Skechers USA, Inc. reported fiscal year 2002 net sales slipped 1.8% to $943.6 million, compared to net sales of $960.4 million in 2001. Net earnings for 2002 were $47.0 million versus net earnings of $47.3 million in 2001. For the year ended 2002, diluted earnings per share reached $1.20 on 40, 854,000 diluted weighted average shares outstanding versus diluted earnings per share of $1.24 on 38,059,000 diluted weighted average shares outstanding in 2001.
Net sales for the fourth quarter of 2002 were $180.8 million compared to $214.1 million in the fourth quarter of 2001. Net loss for the quarter was $8.6 million versus net earnings of $2.0 million in the comparable period of 2001. Net loss per share in the fourth quarter was $0.23 on 37,568,000 weighted average shares outstanding compared to earnings per share of $0.05 on 37,476,000 diluted weighted average shares outstanding in the fourth quarter of 2001.
Gross profit in 2002 was $386.7 million, or 41.0 percent of sales, compared to $406.2 million, or 42.3 percent of sales in 2001. Gross profit for the fourth quarter of 2002 was $69.6 million compared to $85.1 million in the fourth quarter of 2001. Gross margin in the fourth quarter 2002 was 38.5 percent versus 39.7 percent in the fourth quarter of 2001.
David Weinberg, the Company’s Chief Financial Officer, stated, “We are pleased with our ability to maintain our share of the global footwear market and deliver solid earnings despite the difficult economic environment, a West Coast port strike, and a reduction in revenue from eliminating our mail order division. Our ability to maintain volume and profits for two consecutive and challenging years is a testament to our diversified business model, characterized by 11 product lines, a strong investment in advertising, and our wholesale, retail and international channels of distribution.
“In addition to our consistent sales and operating performance in 2002, we focused on strengthening our balance sheet and began 2003 in a solid financial position with inventory that is current and on plan. At year-end, cash balances rose substantially to $124.8 million, inventory decreased 6.1 percent to $148 million and trade receivables decreased 19 percent to $97.4 million when compared to December 31, 2001. We believe that our strong balance sheet positions us well to capitalize on growth opportunities in the future.
“We also made strategic progress on key international and domestic fronts in 2002. We moved our international plan forward by establishing eight European subsidiaries, taking over wholesale distribution in five European territories and opening our own distribution warehouse in Europe. We believe these infrastructure changes in our international business will allow us to reach our international sales goal of 25 percent to 30 percent of overall sales and increase our profit margins over the longer term. We continued to open Company-owned retail stores in key domestic and international cities. In addition, we began selectively licensing the brand, partnering with leaders in the socks, watches and childrens apparel sectors.
“Looking at 2003, we will continue our aggressive approach to global brand building and have already taken significant strides to leverage our brand worldwide. In January, we took over wholesale distribution and marketing in Canada. We also opened flagship retail stores in Times Square and Manchester, England during the first quarter. We are continuing to explore licensing opportunities with leaders across several product categories and expect to announce several licenses within the next few months.”
Robert Greenberg, the Company’s Chief Executive Officer, stated, “I am very proud of what the men and women of SKECHERS have accomplished in our first ten years. We started in 1992 as a distributor for one line. Today we feature one of the most extensive and creative line-ups in the footwear industry, we drive our new and always exciting styles across wholesale and retail sales channels, and we advertise our brands aggressively.
“While I am pleased with the Company’s accomplishments in 2002, there is much more work to be done. Our goals in 2003 are to gain quality market share for all of our lines, increase profitability and enhance stockholder value. This is a challenging undertaking given the general economic and political conditions around the world. However, we believe that we started this year positioned to accomplish these goals. We were encouraged by the response to our new and existing product offerings at the World Shoe Association Trade Show in Las Vegas this month and during several weeks of pre-line review by our major customers in January. We have an experienced management team, a strong balance sheet and a continued commitment to invest approximately eight to 10 percent of our sales into cutting edge and powerful advertising.”
SKECHERS U.S.A., INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
December 31, December 31,
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2002 2001 2002 2001
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Net sales $180,834 $214,092 $943,582 $960,385
Cost of sales 111,271 128,996 556,909 554,205
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Gross profit 69,563 85,096 386,673 406,180
Royalty income, net 613 (571) 1,145 (303)
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70,176 84,525 387,818 405,877
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Operating expenses:
Selling 21,638 25,597 94,274 111,401
General and administrative 60,035 53,117 210,752 205,989
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81,673 78,714 305,026 317,390
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Earnings from operations (11,497) 5,811 82,792 88,487
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Other income (expense):
Interest (2,295) (2,483) (8,927) (13,852)
Other, net 1,230 (212) 1,476 1,320
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(1,065) (2,695) (7,451) (12,532)
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Earnings before income taxes (12,562) 3,116 75,341 75,955
Income taxes (3,955) 1,146 28,305 28,685
