payment of the abovementioned quarterly payments of the Price on the aforementioneddates when the payments are due, overdue payment shall automatically bear interest at an interest rate determined in conformity with the Law of 2 August2002 relative to late payments in commercial transactions applicable on the due date, per annum, as from the date payments are due, and this withoutnotice of default."Article 4 - Adjustment of the PriceAs from the Commencement Date under Agreement DC III, Article 4 of the Agreement DC I, as amended by Article 3 of its Addendum 3, will be replaced withthe following text:"4.1. The Annual Price is linked to the health index as published each month in the Belgian State Gazette.4.2. The Annual Price will be adjusted automatically and as of right each year on January 1 (for the first time on January 1, 2016) and this in accordancewith the following formula: Annual Price X New indexNew Annual Price= Base indexwhereby -Annual Price = the Annual Price referred to in Article 3 of present Addendum 4; -base index = the health index of the month preceding the month during which Partiessigned present Addendum 4, i.e. the index of August 2014, i.e. 100.12 (with 2013 = 100); -new index = the health index of the month preceding the month of the adjustment of the Price (December).However, the new Annual Price will never be less than the Annual Price due during the year preceding the adjustment of the Annual Price.4.3. In the event that the calculation and the publication of the health index should be discontinued or cancelled, the Annual Price will be linked to theconsumer price index. In the event that the calculation and publication of the consumer index should be discontinued or cancelled, the Annual Price will belinked to the new index published by the Belgian government which might replace the consumer price index. In the event that no new official index ispublished and Parties fail to agree on a new method of adjusting the Annual Price, the method of adjustment will be determined by an expert appointed bythe Justice of the Peace in whose jurisdiction the Premises are located.4.4. It is explicitly agreed that Prologis shall only waive the right to adjust the Annual Price arising from this Article by a written confirmation, signed bythe latter."Article 5 - Bank Guarantee - ReleaseArticle 3, paragraph 6-7 and Article 27 of the Agreement DC I and Article 2.1 of its Addendum 1 "Agreement to transfer the rights of Skechers Internationalto Skechers" dated 27 August 2003 shall not longer apply as from the Commencement Date under Agreement DC III.As a result, on Commencement Date under Agreement DC III, the current bank guarantee provided by Skechers, as a security for the good performance of itsobligations under the Agreement DC I and the Agreement DC II, shall be released by Prologis and Prologis Belgium III Sprl.However, Article 20 of Agreement DC III shall apply.Present clause is without prejudice to the applicability and enforceability of Article 6.3Addendum 4 to VAT Lease DC 1 Article 6 - Parent Company Guarantee ("hoofdelijke borgtocht/caution solidaire")6.1. The Guarantor shall be jointly and severally liable with Skechers vis-a-vis Prologis for the good performance by Skechers of its obligations andundertakings under present Agreement.6.2. The Guarantor waives its rights under articles 2026 and 2037 of the Civil Code.6.3. The Guarantor agrees not to claim against Skechers the reimbursement of any payment made to Prologis in accordance to this Article 6 or accept anypayment or security from Skechers, whenever such reimbursement or payment to the Guarantor could jeopardize the due compliance of Skechers of itsobligations under the present Agreement.6.4. Skechers shall provide Prologis with annual financial statements of the Guarantor at its first request. If there has been a material adverse change in thefinancial condition of the Guarantor, Skechers shall procure that another company acceptable to Prologis provides a replacement guarantee on the terms asset out in this Article and Skechers shall procure that such other company concludes an amendment to this Agreement upon written demand by Prologis.6.5. The costs relating to the present guarantee, its enforcement before the courts or before a public official, and its execution shall be borne exclusively bythe Guarantor.6.6. The Guarantor declares that the entering into the parent company guarantee as described in present Article, is in accordance with its corporate purpose.6.7. Present clause is without prejudice to the applicability and enforceability of Article 20 of Agreement DC III.Article 7 - Registration of this Addendum 4The registration of this Addendum 4 shall be done by Skechers.All costs and duties which may arise from entering to this Addendum, the registration duties, the stamp duties, possible fines in case of late filing or non-filing with the Registrar's Office, will be at the charge of Skechers. As present Addendum 4 is an addendum to an agreement by which premises are put at thedisposal of Skechers for activities as described in article 18, § 1, second section, 9° of the Belgian VAT Code, it will be registered at the fixed registrationduty.** *Done in , on 17/10/2014 2014, in four original counterparts, each Party and the Guarantor acknowledging receipt of a fully executedoriginal copy, and one remaining counterpart being intended for the registration office.Prologis /s/ Bram VerhoevenName: Bram VerhoevenCapacity: holder of a special proxySkechers /s/ David WeinbergName: Mr. David WeinbergCapacity: DirectorGuarantor /s/ David WeinbergName: Mr. David WeinbergCapacity: Director 4Exhibit 10.18(a)Execution versionADDENDUM 1 TO AGREEMENT FOR THE AVAILABILITY OFSPACE FOR THE STORAGE OF GOODS AND OFFICES FOR THEMANAGEMENT OF THIS DATED MAY 20. 2008The undersigned:ProLogis Belgium III BVBA, registered with the RPR under number 0472.435.629, with its offices in Park Hill, Building A, 3rd Floor,Jan Emiel Mommaertslaan 18, B-1831 Diegem and hereby represented by Mr. Gerrit Jan Meerkerk,hereinafter referred to as ‘ProLogis’,andSkechers EDC sprl, with its registered office in 4041 Milmort, Parc Industriel Hauts-Sarts, Zone 3, avenue du Parc Industriel, registered with the RPR0478.543.758, hereby represented by Mr. David Weinberg;hereafter referred to as ‘Skechers EDC’ or as ‘CUSTOMER’,AFTER HAVING CONSIDERED THE FOLLOWING:1. On May 20, 2008 Prologis and Skechers EDC have signed an “Agreement for the availability of space for the storage of goods and offices for themanagement of this” concerning the following real estate: Prologis Park Liege Distribution Center II (the “Availability Agreement DC II”).2. Prologis has carried out some additional investments with respect to the warehouse space of the Premises which justifies a slight increase in the Pricethereof.3. Parties wish to confirm an earlier Commencement Date as provided for in the Availability Agreement DC II.4. The terms with a capital will have the same meaning as set forth in the Availability Agreement DC II, unless expressly set forth otherwise herein.HAVE AGREED THE FOLLOWING:1Price and DepositArticle 3 of the Availability Agreement DC II is replaced as follows :The Agreement for the availability of the Premises is entered into on the basis of an annual price of one million nineteen thousand one hundred andthirty-nine Euro and seventy-three Eurocent, i.e. €1,019,139.73, (+VAT : two hundred and fourteen thousand and nineteen Euro and thirty-fourEurocent i.e. € 214,019.34), hereinafter referred to as the ‘Price’, payable per quarter and in advance in four (4) equal parts of two hundred and fifty-four thousand seven hundred and eighty-four Euro ninety-three Eurocent, i.e. € 254,784.93, (+VAT : fifty-three thousand five hundred and four Euroeighty-four Eurocent i.e. € 53,504.84), to be made by direct bank transfer to the bank account of ProLogis.As stipulated in Article 5, this Agreement is to take effect on March 11, 2009 for the Warehouse and March 25, 2009 for the Property. The first periodover which payment is due will therefore be the period from April 1, 2009 up to and including June 30, 2009, which is due as from April 1, 2009.The Price must be paid in Euro and is payable to ProLogis Belgium III sprl, account number: 720540646989 (ABN Amro Bank in Brussels).If Skechers, either in part or in its entirety, is in default with the payment of the above-mentioned quarterly payments of the Price on theaforementioned dates when the payments are due, Skechers must pay ProLogis, by operation of law (“ipso iure”) and without notice of default, theinterest due over that sum amounting to twelve percent (12%) per annum, whereby any month that has commenced must be regarded as completed.When the Price in accordance with Article 4 is modified, the amount of the bank guarantee, as referred to in Article 25, will have to be adjusted in linewith the annual adjustment of the Price payments every year. This bank guarantee may only be released six (6) months after the termination of theAgreement, provided that Skechers have been released properly of the obligations resulting from this Agreement. Under no circumstance, shall thebank guarantee be used by Skechers to pay the Execution version Price. However, in the event of breach of Agreement on the part of Skechers, ProLogis may use the aforementioned deposit to compensate forSkechers’ overdue payments and any other omissions in the performance of its obligations by Skechers.2Commencement and Duration of the Availability Agreement DC IIArticle 5 of the Availability Agreement DC II is replaced as follows :The availability of the Premises commences on 11 March 2009 for the Warehouse and 25 March 2009 for the Property. 11 March 2009 is referred to asthe ‘Commencement Date’, unless parties confirm otherwise in writing, for a duration of twenty (20) consecutive years and twenty (20) days as ofCommencement Date and ends by operation of law on March 31, 2029.Skechers is only entitled to terminate the Agreement as at (i) March 31, 2014, (ii) March 31, 2019, and (iii) March 31, 2024, subject to a prior noticeperiod of twelve (12) months, without any compensation to Prologis nor VAT adjustment to be paid, except as set forth in article 2 of this Agreement.Notice needs to be given in such a case twelve (12) months prior to the dates mentioned in the previous paragraph by bailliff’s writ or by registeredletter. Notices hereunder shall be deemed given and effective (i) if delivered by a bailiff, upon delivery, or (ii) if sent by certified or registered mail,within five (5) days of deposit in the post office.This Agreement will however in any case end by operation of law on March 31, 2029. After this date, this Agreement can not be tacitly renewed.3Various clauses3.1The other terms and conditions of the Availability Agreement DC II remain fully applicable between parties with respect to the Premises. It beingunderstood that where reference is made in the text of the Availability Agreement DC II to “April 1, 2009”, this needs to be replaced by a reference toMarch 11, 2009.No amendment or modification of this Addendum shall take effect unless it is in writing and is executed by duly authorized representatives of theparties.3.2If one or more of the provisions of this Addendum is declared to be invalid, illegal or unenforceable in any respect under the applicable law, thevalidity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected. In the case whereby such invalid,illegal or unenforceable clause affects the entire nature of this Addendum, each of the parties shall use its best efforts to immediately and in good faithnegotiate a legally valid replacement provision.4Applicable law and competent courtsThis Addendum shall be governed by and construed in accordance with Belgian law. In the event of any dispute relating to the conclusion, validity, theimplementation or the interpretation of this Addendum, the courts of Liege will have sole and exclusive jurisdiction.This Agreement was made out in four (4) copies in Liege, 10/3/ , 2009. Each party acknowledges to have received its original copy. /s/ Gerrit Jan Meerkerk /s/ David WeinbergGerrit Jan Meerkerk ProLogis Belgium III Skechers EDC - 2/2 -Exhibit 10.18(b)AMENDMENT 2 (“AMENDMENT 2”) TO THE AGREEMENT FOR THEAVAILABILITY OF SPACE FOR THE STORAGE OF GOODS ANDOFFICES FOR THE MANAGEMENT OF THIS DATED MAY 20,2008The undersigned:(1)Prologis Belgium III BVBA, registered with the RPR under number 0472.435.629, with its offices in Park Hill, Building A, 3rd Floor, Jan EmielMommaertslaan 18, B-1831 Diegem and hereby represented by Mr. Gerrit Jan Meerkerk, hereinafter referred to as ‘Prologis’, and(2)Skechers EDC Sprl, with its registered office in 4041 Milmort, Parc Industriel Hauts-Sarts, Zone 3, avenue du Parc Industriel, registered with the RPR0478.543.758, hereby represented by Mr. David Weinberg, hereafter referred to as ‘Skechers’,AFTER HAVING CONSIDERED THE FOLLOWING:(A)On May 20, 2008 Prologis and Skechers signed an “Agreement for the availability of space for the storage of goods and offices for the management ofthis” concerning the following real estate: Prologis Park Liege Distribution Center II, as amended by Addendum 1 dated March 10. 200*9 (the“Availability Agreement DC II”).(B)Prologis has carried out some additional investments with respect to the warehouse space of the Premises as referred to in Addendum 1 and somefurther investments.(C)By entering into this Amendment 2 the parties wish to record all items that were added to the Premises in addition to the specifications in theAvailability Agreement DC II and to indicate which of the parties is the owner of the relevant items and is responsible for the maintenance andreplacement thereof.(D)The capitalised terms shall have the same meaning as in the Availability Agreement DC II, unless expressly defined herein.HAVE AGREED THE FOLLOWING:1List of Additional Items1.1The parties hereby agree that the List of Additional Items attached to this Agreement as Appendix 1 (the “List”) contains all items added to thePremises as of the date of this Amendment 2. The parties agree that each party is the owner of, and is responsible for the maintenance and replacementof, the items as indicated in the List.1.2The List shall form an integral part of the Availability Agreement DC II .2Various clauses2.1Availability Agreement DC II remains in full force and effect save as hereby amended.2.2No amendment or modification of this Amendment 2 shall take effect unless it is in writing and is executed by duly authorized representatives of theparties.2.3If one or more of the provisions of this Amendment 2 is declared to be invalid, illegal or unenforceable in any respect under the applicable law, thevalidity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected. In the case whereby such invalid,illegal or unenforceable clause affects the entire nature of this Amendment 2, each of the parties shall use its best efforts to immediately and in goodfaith negotiate a legally valid replacement provision.2.4This Amendment 2 shall be governed by and construed in accordance with Belgian law. In the event of any dispute relating to the conclusion,validity, the implementation or the interpretation of this Amendment 2, the courts of Liege will have sole and exclusive jurisdiction.- 1/3 -This Amendment 2 is signed in four (4) copies in Liege, (date) 22 December, 2009. Each part acknowledges to have received its original copy. /s/ Gerrit Jan Meerkerk /s/ David Weinberg Gerrit Jan Meerkerk David WeinbergProLogis Belgium III BVBA Skechers EDC Sprl - 2/3 -Appendix 1List of Additional Items - 3/3 - Skechers DC#2 Milmort, ADDITIONAL WORKS TI INVESTMENT OWNED BY RESPONSIBLE MAINTENANCE * RESPONSIBLE RENEWAL ** Items additional to the Contract Specification Cost Skechers direct Cost Prologis SKECHERS PROLOGIS SKECHERS PROLOGIS SKECHERS PROLOGIS 5.2 Changing 2 fire doors Rf 1h, 4x6 m €22,050.00 addendum 1 x addendum 1 5.3 Two extra escape doors €7,350.00 addendum 1 x addendum 1 5.4 Barrier next to the parking road € 18,201.92 addendum 1 x addendum 1 5.5 Adaptions lighting capacity (200 Lux between racks) €179,295.84 addendum 1 x addendum 1 5.7 Motion detection in racking lanes €24,363.09 addendum 1 x addendum 1 5.8a Water supplies €2,076.90 addendum 1 x addendum 1 5.8b Slophoppers €7,703.69 addendum 1 x addendum 1 5.9 Adaptions acces control Intercom €5,826.12 addendum 1 x addendum 1 510 High voltage €124,676.12 addendum 1 x addendum 1 5.11 Electrical extra existing DC new DC ask by Skechers €105,515.56 addendum 1 x addendum 1 5.12a IT room on mezzanine €23,665.15 x x x 5.12b IT room on mezzanine floor cabling €108,888.71 x x x 5.13 Offer for radio-system €12,086.54 x x x 5.15 Extra porte Hall1 (electrical) €8,821.84 x x x 5.16 24 extra connection Telefoon atenne computer system €1,653.60 x x x 5.17 more high of IT-room €8,880.62 x x x 5.19 addaption of hight double doors €475.00 x x x 5.20 reeling removebal €5,889.00 x x x 5.21 addapion of the service road by sprinkler tank €5,530.00 x x x 5.22 barrier between parking and entrance road €5,135.00 €5,135.00 x x x 5.23 extra water and sewage in IT Room €1,577.49 x x x 5.24 bicyclesheet €4,240.36 x x x 5.26 painting €675.44 x x x 5.27 woks high tension€1,775.00 €1,775.00 x x x 5.28 work on music installation €2,234.60 x x x 5.29 greenery €3,940.00 €3,940.00 x x x 6.1 Exit doors safety as 103 en 106 €11,413.71 x x x 6.4 Offices fire detectors €49,524.93 x x x 6.5 Heating in offices €43,190.95 x x x 6.6 Thermostate protection €1,537.60 x x 6.7 Modification sanitary area’s €9,392.17 x x x 6.8 Electrical “loze’ pipe €5,789.41 x x x 6.11 IT local (outside walls) €25,889.94 x x x 6.13 Sewer pit (sterfput) €987.48 x x x 6.14 Change connections fire brigade €11,439.46 x x x 6.15 extra lighting €6,779.59 x x x 6.16 adaptions control room demanded by fire department €4,901.00 x x x 6.17 parking buffers 50% sketcher, 50% Prologis €2,100.00 €2,100.00 x x x 6.19 tiles in sanitary floor on the mezzanine €3,153.13 x x x * Maintenance as indicate in the lease agreement and the general terms and conditions. ** Renewal as indicated in the lease agreement and the general terms and conditions. Exhibit 10.18(c)Addendum 3 to Agreement for the availability of apace for the storage of goods and offices forthe management of this dated May 20, 2008The undersigned:Prologis Belgium Ill BVBA, registered with the RPR under number 0472.435.629, with its offices in Park Hill, Building A, 3rd Floor,Jan Emile Mommaertslaan 18, B-1831 Diegem and hereby represented by A.C. TOL,hereafter referred to as ‘Prologis’andSkechers EDC sprl, with its registered office in 4041 Milmort, Parc Industriel Hauts-Sarts, Zone 3, avenue du Parc Industriel, registered with the RPR0478.543.758, hereby represented by Mr. David Weinberg.hereafter referred to as ‘Skechers EDC’ or as ‘Customer’together referred to as the "Parties".Whereas:(A)On May 20, 2008 Prologis and Skechers signed an "Agreement for the availability of space for the storage of goods and offices for the management ofthis" concerning the following real estate: Prologis Park Liege Distribution Center II with a total surface area of approximately 22,945 m2 andapproximately 118 car parking space located in the Industrial Park Hauts Sarts, Milmort, Liege, Avenue Pare Industrial (hereafter referred to as 'theAvailability Agreement DCII ');(B)On March 10, 2009, an "Addendum 1" was signed to confirm an ear1ier commencement date per March 11, 2009 and to adjust the annual price to bepaid by Skechers to Prologis under the Availability Agreement DC II.(C)On December 22, 2009, an "Amendment 2" was signed to record the items that were added to the premises in addition to the specification of theAvailability Agreement DC II and to indicate which of the parties is owner of the relevant items and who is responsible for the maintenance andreplacement thereof.(D)Early 2013, as the current 5 year lease period (expiring on March 31, 2014) was approaching its expiry date, Prologis and Skechers startednegotiations on the possible early termination of the Availability Agreement DC II by Skechers and on possible amendments to the provisions of theAvailability Agreement DC II dealing with price and price indexation.(E)The abovementioned negotiations have resulted in an agreement whereby (i) Skechers has agreed not to terminate the Availability Agreement DC IIby March 31, 2014; whereby (ii) Skechers and Prologis have agreed to extend the Availability Agreement DC II (on the terms and conditions set outbelow) with a period of at least ten (10) years; and whereby (iii) Skechers and Prologis have agreed to amend the price and price indexationmechanism, as further set out below.(F)Skechers and Prologis also entered into an Availability Agreement for the adjoining premises "Prologis Park Liege Distribution Center I with a totalsurface area of approximately 22,458 m2 and approximately 100 car parking space located in the Industrial Park Hauts-Sarts, Milmort, Liege, AvenueParc Industriel" (hereinafter : "the Availability Agreement DC I"). The Availability Agreement DC I is extended and amended under the sameconditions as recorded in this Addendum and these Agreements are indissolubly connected to each other. 1Commencement and Duration of the Agreement Article 5 of the Availability Agreement DC II and Article 2 of Addendum 1 are replaced as follows:After the lease period which will end on March 31, 2014, the Availability Agreement DC II will be extended for a period of ten (10) years until March31, 2024 (hereinafter : "the Extended Period")..If either party does not terminate the Availability Agreement DC II by registered mail not later than (12) months prior to the end of the ExtendedPeriod, this Availability Agreement DC II will be extended with an additional period of five (5) years. Unless a party terminates the AvailabilityAgreement DC II by registered mail not later than (12) months prior to the end of that five (5) year period, the Availability Agreement DC II will eachtime be extended with consecutive periods of five (5) years.Notice needs to be given by bailiff's writ or by registered letter. Notices hereunder shall be deemed given and effective (i)if delivered by a bailiff, upon delivery, or (ii)if sent by certified or registered mail, within five (5) days of deposit in the post office.Skechers has a one-time option to terminate the Availability Agreement DC II at the fifth (5th) anniversary of the Extended Period (i.e., on March 31,2019), subject to a notice period of 12 months in advance..Termination of the Availability Agreement DC II can only take place in combination with termination of the Availability Agreement DC I.If Skechers terminates both Availability Agreements DC II and DC I, a lump sum compensation payment (for the termination of both AvailabilityAgreements DC II and DC I combined) in the amount of € 200,000 (two hundred thousand Euro) excluding VAT will be due by Skechers to Prologis(and whereby, unless otherwise instructed by Prologis, 50% of this amount shall be paid to Prologis Belgium III BVBA and the remaining 50% toPrologis Belgium II BVBA).2Price and DepositArticle 3 of Availability Agreement DC II and Article 1, paragraphs 1 and 2 of Addendum 1 are replaced as follows :As from April 1. 2014, the annual price will be € 1,017,485 (one million seventeen thousand four hundred and eighty-five Euro zero Eurocent) +VAT:€ 213,671.85 (two hundred thirteen thousand six hundred seventy-one Euro and eighty-five Eurocent), hereafter referred to as the 'Price', payable perquarter and in advance in four (4) equal parts of € 254,371.25 (two hundred fifty-four thousand three hundred seventy-one Euro and twenty-fiveEurocent + VAT: € 53,417.96 (fifty-three thousand four hundred seventeen Euro and ninety-six Eurocent) to be made by direct bank transfer to thebank account of Prologis.The Price excluding VAT is broken down into: Warehouse: € 45.00 (forty-five Euro zero Eurocent). + VAT per sqm per annumOffice: € 85.00 (eighty-five Euro zero Eurocent) + VAT per sqm per annumMezzanine storage: € 23.00 (twenty-three Euro zero Eurocent) + VAT per sqm per annumThe new Price will be applicable as from April 1, 2014. The first payment will be related to the period from April 1, 2014 up and including 30 June2014.All other paragraphs of Article 1 of Addendum 1 will remain in force.3Price lndexationThe second and third paragraph of article 4 of the Availability Agreement DC II will be replaced as follows:The Price will be annually indexed according to the following formula: New Price = Price x new index Basic indexIndexation will take place for the first time at the expiry of the first year of the Extended Period i.e. April 1, 2015. The basic index is that of the monthprior to the commencement date of the Extended Period, i.e. the month March 2014, and the new Index is that of the month prior to the anniversary ofthe Extended Period.2All other paragraphs of this article 4 of the Availability Agreement DC II will remain in force.Availability AgreementSave as hereby amended, the Availability Agreement DC II shall continue in full force and effect until the Premises have been returned in accordancewith the provisions of the Availability Agreement DC II.Agreed and signed in two copies: ProLogis Belgium II BVBA, Skechers EDC sprl, Place: Place:Date: Date: /s/ A. C. TOL /s/ David Weinberg Mr. A. C. TOL Mr. David Weinberg 3Exhibit 10.18(d)Addendum 4 to VAT Lease DC 2Addendum 4 to the "Agreement for the availability of space for the storageof goods and offices for the management of this", dated May 20, 2008Between the undersigned:1.The limited liability company Prologis Belgium III BVBA, having its registered office at 2850 Boom, Scheldeweg I, registered with the CrossroadsBank for Enterprises under the number 0472.435.629 (RLE Antwerp) and with VAT number 0472.435.629,represented by Mr. Bram Verhoeven, holder of a special proxy,Hereafter referred to as "Prologis"AND2.The limited liability company Skechers EDC Sprl, having its registered office at [4041 Milmort (Liege), avenue du Pare Industriel 3], registered withthe Crossroads Bank for Enterprises under the number 0478.543.758 (RLE Liege) and with VAT number 0478.543.758,represented by Mr. David Weinberg,Hereafter referred to as "Skechers"Prologis and Skechers hereinafter jointly referred to as "Parties" or individually as "Party";AND3.The limited liability company under the laws of the State of Delaware (USA) Skechers USA Inc., having its registered office at CA 90266 ManhattanBeach (USA), Manhattan Beach Blvd. 228, and registered under the Commision File Number 001-1429 with I.R.S. Employer Identification No. 95-437615,represented by Mr. David Weinberg,hereinafter referred to as "Guarantor",WHEREAS:A.Prologis and Skechers entered into an agreement dated 20 May 2008 and named "Agreement for the availability of space for the storage of goods andoffices for the management of this", with respect to Prologis Park Liege Distribution Center II located in the Industrial Park Hauts-Sarts, Milmort,Liege, avenue du Pare Industriel (hereinafter referred to as the "Agreement DC II");B.Prologis and Skechers entered into an "Addendum I" to the Agreement DC II dated 10 March 2009 in which they agreed to confirm an earlierCommencement Date per March 11, 2009 and to adjust the annual price to be paid.C.Prologis and Skechers entered into an "Amendment 2" to the Agreement DC II dated 22 December 2009 in which they agreed to record the itemsadded to the Premises and to indicate who is owner of the relevant items and who is responsible for the maintenance and replacement thereof.D.In 2013, Prologis and Skechers entered into an "Addendum 3" to the Agreement DC II in which they agreed to extend the Agreement DC II with aperiod of ten years and to amend the price and price indexation mechanism. Addendum 4 to VAT Lease DC 2 E.Previously, Skechers has also entered into an agreement dated 12 August 2002 and named "Agreement for the availability of space for the storage ofgoods and offices for the management of this", as amended, with respect to the adjoining premises Prologis Park Liege Distribution Center I located inthe Industrial Park Hauts-Sarts, Milmort, Liege, avenue du Pare lndustriel (hereinafter referred to as the "Agreement DC I"). F.Skechers has now entered into an agreement named "Warehouse Agreement" with respect to the adjoining premises Prologis Park Liege DistributionCenter III located in the Industrial Park Hauts-Sarts, Milmort, Liege, Avenue Pare lndustriel" (hereinafter referred to as the "Agreement DC III").G.By way of present Agreement, Parties wish to extend and amend the Agreement DC II in order to, among others, align the duration of the AgreementDC II with the Agreement DC III.THE FOLLOWING HAS BEEN AGREED:Article 1 - Application of Agreement DC II - Condition Precedent1.1.Current Addendum 4 is an addendum to Agreement DC II as amended. The clauses of Agreement DC II as amended, which are not expressly waived ormodified by this Addendum 4, remain unchanged. The defined terms and concepts of the Agreement DC II as amended, which are used in thisAddendum 4 will therefore have the same meaning as in Agreement DC II as amended, except when this Addendum 4 expressly provides otherwise.1.2.The effectiveness and entry into force of the present Addendum 4 is conditional upon, cumulatively:(i)the cumulative fulfilment of the Conditions Precedent under Article 1.1. and 1.2. of the Preliminary Part of Agreement DC Ill; and(ii)the actual occupation of Prologis Park Liege Distribution Center III by Skechers as from the Commencement Date under Agreement DC Ill.Article 2 - DurationArticle 5 of Agreement DC II, as amended by Article 2 of its Addendum I and Article I of its Addendum 3 is replaced as follows:"The present Agreement is extended for an additional unreducible period of 15 consecutive years following the Commencement Date under Agreement DCIII (hereinafter the "Extended Period'').Following the expiry of the Extended Period, this Agreement will be automatically extended for subsequent periods of 5 years, unless one of the Partiesexpressly terminates present Agreement by registered mail or bailiff's writ served not less than (i) 12 months prior to the end of the Extended Period or (ii)12 months prior to the end of the applicable five year extension period.Notices hereunder shall be deemed given and effective (i) if delivered by a bailiff, upon delivery, or (it) ((sent by registered mail within two (2) business daysat the date of deposit in the post office."Article 3 - PriceAs from the Commencement Date under Agreement DC III, Article 3, paragraphs 1-5, of the Agreement DC II, as amended by Article 1, paragraphs 1-5, of itsAddendum I will be replaced as follows:"3.1. The Parties agree that as from the Commencement Date under Agreement DC III the annual base compensation consists of -€ 40.00 / m2 / year for the Warehouse, i.e. a total amount of € 851,000.00 / year; -€ 23.00 / m2 / year for the Mezzanine, i.e. a total amount of € 46,598.00 / year; -€ 85.00 / m2 / year for the Office Space, i.e. a total amount of € 29,750.00 / year;and has been determined at an amount of € 911,110.00 per year or € 227,777.50 per quarter, always to be increased with VAT, and excluding Services asdefined in Article 9 and other expenses, and subject to yearly adjustment as described in Article 4 (hereinafter referred to as the "Price'').2Addendum 4 to VAT Lease DC 2 3.2 Skechers shall be granted a Price free period of 2 months equal to f 151,851.66 (VAT excluded), starting from the Commencement Date under AgreementDC Ill. Individual charges (as the case may be increased with VAT) and taxes are not included in the Price free period and will remain payable."In addition, as from the Commencement Date under Agreement DC Ill, Article 3, paragraph 5, of the Agreement DC II, as amended by Article I, paragraph 4, ofits Addendum I, will be replaced as follows:''If Skechers, either in part of' in its entirety, is in default with the payment of the abovementioned quarterly payments of the Price on the aforementioneddates when the payments are due, overdue payment shall automatically bear interest at an interest rate determined in conformity with the Law of' 2 August2002 relative to late payments in commercial transactions applicable on the due date, per annum, as from the date payments are due, and this withoutnotice of default."Article 4 - Adjustment of the PriceAs from the Commencement Date under Agreement DC Ill, Article 4 of the Agreement DC II, as amended by Article 3 of its Addendum 3, will be replacedwith the following text:"4.1. The Annual Price is linked to the health index as published each month in the Belgian State Gazette.4.2. The Annual Price will be adjusted automatically and as of right each year on January 1 (for the first time on January 1, 2016) and this in accordancewith the following formula: Annual Price X New indexNew Annual Price= Base indexwhereby -Annual Price = the Annual Price referred to in Article 3 of present Addendum 4; -base index = the health index of the month preceding the month during which Parties signed present Addendum 4, i.e. the index of August2014, i.e. 100.12 (with 2013 = 100); -new index = the health index of the month preceding the month of the adjustment of the Price (December).However, the new Annual Price will never be less than the Annual Price due during the year preceding the adjustment of the Annual Price.4.3. In the event that the calculation and the publication of the health index should be discontinued or cancelled, the Annual Price will be linked to theconsumer price index. In the event that the calculation and publication of the consumer index should be discontinued or cancelled, the Annual Price will belinked to the new index published by the Belgian government which might replace the consumer price index. In the event that no new official index ispublished and Parties fail to agree on a new method of adjusting the Annual Price, the method of adjustment will be determined by an expert appointed bythe Justice of the Peace in whose jurisdiction the Premises are located.4.4. It is explicitly agreed that Prologis shall only waive the right to adjust the Annual Price arising from this Article by a written confirmation, signed bythe latter."Article 5 - Bank Guarantee - ReleaseArticle 3, paragraph 6 and Article 25 of the Agreement DC II, as amended by Article 1, paragraph 6 of its Addendum 1, shall not longer apply as from theCommencement Date under Agreement DC III.As a result, on Commencement Date under Agreement DC III, the current bank guarantee provided by Skechers, as a security for the good performance of itsobligations under the Agreement DC I and the Agreement DC II, shall be released by Prologis Belgium II Sprl and Prologis.However, Article 20 of Agreement DC III shall apply.3Addendum 4 to VAT Lease DC 2 Present clause is without prejudice to the applicability and enforceability of Article 6.Article 6 - Parent Company Guarantee ("hoofdelijke borgtocht/caution solidaire")6.1. The Guarantor shall be jointly and severally liable with Skechers vis-a-vis Prologis for the good performance by Skechers of its obligations andundertakings under present Agreement.6.2. The Guarantor waives its rights under articles 2026 and 2037 of the Civil Code.6.3. The Guarantor agrees not to claim against Skechers the reimbursement of any payment made to Prologis in accordance to this Article 6 or accept anypayment or security from Skechers, whenever such reimbursement or payment to the Guarantor could jeopardize the due compliance of Skechers of itsobligations under the present Agreement.6.4. Skechers shall provide Prologis with annual financial statements of the Guarantor at its first request. If there has been a material adverse change in thefinancial condition of the Guarantor, Skechers shall procure that another company acceptable to Prologis provides a replacement guarantee on the terms asset out in this Article and Skechers shall procure that such other company concludes an amendment to this Agreement upon written demand by Prologis.6.5. The costs relating to the present guarantee, its enforcement before the courts or before a public official, and its execution shall be borne exclusively bythe Guarantor.6.6. The Guarantor declares that the entering into the parent company guarantee as described in present Article, is in accordance with its corporate purpose.6.7. Present clause is without prejudice to the applicability and enforceability of Article 20 of Agreement DC III.Article 7 - Registration of this Addendum 4The registration of this Addendum 4 shall be done by Skechers.All costs and duties which may arise from entering to this Addendum, the registration duties, the stamp duties, possible fines in case of late filing or non-filing with the Registrar's Office, will be at the charge of Skechers. As present Addendum 4 is an addendum to an agreement by which premises are put at thedisposal of Skechers for activities as described in article 18, § 1, second section, 9° of the Belgian VAT Code, it will be registered at the fixed registrationduty.** *Done in ,on 17/10/2014 2014, in four original counterparts, each Party and the Guarantor acknowledging receipt of a fullyexecuted original copy, and one remaining counterpart being intended for the registration office.Prologis /s/ Bram VerhoevenName: Bram VerhoevenCapacity: holder of a special proxySkechers /s/ David WeinbergName: Mr. David WeinbergCapacity: Director4Addendum 4 to VAT Lease DC 2 Guarantor /s/ David WeinbergName: Mr. David WeinbergCapacity: Director 5Exhibit 21.1SUBSIDIARIES OF THE REGISTRANT Name of SubsidiaryState/Country of Incorporation/Organization Skechers U.S.A., Inc. IIDelawareSkechers By Mail, Inc.DelawareSavva’s Café, Inc.DelawareDuncan Investments, LLCCaliforniaHF Logistics-SKX, LLCDelawareHF Logistics-SKX T1, LLCDelawareHF Logistics-SKX T2, LLCDelawareSepulveda Blvd. Properties, LLCCaliforniaSepulveda Design Center, LLCCaliforniaBrandBlack, LLCCaliforniaSkechers Collection, LLCCaliforniaSkechers Sport, LLCCaliforniaSkechers R.B., LLCDelawareSKX Illinois, LLCIllinoisSkechers EDC SPRLBelgiumSkechers BH d.o.o.Bosnia & HerzegovinaSkechers Do Brasil Calcados LTDABrazilSkechers USA Canada Inc.CanadaComercializadora Skechers Chile LimitadaChileSkechers China Business TrustChinaSkechers Footwear (Dongguan) Co., Ltd.ChinaSkechers Guangzhou Co., Ltd.ChinaSkechers Trading (Shanghai) Co. Ltd.ChinaSkechers E-Commerce Co., Ltd.ChinaSkechers China Hengqin Co., Ltd.ChinaLeadtime Co., Ltd.ChinaSkechers Colombia, S.A.S.ColombiaSepulveda Footwear Costa Rica, S.R.L.Costa RicaSkechers USA Ltd.EnglandSkechers USA France SASFranceSkechers USA Deutschland GmbHGermanySkechers China LimitedHong KongSkechers Hong Kong LimitedHong KongSkechers Southeast Asia LimitedHong KongSkechers CEE Kft.HungarySkechers South Asia Private LimitedIndiaSkechers Retail India Private LimitedIndiaSkechers USA Italia S.r.lItalySkechers Japan GKJapanSkechers Holdings Jersey LimitedJerseySkechers InternationalJerseySkechers International IIJerseySkechers Macau LimitedMacauSkechers Malaysia Sdn. Bhd.MalaysiaSkechers Holdings MauritiusMauritiusSkechers USA Mauritius 10MauritiusSkechers USA Mauritius 90MauritiusSkechers USA Benelux B.VNetherlandsSkechers Latin America, LLCPanamaSkechers Panama, LLCPanamaSkechers Peru, S.R.L.PeruSkechers USA Portugal Unipessoal LimitadaPortugalSkechers USA Romania S.R.L.RomaniaSkechers Singapore Pte. LimitedSingaporeSkechers USA Iberia, S.L.SpainSkechers S.a.r.l.SwitzerlandSkechers (Thailand) LimitedThailandSkechers Vietnam Co. Ltd.Vietnam Exhibit 23.1 Tel: 310-557-0300Fax: 310-557-1777www.bdo.com1888 Century Park East, 4th FloorLos Angeles, CA 90067Consent of Independent Registered Public Accounting FirmSkechers U.S.A., Inc.Manhattan Beach, CAWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 No. (333-147095) of Skechers U.S.A., Inc. and subsidiaries ofour reports dated February 26, 2016, relating to the consolidated financial statements and schedule, and the effectiveness of internal control over financialreporting of Skechers U.S.A., Inc. and subsidiaries, which appears in this Form 10-K./s/ BDO USA, LLP Los Angeles, CAFebruary 26, 2016Exhibit 31.1CERTIFICATIONI, Robert Greenberg, certify that:1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2015 of Skechers U.S.A., Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: February 26, 2016 /s/ Robert Greenberg Robert Greenberg Chief Executive Officer Exhibit 31.2CERTIFICATIONI, David Weinberg, certify that:1. I have reviewed this annual report on Form 10-K for the year ended December 31, 2015 of Skechers U.S.A., Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date February 26, 2016 /s/ David Weinberg David Weinberg Chief Financial Officer Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the annual report of Skechers U.S.A, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2015 as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the date indicated below, hereby certifies,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. /s/ Robert Greenberg Robert GreenbergChief Executive Officer(Principal Executive Officer)February 26, 2016 /s/ David Weinberg David WeinbergChief Financial Officer(Principal Financial and Accounting Officer)February 26, 2016A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN PROVIDED TO THE COMPANY AND WILL BERETAINED BY THE COMPANY AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.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 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 2015 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 2015 Annual Report on Form 10-K. In addition, Skechers submitted to the NYSE on June 19, 2015, 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). 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 Rick Higgins Senior Vice President, Production, Skechers Performance Clay Irving Senior Vice President, Information Technology Kathy Garber Kartalis Senior Vice President, Global Product Peter Mow Senior Vice President, Real Estate and Construction David Raysse Senior Vice President, Design, Skechers Performance George Zelinsky President, Retail 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. These forward-looking statements include, without limitation, our future domestic and international growth, financial results and operations including expected net sales and earnings, our development of new products, future demand for our products, our planned domestic and international expansion and opening of new stores, completion of the expansion and upgrade of our European distribution center, and our advertising and marketing initiatives. 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 2015 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.  The Grand Canal Shoppes at the Venetian, Las Vegas (front and back cover) 

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