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Delaware
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95-3015862
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Page
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PART I
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Item 1.
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Condensed Consolidated Financial Statements (Unaudited)
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PART II
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*
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*
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*
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•
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the results of our restructuring efforts, including retail store fleet optimization and office consolidation;
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•
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the implementation and potential impact of our Business Transformation Project (as defined in this Quarterly Report);
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•
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our global business, growth, operating, investing, and financing strategies;
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•
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our product offerings, distribution channels, and geographic mix;
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•
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the success of new products, brands, and growth initiatives;
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•
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the impact of seasonality and weather on our operations;
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•
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expectations regarding our net sales and earnings growth and other financial metrics;
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•
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our development of worldwide distribution channels;
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•
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trends affecting our financial condition, results of operations, liquidity or cash flows;
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•
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our expectations for expansion of our Direct-to-Consumer capabilities;
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•
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overall global economic trends, including foreign currency exchange rate fluctuations;
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•
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reliability of overseas factory production and storage;
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•
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the availability and cost of raw materials;
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•
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our commitments and contingencies, including our purchase obligations for product and sheepskin; and
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•
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the impact of recent accounting pronouncements.
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June 30, 2016
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March 31, 2016
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||||
ASSETS
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Current assets:
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Cash and cash equivalents
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$
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202,309
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$
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245,956
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Trade accounts receivable, net of allowances ($31,418 at June 30, 2016 and $30,195 at March 31, 2016)
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102,951
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160,154
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Inventories
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469,163
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299,911
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Prepaid expenses
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17,051
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18,249
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Other current assets
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37,987
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38,039
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Income taxes receivable
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29,502
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23,456
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Total current assets
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858,963
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785,765
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Property and equipment, net of accumulated depreciation ($169,010 at June 30, 2016 and $163,807 at March 31, 2016)
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245,111
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237,246
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Goodwill
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127,934
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127,934
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Other intangible assets, net of accumulated amortization ($47,241 at June 30, 2016 and $45,302 at March 31, 2016)
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80,684
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83,026
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Deferred tax assets
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21,038
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20,636
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Other assets
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24,015
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23,461
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Total assets
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$
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1,357,745
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$
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1,278,068
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities:
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Short-term borrowings
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$
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110,558
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$
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67,475
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Trade accounts payable
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212,723
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100,593
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Accrued payroll
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21,425
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20,625
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Other accrued expenses
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21,072
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39,449
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Income taxes payable
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5,877
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6,461
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Value added tax payable
|
376
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3,895
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Total current liabilities
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372,031
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238,498
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Long-term liabilities:
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Mortgage payable
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32,500
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32,631
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Income tax liability
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9,208
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9,073
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Deferred rent obligations
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15,234
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16,139
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Other long-term liabilities
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11,528
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14,256
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Total long-term liabilities
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68,470
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72,099
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Commitments and contingencies (Note 7)
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Stockholders’ equity:
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Common stock ($0.01 par value; 125,000 shares authorized; shares issued and outstanding of 32,035 at June 30, 2016 and 32,020 at March 31, 2016)
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320
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320
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Additional paid-in capital
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163,342
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161,259
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Retained earnings
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767,531
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826,449
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Accumulated other comprehensive loss
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(13,949
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)
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(20,557
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)
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Total stockholders’ equity
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917,244
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967,471
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Total liabilities and stockholders' equity
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$
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1,357,745
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$
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1,278,068
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Three Months Ended
June 30, |
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2016
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2015
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||||
Net sales
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$
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174,393
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$
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213,805
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Cost of sales
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98,141
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127,209
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Gross profit
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76,252
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86,596
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Selling, general and administrative expenses
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154,571
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150,304
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Loss from operations
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(78,319
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)
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(63,708
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)
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Other expense (income), net:
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Interest income
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(204
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)
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(116
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)
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Interest expense
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1,435
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1,035
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Other, net
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(669
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)
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55
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Total other expense, net
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562
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974
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Loss before income taxes
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(78,881
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)
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(64,682
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)
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Income tax benefit
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(19,963
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)
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(17,355
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)
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Net loss
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(58,918
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)
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(47,327
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)
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Other comprehensive income (loss), net of tax:
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Unrealized gain (loss) on foreign currency hedging
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2,909
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(1,463
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)
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Foreign currency translation adjustment
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3,699
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2,766
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Total other comprehensive income
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6,608
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1,303
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Comprehensive loss
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$
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(52,310
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)
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$
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(46,024
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)
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Net loss per share:
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Basic
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$
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(1.84
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)
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$
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(1.43
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)
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Diluted
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$
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(1.84
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)
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$
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(1.43
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)
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Weighted-average common shares outstanding:
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Basic
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32,024
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33,117
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Diluted
|
32,024
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33,117
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Three Months Ended
June 30, |
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2016
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2015
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Cash flows from operating activities:
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Net loss
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$
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(58,918
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)
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$
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(47,327
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)
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Adjustments to reconcile net loss to net cash used in operating activities:
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|
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Depreciation, amortization and accretion
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13,021
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11,905
|
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Change in fair value of contingent consideration
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—
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(1,152
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)
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Provision for doubtful accounts, net
|
549
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|
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3,262
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Deferred tax provision
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(2,132
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)
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|
169
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|
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Stock compensation
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2,070
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2,284
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Restructuring costs
|
1,732
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|
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—
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Other
|
244
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122
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Changes in operating assets and liabilities:
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Trade accounts receivable
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56,655
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22,443
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Inventories
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(169,253
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)
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(133,811
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)
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Prepaid expenses and other current assets
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4,681
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(674
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)
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Income tax receivable
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(5,584
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)
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(20,458
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)
|
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Other assets
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(556
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)
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|
592
|
|
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Trade accounts payable
|
112,130
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|
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142,136
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Accrued expenses
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6,050
|
|
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(7,757
|
)
|
||
Income taxes payable
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(584
|
)
|
|
(1,890
|
)
|
||
Long-term liabilities
|
(3,498
|
)
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3,136
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Net cash used in operating activities
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(43,393
|
)
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(27,020
|
)
|
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Cash flows from investing activities:
|
|
|
|
|
|
||
Purchases of property and equipment
|
(20,114
|
)
|
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(18,755
|
)
|
||
Purchases of tangible, intangible, and other assets, net
|
—
|
|
|
(4,700
|
)
|
||
Net cash used in investing activities
|
(20,114
|
)
|
|
(23,455
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
||
Proceeds from issuance of short-term borrowings
|
110,000
|
|
|
38,000
|
|
||
Repayments of short-term borrowings
|
(66,633
|
)
|
|
—
|
|
||
Cash paid for shares withheld for taxes
|
(1,106
|
)
|
|
(198
|
)
|
||
Excess tax benefit from stock compensation
|
59
|
|
|
9
|
|
||
Cash paid for repurchases of common stock
|
—
|
|
|
(45,407
|
)
|
||
Contingent consideration paid
|
(19,784
|
)
|
|
—
|
|
||
Repayment of mortgage principal
|
(125
|
)
|
|
(119
|
)
|
||
Net cash provided by (used in) financing activities
|
22,411
|
|
|
(7,715
|
)
|
||
|
|
|
|
||||
Effect of exchange rates on cash
|
(2,551
|
)
|
|
1,791
|
|
||
Net change in cash and cash equivalents
|
(43,647
|
)
|
|
(56,399
|
)
|
||
Cash and cash equivalents at beginning of period
|
245,956
|
|
|
225,143
|
|
||
Cash and cash equivalents at end of period
|
$
|
202,309
|
|
|
$
|
168,744
|
|
|
Three Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid (refunded) during the period for:
|
|
|
|
||||
Income taxes, net of $3,720 payments in 2016
|
$
|
(11,500
|
)
|
|
$
|
4,012
|
|
Interest
|
913
|
|
|
782
|
|
||
Non-cash investing and financing activities:
|
|
|
|
|
|
||
Accrued for purchases of property and equipment
|
957
|
|
|
1,217
|
|
||
Accrued for asset retirement obligations
|
345
|
|
|
154
|
|
||
Accrued for shares withheld for taxes
|
321
|
|
|
57
|
|
|
Lease Termination Costs
|
|
Severance Costs
|
|
Leasehold Impairments
|
|
Software Impairments
|
|
Other
|
|
Total
|
||||||||||||
Fiscal year 2016 charges
|
$
|
8,900
|
|
|
$
|
4,000
|
|
|
$
|
5,800
|
|
|
$
|
3,800
|
|
|
$
|
2,300
|
|
|
$
|
24,800
|
|
Paid in cash
|
(1,200
|
)
|
|
(600
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,800
|
)
|
||||||
Non-cash
|
—
|
|
|
—
|
|
|
(5,800
|
)
|
|
(3,800
|
)
|
|
(500
|
)
|
|
(10,100
|
)
|
||||||
Liability as of March 31, 2016
|
7,700
|
|
|
3,400
|
|
|
—
|
|
|
—
|
|
|
1,800
|
|
|
12,900
|
|
||||||
Additional charges
|
1,200
|
|
|
400
|
|
|
100
|
|
|
—
|
|
|
—
|
|
|
1,700
|
|
||||||
Non-cash
|
—
|
|
|
—
|
|
|
(100
|
)
|
|
—
|
|
|
—
|
|
|
(100
|
)
|
||||||
Paid in cash
|
(6,700
|
)
|
|
(2,000
|
)
|
|
—
|
|
|
—
|
|
|
(1,800
|
)
|
|
(10,500
|
)
|
||||||
Liability as of June 30, 2016
|
$
|
2,200
|
|
|
$
|
1,800
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,000
|
|
|
Goodwill
|
|
Other
Intangible
Assets, Net
|
||||
Balance at March 31, 2016
|
$
|
127,934
|
|
|
$
|
83,026
|
|
Amortization expense
|
—
|
|
|
(2,069
|
)
|
||
Changes in foreign currency exchange rates
|
—
|
|
|
(273
|
)
|
||
Balance at June 30, 2016
|
$
|
127,934
|
|
|
$
|
80,684
|
|
|
June 30,
2016 |
|
March 31,
2016 |
||||
UGG brand
|
$
|
6,101
|
|
|
$
|
6,101
|
|
Sanuk brand
|
113,944
|
|
|
113,944
|
|
||
Other brands
|
7,889
|
|
|
7,889
|
|
||
Total
|
$
|
127,934
|
|
|
$
|
127,934
|
|
•
|
Level 1: Quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities.
|
•
|
Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring the reporting entity to develop its own assumptions.
|
|
Fair Value at June 30,
|
|
Fair Value Measurement Using
|
||||||||||||
|
2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets (liabilities) at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nonqualified deferred compensation asset
|
$
|
6,259
|
|
|
$
|
6,259
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Nonqualified deferred compensation liability
|
(6,534
|
)
|
|
(6,534
|
)
|
|
—
|
|
|
—
|
|
||||
Designated derivatives asset
|
6,199
|
|
|
—
|
|
|
6,199
|
|
|
—
|
|
||||
Designated derivatives liability
|
(1,029
|
)
|
|
—
|
|
|
(1,029
|
)
|
|
—
|
|
||||
Non-designated derivatives assets
|
133
|
|
|
—
|
|
|
133
|
|
|
—
|
|
||||
Contingent consideration for acquisition of business
|
(300
|
)
|
|
—
|
|
|
(300
|
)
|
|
—
|
|
|
Fair Value at March 31,
|
|
Fair Value Measurement Using
|
||||||||||||
|
2016
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Assets (liabilities) at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nonqualified deferred compensation asset
|
$
|
6,083
|
|
|
$
|
6,083
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Nonqualified deferred compensation liability
|
(6,301
|
)
|
|
(6,301
|
)
|
|
—
|
|
|
—
|
|
||||
Designated derivatives asset
|
2,903
|
|
|
—
|
|
|
2,903
|
|
|
—
|
|
||||
Designated derivatives liability
|
(2,549
|
)
|
|
—
|
|
|
(2,549
|
)
|
|
—
|
|
||||
Contingent consideration for acquisition of business
|
(20,000
|
)
|
|
—
|
|
|
—
|
|
|
(20,000
|
)
|
|
|
Three Months Ended
June 30, |
||
|
|
2016
|
|
2015
|
Derivatives in designated cash flow hedging relationships
|
|
Foreign currency exchange contracts
|
|
Foreign currency exchange contracts
|
Amount of gain (loss) recognized in other comprehensive income on derivatives (effective portion)
|
|
$4,464
|
|
$(2,353)
|
Location of amount reclassified from accumulated other comprehensive income into income (effective portion)
|
|
Net sales
|
|
Net sales
|
Amount of loss reclassified from accumulated other comprehensive income into income (effective portion)
|
|
$(175)
|
|
$—
|
Location of amount excluded from effectiveness testing
|
|
Selling, general and administrative expenses
|
|
Selling, general and administrative expenses
|
Amount of gain excluded from effectiveness testing
|
|
$192
|
|
$52
|
|
|
Three Months Ended
June 30, |
||
|
|
2016
|
|
2015
|
Derivatives not designated as hedging instruments
|
|
Foreign currency exchange contracts
|
|
Foreign currency exchange contracts
|
Location of amount recognized in income on derivatives
|
|
Selling, general and administrative expenses
|
|
Selling, general and administrative expenses
|
Amount of (loss) gain recognized in income on derivatives
|
|
$(591)
|
|
$865
|
|
June 30,
2016 |
|
March 31,
2016 |
||||
Unrealized gain on foreign currency hedging, net of tax
|
$
|
3,061
|
|
|
$
|
152
|
|
Cumulative foreign currency translation adjustment, net of tax
|
(17,010
|
)
|
|
(20,709
|
)
|
||
Accumulated other comprehensive loss
|
$
|
(13,949
|
)
|
|
$
|
(20,557
|
)
|
|
Three Months Ended
June 30, |
||||
|
2016
|
|
2015
|
||
Weighted-average shares used in basic computation
|
32,024,000
|
|
|
33,117,000
|
|
Dilutive effect of stock-based awards*
|
—
|
|
|
—
|
|
Weighted-average shares used in diluted computation
|
32,024,000
|
|
|
33,117,000
|
|
|
|
|
|
||
*Excluded annual RSUs
|
267,000
|
|
|
487,000
|
|
*Excluded long-term incentive plan RSUs
|
396,000
|
|
|
487,000
|
|
*Excluded non-employee director restricted stock awards (RSAs)
|
10,000
|
|
|
8,000
|
|
*Excluded stock appreciation rights (SARs)
|
600,000
|
|
|
700,000
|
|
|
Three Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
Net sales to external customers:
|
|
|
|
||||
UGG wholesale
|
$
|
45,901
|
|
|
$
|
66,422
|
|
Teva wholesale
|
29,525
|
|
|
37,066
|
|
||
Sanuk wholesale
|
22,303
|
|
|
28,513
|
|
||
Other brands wholesale
|
18,411
|
|
|
21,385
|
|
||
Direct-to-Consumer
|
58,253
|
|
|
60,419
|
|
||
|
$
|
174,393
|
|
|
$
|
213,805
|
|
Income (loss) from operations:
|
|
|
|
||||
UGG wholesale
|
$
|
(10,212
|
)
|
|
$
|
(3,380
|
)
|
Teva wholesale
|
1,862
|
|
|
5,874
|
|
||
Sanuk wholesale
|
4,181
|
|
|
5,348
|
|
||
Other brands wholesale
|
(1,630
|
)
|
|
(4,000
|
)
|
||
Direct-to-Consumer
|
(19,419
|
)
|
|
(15,205
|
)
|
||
Unallocated overhead costs
|
(53,101
|
)
|
|
(52,345
|
)
|
||
|
$
|
(78,319
|
)
|
|
$
|
(63,708
|
)
|
|
June 30,
2016 |
|
March 31,
2016 |
||||
Total assets for reportable segments:
|
|
|
|
||||
UGG wholesale
|
$
|
402,515
|
|
|
$
|
248,937
|
|
Teva wholesale
|
65,070
|
|
|
87,225
|
|
||
Sanuk wholesale
|
205,089
|
|
|
212,816
|
|
||
Other brands wholesale
|
66,559
|
|
|
65,072
|
|
||
Direct-to-Consumer
|
122,934
|
|
|
148,733
|
|
||
|
$
|
862,167
|
|
|
$
|
762,783
|
|
|
June 30,
2016 |
|
March 31,
2016 |
||||
Total assets for reportable segments
|
$
|
862,167
|
|
|
$
|
762,783
|
|
Unallocated cash and cash equivalents
|
202,309
|
|
|
245,956
|
|
||
Unallocated deferred tax assets
|
21,038
|
|
|
20,636
|
|
||
Other unallocated corporate assets
|
272,231
|
|
|
248,693
|
|
||
Consolidated total assets
|
$
|
1,357,745
|
|
|
$
|
1,278,068
|
|
|
June 30,
2016 |
|
March 31,
2016 |
||||
US
|
$
|
219,072
|
|
|
$
|
211,111
|
|
All other countries*
|
26,039
|
|
|
26,135
|
|
||
Total
|
$
|
245,111
|
|
|
$
|
237,246
|
|
|
June 30,
2016 |
|
March 31,
2016 |
||||
Money market fund accounts
|
$
|
177,377
|
|
|
$
|
195,575
|
|
Cash
|
24,932
|
|
|
50,381
|
|
||
Total cash and cash equivalents
|
$
|
202,309
|
|
|
$
|
245,956
|
|
•
|
UGG® (UGG): Premier brand in luxurious comfort footwear, and expanding into handbags, apparel, home and cold weather accessories;
|
•
|
Teva® (Teva): Born from the outdoors, active lifestyle footwear for the adventurous spirit; and
|
•
|
Sanuk® (Sanuk): Authentic Southern California casual footwear for those seeking a playful escape.
|
•
|
Sales of our products are highly seasonal and are sensitive to weather conditions, which are beyond our control. Even though we continue to expand our product lines and create more year-round styles for our brands, the effect of favorable or unfavorable weather on our aggregate sales has been and is likely to continue to be significant. We especially saw the impact of this trend during the third quarter of fiscal year 2016 where weather was unseasonably warm in many of our key markets. Weather will continue to be a significant factor impacting our business, and it will continue to be difficult for us to predict the impact that weather conditions in any future period will have on our financial condition and operating results.
|
•
|
We believe there has been a meaningful shift in the way customers shop for products and make purchasing decisions. In particular, brick-and-mortar retail platforms appear to be experiencing a significant and prolonged decrease in consumer traffic, while E-Commerce businesses continue to evolve and experience growth. We expect that these behaviors and trends will continue to change the competitive landscape in which we operate.
|
•
|
Fluctuations in currency exchange rates have had the effect of significantly increasing the value of the US dollar compared to most other major foreign currencies over the past couple of years. We believe that this has been a significant factor contributing to a slowdown in traffic within our domestic retail locations, particularly within our flagship stores that are located in major tourist cities. While we seek to hedge some of the risks associated with currency exchange rate fluctuations, these changes are largely outside of our control and we expect they will continue to impact the demand for our products, and ultimately our operating results.
|
•
|
The sheepskin used in certain UGG and Koolaburra products is in high demand and limited supply, and there have been significant fluctuations in the price of sheepskin in the past, as the demand for this material has fluctuated. While we continually strive to contain our material costs by entering into fixed price contracts, exploring new footwear materials and utilizing new production technologies, we expect that fluctuations in sheepskin prices will continue to materially impact our financial condition and operating results. In recent years, the impact of sheepskin price fluctuations on our operating results have been less dramatic, which we believe is partially a result of our introduction of UGGpure™, which is real wool material woven into a durable backing.
|
•
|
Continuing uncertainty surrounding US and global economic conditions has adversely impacted businesses worldwide. Some of our customers have been, and more may be, adversely affected, which in turn has, and may continue to, adversely impact our financial results.
|
•
|
We believe that consumers have narrowed their footwear product breadth, focusing on brands with a rich heritage and authenticity as market category creators and leaders. We also believe that consumers have become increasingly focused on luxury and comfort, seeking out products and brands that are fashionable while still comfortable.
|
•
|
We believe that the growth and evolution of the DTC channel is a principal factor that has allowed us to evolve the lifestyle nature of our brands and to diversify our product lines. The DTC channel exposes individual customers to the full line of our products, including non-core products such as casual boots and specialty classics. In addition, sales through the DTC channel are typically associated with higher gross margins, which have a favorable impact on our operating results.
|
•
|
We have responded and intend to continue to respond to consumer focus on sustainability by establishing objectives, policies, and procedures to help us drive key sustainability initiatives around human rights, environmental sustainability, and community affairs.
|
•
|
High consumer brand loyalty, due to almost 40 years of delivering quality and luxuriously comfortable UGG footwear.
|
•
|
Evolution of our Classics business through the evolution of features in our Classic boot and the introduction of innovative, Classics-inspired products such as the Classic Slim, the Classic Luxe, and the Classic Street, alongside targeted marketing campaigns.
|
•
|
Growth and diversification of our UGG footwear product lines in non-core categories, including weather, casual boots, slippers, specialty classics, and transitional products that bridge the seasons, which has been driven by an important shift in the way we guide our wholesale customers in the pre-booking process.
|
•
|
Exploration of opportunities in new product categories and styles beyond footwear, such as loungewear, handbags, cold-weather accessories and new home offerings.
|
•
|
Continued growth of the DTC channel, which we believe will continue to allow us to diversify our UGG product lines, as the DTC channel exposes individual customers to the full line of our products.
|
•
|
Continued enhancement of our Omni-Channel capabilities to enable us to increasingly engage existing and prospective consumers in a more connected environment and expose them to the brand. In particular, we are working towards a more segmented channel and product approach to the market, whereby we can customize our product offerings based on unique consumer reach, market positioning and brand experience.
|
•
|
Continued evolution of our men’s product lines, alongside targeted UGG for Men campaigns.
|
•
|
We intend to launch certain products directly through the DTC segment, including certain Classics-inspired products, which we believe will drive growth within the segment.
|
•
|
The evaluation of the growth of the DTC channel provides us with important data about product demand that we share with wholesale customers to help them make more informed ordering decisions.
|
•
|
We expect operating profit to remain strong for the DTC channel, and for the DTC channel to serve as a key driver of our overall profitability. This is principally because the gross margins associated with sales made through our DTC channel are typically higher than those associated with sales made through our wholesale channel.
|
•
|
Our retail store fleet continues to be an important component of our DTC segment. We have already penetrated the major metropolitan markets globally with our retail presence, and we intend to maintain our retail presence in these top markets and continue further expansion in secondary markets, as appropriate. However, we are in the process of evaluating our portfolio of retail stores with the goal of optimizing our fleet, and have identified
24
retail stores that are candidates for closure by the end of fiscal year 2017, of which we have closed
six
during the three months ended
June 30, 2016
and
three
during the three months ended March 31, 2016.
|
•
|
We continue to expect that our E-Commerce business will be a driver of growth, although we expect the growth rate will decline over time as the size of the E-Commerce business increases.
|
•
|
We believe the results of the retail component of our DTC business have been negatively impacted by recent weather patterns differing from historical weather patterns.
|
•
|
We believe the strengthening of the US dollar as compared to most other major foreign currencies has reduced tourism traffic in our domestic retail stores, which has further negatively impacted the results of the retail component of our DTC business.
|
|
Three Months Ended June 30,
|
|||||||||||||||||||
|
2016
|
|
2015
|
|
Change
|
|||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||||
Net sales
|
$
|
174,393
|
|
|
100.0
|
%
|
|
$
|
213,805
|
|
|
100.0
|
%
|
|
$
|
(39,412
|
)
|
|
(18.4
|
)%
|
Cost of sales
|
98,141
|
|
|
56.3
|
|
|
127,209
|
|
|
59.5
|
|
|
(29,068
|
)
|
|
(22.9
|
)
|
|||
Gross profit
|
76,252
|
|
|
43.7
|
|
|
86,596
|
|
|
40.5
|
|
|
(10,344
|
)
|
|
(11.9
|
)
|
|||
Selling, general and administrative expenses
|
154,571
|
|
|
88.6
|
|
|
150,304
|
|
|
70.3
|
|
|
4,267
|
|
|
2.8
|
|
|||
Loss from operations
|
(78,319
|
)
|
|
(44.9
|
)
|
|
(63,708
|
)
|
|
(29.8
|
)
|
|
(14,611
|
)
|
|
(22.9
|
)
|
|||
Other expense, net
|
562
|
|
|
0.3
|
|
|
974
|
|
|
0.4
|
|
|
(412
|
)
|
|
(42.3
|
)
|
|||
Loss before income taxes
|
(78,881
|
)
|
|
(45.2
|
)
|
|
(64,682
|
)
|
|
(30.2
|
)
|
|
(14,199
|
)
|
|
(22.0
|
)
|
|||
Income tax benefit
|
(19,963
|
)
|
|
(11.4
|
)
|
|
(17,355
|
)
|
|
(8.1
|
)
|
|
(2,608
|
)
|
|
(15.0
|
)
|
|||
Net loss
|
$
|
(58,918
|
)
|
|
(33.8
|
)%
|
|
$
|
(47,327
|
)
|
|
(22.1
|
)%
|
|
$
|
(11,591
|
)
|
|
(24.5
|
)%
|
|
Three Months Ended June 30,
|
|||||||||||||
|
|
|
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
Amount
|
|
%
|
|||||||
Net sales by location:
|
|
|
|
|
|
|
|
|||||||
US
|
$
|
109,507
|
|
|
$
|
134,474
|
|
|
$
|
(24,967
|
)
|
|
(18.6
|
)%
|
International
|
64,886
|
|
|
79,331
|
|
|
(14,445
|
)
|
|
(18.2
|
)
|
|||
Total
|
$
|
174,393
|
|
|
$
|
213,805
|
|
|
$
|
(39,412
|
)
|
|
(18.4
|
)%
|
Net sales by brand and channel:
|
|
|
|
|
|
|
|
|||||||
UGG:
|
|
|
|
|
|
|
|
|||||||
Wholesale
|
$
|
45,901
|
|
|
$
|
66,422
|
|
|
$
|
(20,521
|
)
|
|
(30.9
|
)%
|
Direct-to-Consumer
|
45,953
|
|
|
48,073
|
|
|
(2,120
|
)
|
|
(4.4
|
)
|
|||
Total
|
91,854
|
|
|
114,495
|
|
|
(22,641
|
)
|
|
(19.8
|
)
|
|||
Teva:
|
|
|
|
|
|
|
|
|||||||
Wholesale
|
29,525
|
|
|
37,066
|
|
|
(7,541
|
)
|
|
(20.3
|
)
|
|||
Direct-to-Consumer
|
5,163
|
|
|
4,869
|
|
|
294
|
|
|
6.0
|
|
|||
Total
|
34,688
|
|
|
41,935
|
|
|
(7,247
|
)
|
|
(17.3
|
)
|
|||
Sanuk:
|
|
|
|
|
|
|
|
|||||||
Wholesale
|
22,303
|
|
|
28,513
|
|
|
(6,210
|
)
|
|
(21.8
|
)
|
|||
Direct-to-Consumer
|
4,402
|
|
|
4,942
|
|
|
(540
|
)
|
|
(10.9
|
)
|
|||
Total
|
26,705
|
|
|
33,455
|
|
|
(6,750
|
)
|
|
(20.2
|
)
|
|||
Other brands:
|
|
|
|
|
|
|
|
|||||||
Wholesale
|
18,411
|
|
|
21,385
|
|
|
(2,974
|
)
|
|
(13.9
|
)
|
|||
Direct-to-Consumer
|
2,735
|
|
|
2,535
|
|
|
200
|
|
|
7.9
|
|
|||
Total
|
21,146
|
|
|
23,920
|
|
|
(2,774
|
)
|
|
(11.6
|
)
|
|||
|
|
|
|
|
|
|
|
|||||||
Total Wholesale
|
$
|
116,140
|
|
|
$
|
153,386
|
|
|
$
|
(37,246
|
)
|
|
(24.3
|
)%
|
Total Direct-to-Consumer
|
58,253
|
|
|
60,419
|
|
|
(2,166
|
)
|
|
(3.6
|
)
|
|||
Total
|
$
|
174,393
|
|
|
$
|
213,805
|
|
|
$
|
(39,412
|
)
|
|
(18.4
|
)%
|
•
|
increased occupancy and rent expense of approximately $2,000 in the current period, largely driven by the additional $1,200 restructuring charges for early termination of store leases and new retail stores opened subsequent to
June 30, 2015
;
|
•
|
increased project-based expenses of approximately $2,000 in the current period, largely attributable to contracts related our Business Transformation Project implementation and management fees related to our updated E-Commerce website;
|
•
|
increased expense of approximately $1,000 related to changes in the current period for the Sanuk brand contingent consideration compared to the prior period;
|
•
|
increased depreciation expense of approximately $1,000 primarily associated with the ERP system upgrade that was placed into service in April 2016;
|
•
|
increased warehouse expenses of approximately $1,000 largely driven by costs related to closing and transitioning warehouses and moving inventory;
|
•
|
increased salaries of approximately $1,400, largely attributable to transition costs related to the move from Irvine to our new distribution center in Moreno Valley and a timing difference attributable to full operations commencing in the prior period at Moreno Valley and increased severance costs of $400 related to restructuring;
|
•
|
a decrease in our accounts receivable allowances of approximately $3,000 in the current period compared to the first quarter fiscal year 2016 which reflected an adjustment for several customers; and
|
•
|
decreased recognition of performance-based compensation of approximately $1,000 attributable to a change in the annual cash incentive plan.
|
|
Three Months Ended June 30,
|
|||||||||||||
|
|
|
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
Amount
|
|
%
|
|||||||
UGG wholesale
|
$
|
(10,212
|
)
|
|
$
|
(3,380
|
)
|
|
$
|
(6,832
|
)
|
|
(202.1
|
)%
|
Teva wholesale
|
1,862
|
|
|
5,874
|
|
|
(4,012
|
)
|
|
(68.3
|
)
|
|||
Sanuk wholesale
|
4,181
|
|
|
5,348
|
|
|
(1,167
|
)
|
|
(21.8
|
)
|
|||
Other brands wholesale
|
(1,630
|
)
|
|
(4,000
|
)
|
|
2,370
|
|
|
59.3
|
|
|||
Direct-to-Consumer
|
(19,419
|
)
|
|
(15,205
|
)
|
|
(4,214
|
)
|
|
(27.7
|
)
|
|||
Unallocated overhead costs
|
(53,101
|
)
|
|
(52,345
|
)
|
|
(756
|
)
|
|
(1.4
|
)
|
|||
Total
|
$
|
(78,319
|
)
|
|
$
|
(63,708
|
)
|
|
$
|
(14,611
|
)
|
|
(22.9
|
)%
|
|
Three Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
Income tax benefit
|
$
|
(19,963
|
)
|
|
$
|
(17,355
|
)
|
Effective income tax rate
|
25.3
|
%
|
|
26.8
|
%
|
|
Three Months Ended June 30,
|
|||||||||||||
|
|
|
|
|
Change
|
|||||||||
|
2016
|
|
2015
|
|
Amount
|
|
%
|
|||||||
Net cash used in operating activities
|
$
|
(43,393
|
)
|
|
$
|
(27,020
|
)
|
|
$
|
(16,373
|
)
|
|
(60.6
|
)%
|
Net cash used in investing activities
|
(20,114
|
)
|
|
(23,455
|
)
|
|
3,341
|
|
|
14.2
|
|
|||
Net cash provided by (used in) financing activities
|
22,411
|
|
|
(7,715
|
)
|
|
30,126
|
|
|
390.5
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
Total
|
|
Less than
1 Year |
|
1-3 Years
|
|
3-5 Years
|
|
More than
5 Years |
||||||||||
Operating lease obligations (1)
|
$
|
315,544
|
|
|
$
|
51,367
|
|
|
$
|
96,316
|
|
|
$
|
68,313
|
|
|
$
|
99,548
|
|
Purchase obligations for product (2)
|
311,139
|
|
|
311,139
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Purchase obligations for sheepskin (3)
|
78,502
|
|
|
19,553
|
|
|
58,949
|
|
|
—
|
|
|
—
|
|
|||||
Other purchase obligations (4)
|
26,152
|
|
|
11,606
|
|
|
6,796
|
|
|
7,750
|
|
|
—
|
|
|||||
Mortgage obligation (5)
|
51,977
|
|
|
2,168
|
|
|
4,336
|
|
|
4,336
|
|
|
41,137
|
|
|||||
Contingent consideration obligations (6)
|
274
|
|
|
274
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Unrecognized tax benefit (7)
|
7,236
|
|
|
856
|
|
|
2,459
|
|
|
3,921
|
|
|
—
|
|
|||||
Total
|
$
|
790,824
|
|
|
$
|
396,963
|
|
|
$
|
168,856
|
|
|
$
|
84,320
|
|
|
$
|
140,685
|
|
(1)
|
Our operating lease obligations primarily relate to property leases for our retail locations, distribution centers and regional offices.
|
(2)
|
The amounts set forth in the table reflect purchase obligations for products that we reasonably expect to fulfill in the ordinary course of business. However, a significant portion of the purchase obligations can be cancelled by us under certain circumstances. As a result, the amount does not necessarily reflect the dollar amount of our binding commitments or minimum purchase obligations, and instead reflects an estimate of our future payment obligations based on information currently available.
|
(3)
|
The amounts set forth in the table reflect our remaining commitments under existing supply agreements, net of any deposits or advances, for the periods indicated. We expect that purchases made by us under these agreements in the ordinary course of business will eventually exceed the minimum commitment levels, and that any deposits or advances will become fully refundable or reflected as a credit against purchases.
|
(4)
|
Our other purchase obligations generally consist of commitments for future capital expenditures, obligations under service contracts, and requirements to pay promotional expenses.
|
(5)
|
Our mortgage obligation consists of a mortgage secured by our corporate headquarters property. The mortgage has a fixed interest rate of
4.928%
. Payments include principal and interest in an amount that amortizes the principal balance over a
30
-year period; however, the loan will mature and have a balloon payment due on
July 1, 2029
of approximately $23,400.
|
(6)
|
Our contingent consideration obligations consist solely of the final contingent consideration payment for the acquisition of the Hoka brand. For additional information, refer to Note 7 “Commitments and Contingencies” to our accompanying unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report.
|
(7)
|
The unrecognized tax benefits relate to uncertain tax positions taken in our income tax return that would impact the effective tax rate, if recognized. For additional information, refer to Note 5 “Income Taxes” to our accompanying unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report.
|
Exhibit
Number
|
|
Description of Exhibit
|
*#10.1
|
|
2017 Performance-Based Annual RSUs Agreement
|
*#10.2
|
|
2017 Time-Based Annual RSUs Agreement
|
*31.1
|
|
Certification of the Chief Executive Officer pursuant to Rule 13A-14(a) under the Exchange Act, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
*31.2
|
|
Certification of the Chief Financial Officer pursuant to Rule 13A-14(a) under the Exchange Act, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
*32.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, 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.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
*101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
*101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
Deckers Outdoor Corporation
|
|
|
|
|
|
|
Date:
|
August 9, 2016
|
/s/ Thomas A. George
|
|
|
Thomas A. George
|
|
|
Chief Financial Officer
|
Name of Participant (“Awardee”):
|
|
Total Number of Stock Units Granted:
|
|
Date of Grant:
|
|
Vesting Schedule:
|
August 15, 2017 33.33%
August 15, 2018 33.33%
August 15, 2019 33.34%
|
Performance Period:
|
Fiscal Year Ending March 31, 2017 (the “
Performance Period
”)
|
Performance Criteria:
|
The percentage of unvested Stock Units that may vest will be based on the value of diluted 2017 EPS as set forth in
Exhibit A
attached hereto (the “
Performance Criteria
”).
|
2.
|
AGREEMENT
|
Name of Participant (“
Awardee
”):
|
|
Total Number of Stock Units Granted:
|
|
Date of Grant:
|
|
Vesting Schedule:
|
August 15, 2017: 33.33%
August 15, 2018: 33.33%
August 15, 2019: 33.34%
|
2.
|
AGREEMENT
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Deckers Outdoor Corporation;
|
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 the statements 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 financial condition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange 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 the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness 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 recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’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 reasonably likely 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 control over financial reporting.
|
Date:
|
August 9, 2016
|
/s/ Dave Powers
|
|
|
Dave Powers
|
|
|
Chief Executive Officer
|
|
|
Deckers Outdoor Corporation
|
|
|
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Deckers Outdoor Corporation;
|
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 the statements 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 financial condition, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange 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 the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, 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 our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness 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 recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’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 reasonably likely 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 control over financial reporting.
|
Date:
|
August 9, 2016
|
/s/ Thomas A. George
|
|
|
Thomas A. George
|
|
|
Chief Financial Officer
|
|
|
Deckers Outdoor Corporation
|
|
|
(Principal Financial and Accounting Officer)
|
Very truly yours,
|
|
|
|
|
|
Dave Powers
|
|
|
|
/s/ Dave Powers
|
|
Chief Executive Officer (Principal Executive Officer)
|
|
|
|
|
|
Thomas A. George
|
|
|
|
/s/ Thomas A. George
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
|
|
|
|
Dated:
|
August 9, 2016
|