|
Delaware
|
95-3015862
|
(State of incorporation)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer
x
|
Accelerated filer
o
|
|
|
Non-accelerated filer
o
|
(Do not check if a smaller reporting company)
|
|
|
|
Smaller reporting company
o
|
|
|
|
Emerging growth company
o
|
|
|
|
Page
|
|
|
|
Item 1.
|
|
|
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
Item 1.
|
||
Item 2.
|
||
Item 3.
|
Defaults Upon Senior Securities
|
*
|
Item 4.
|
Mine Safety Disclosures
|
*
|
Item 5.
|
Other Information
|
*
|
Item 6.
|
||
|
•
|
the results of and costs associated with our restructuring and operating profit improvement plans;
|
•
|
our global business, growth, operating, investing, and financing strategies;
|
•
|
our product offerings, distribution channels, and geographic mix;
|
•
|
consumer preferences with respect to our brands and products;
|
•
|
the purchasing trends impacting the buying patterns of wholesale customers and retail consumers;
|
•
|
the impact of seasonality and weather on consumer behavior and our results of operations;
|
•
|
expectations regarding and trends affecting our financial condition, operating results, capital expenditures, liquidity or cash flows;
|
•
|
expectations relating to the expansion of Direct-to-Consumer capabilities;
|
•
|
our plans to consolidate certain United States (US) distribution center operations;
|
•
|
overall global economic trends, including foreign currency exchange rate fluctuations;
|
•
|
reliability of overseas factory production and storage;
|
•
|
availability and cost of raw materials;
|
•
|
the value of goodwill and other intangible assets, and potential write-downs or impairment charges;
|
•
|
changes impacting our tax liability and effective tax rates, including as a result of changes in tax laws or treaties, foreign income or loss, and the realization of net deferred tax assets;
|
•
|
completed and expected repatriation of earnings of non-US subsidiaries and any related foreign withholding taxes, as well as other related tax impacts;
|
•
|
potential impacts of our ongoing operational system upgrades;
|
•
|
commitments and contingencies, including purchase obligations for product and sheepskin; and
|
•
|
the impact of recent accounting pronouncements.
|
|
June 30, 2018
|
|
March 31, 2018
|
||||
ASSETS
|
(UNAUDITED)
|
|
|
||||
Current assets
|
|
|
|
||||
Cash and cash equivalents
|
$
|
417,851
|
|
|
$
|
429,970
|
|
Trade accounts receivable, net of allowances ($9,742 and $33,462 as of June 30, 2018 and March 31, 2018, respectively)
|
131,899
|
|
|
143,704
|
|
||
Inventories, net of reserves ($8,584 and $9,020 as of June 30, 2018 and March 31, 2018, respectively)
|
435,564
|
|
|
299,602
|
|
||
Prepaid expenses
|
21,166
|
|
|
17,639
|
|
||
Other current assets
|
31,075
|
|
|
17,599
|
|
||
Income tax receivable
|
2,405
|
|
|
2,176
|
|
||
Total current assets
|
1,039,960
|
|
|
910,690
|
|
||
|
|
|
|
||||
Property and equipment, net of accumulated depreciation ($217,353 and $210,763 as of June 30, 2018 and March 31, 2018, respectively)
|
217,653
|
|
|
220,162
|
|
||
Goodwill
|
13,990
|
|
|
13,990
|
|
||
Other intangible assets, net of accumulated amortization ($67,413
and $66,065 as of June 30, 2018 and March 31, 2018, respectively)
|
55,786
|
|
|
57,850
|
|
||
Deferred tax assets, net
|
37,443
|
|
|
38,381
|
|
||
Other assets
|
21,888
|
|
|
23,306
|
|
||
Total assets
|
$
|
1,386,720
|
|
|
$
|
1,264,379
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities
|
|
|
|
||||
Short-term borrowings
|
$
|
585
|
|
|
$
|
578
|
|
Trade accounts payable
|
262,508
|
|
|
93,939
|
|
||
Accrued payroll
|
53,605
|
|
|
55,695
|
|
||
Other accrued expenses
|
31,418
|
|
|
24,446
|
|
||
Income taxes payable
|
4,888
|
|
|
11,006
|
|
||
Value added tax payable
|
1,587
|
|
|
3,502
|
|
||
Total current liabilities
|
354,591
|
|
|
189,166
|
|
||
|
|
|
|
||||
Mortgage payable
|
31,358
|
|
|
31,504
|
|
||
Income tax liability
|
61,897
|
|
|
64,735
|
|
||
Deferred rent obligations
|
21,376
|
|
|
22,499
|
|
||
Other long-term liabilities
|
15,347
|
|
|
15,696
|
|
||
Total long-term liabilities
|
129,978
|
|
|
134,434
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
||||
|
|
|
|
||||
Stockholders' equity
|
|
|
|
||||
Common stock ($0.01 par value; 125,000 shares authorized; shares issued and outstanding of 30,369
and 30,447 as of June 30, 2018 and March 31, 2018, respectively)
|
304
|
|
|
304
|
|
||
Additional paid-in capital
|
170,785
|
|
|
167,587
|
|
||
Retained earnings
|
746,185
|
|
|
785,871
|
|
||
Accumulated other comprehensive loss
|
(15,123
|
)
|
|
(12,983
|
)
|
||
Total stockholders' equity
|
902,151
|
|
|
940,779
|
|
||
Total liabilities and stockholders' equity
|
$
|
1,386,720
|
|
|
$
|
1,264,379
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Net sales
|
$
|
250,594
|
|
|
$
|
209,717
|
|
Cost of sales
|
135,629
|
|
|
119,092
|
|
||
Gross profit
|
114,965
|
|
|
90,625
|
|
||
Selling, general and administrative expenses
|
154,379
|
|
|
146,881
|
|
||
Loss from operations
|
(39,414
|
)
|
|
(56,256
|
)
|
||
|
|
|
|
||||
Interest income
|
(1,586
|
)
|
|
(452
|
)
|
||
Interest expense
|
1,234
|
|
|
1,007
|
|
||
Other income, net
|
(11
|
)
|
|
(224
|
)
|
||
Total other (income) expense, net
|
(363
|
)
|
|
331
|
|
||
Loss before income taxes
|
(39,051
|
)
|
|
(56,587
|
)
|
||
Income tax benefit
|
(8,644
|
)
|
|
(14,466
|
)
|
||
Net loss
|
(30,407
|
)
|
|
(42,121
|
)
|
||
Other comprehensive income (loss), net of tax
|
|
|
|
||||
Unrealized gain (loss) on foreign currency exchange rate hedges
|
5,323
|
|
|
(3,772
|
)
|
||
Foreign currency translation (loss) gain
|
(7,463
|
)
|
|
1,550
|
|
||
Total other comprehensive loss
|
(2,140
|
)
|
|
(2,222
|
)
|
||
Comprehensive loss
|
$
|
(32,547
|
)
|
|
$
|
(44,343
|
)
|
|
|
|
|
||||
Net loss per share
|
|
|
|
||||
Basic
|
$
|
(1.00
|
)
|
|
$
|
(1.32
|
)
|
Diluted
|
$
|
(1.00
|
)
|
|
$
|
(1.32
|
)
|
Weighted-average common shares outstanding
|
|
|
|
||||
Basic
|
30,423
|
|
|
31,991
|
|
||
Diluted
|
30,423
|
|
|
31,991
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
OPERATING ACTIVITIES
|
|
|
|
||||
Net loss
|
$
|
(30,407
|
)
|
|
$
|
(42,121
|
)
|
Adjustments to reconcile net loss to cash provided by operating activities:
|
|
|
|
||||
Depreciation, amortization and accretion
|
11,405
|
|
|
12,268
|
|
||
Bad debt expense
|
608
|
|
|
3,015
|
|
||
Deferred tax benefit
|
(1,225
|
)
|
|
(2,932
|
)
|
||
Stock-based compensation
|
3,526
|
|
|
2,704
|
|
||
Employee stock purchase plan
|
45
|
|
|
35
|
|
||
Excess tax benefits from stock compensation
|
106
|
|
|
25
|
|
||
Loss on sale of assets
|
58
|
|
|
126
|
|
||
Impairment of intangible and other long-lived assets
|
—
|
|
|
131
|
|
||
Restructuring charges
|
—
|
|
|
1,518
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Trade accounts receivable, net
|
11,940
|
|
|
46,733
|
|
||
Inventories, net
|
(136,641
|
)
|
|
(142,797
|
)
|
||
Prepaid expenses and other current assets
|
(9,295
|
)
|
|
10,112
|
|
||
Income tax receivable
|
(229
|
)
|
|
(8,218
|
)
|
||
Other assets
|
1,418
|
|
|
(118
|
)
|
||
Trade accounts payable
|
168,569
|
|
|
132,108
|
|
||
Accrued expenses
|
(1,795
|
)
|
|
(13,273
|
)
|
||
Income taxes payable
|
(5,700
|
)
|
|
(7,228
|
)
|
||
Long-term liabilities
|
(4,310
|
)
|
|
564
|
|
||
Net cash provided by (used in) operating activities
|
8,073
|
|
|
(7,348
|
)
|
||
|
|
|
|
||||
INVESTING ACTIVITIES
|
|
|
|
||||
Purchases of property and equipment
|
(7,286
|
)
|
|
(3,835
|
)
|
||
Proceeds from sales of property and equipment, net
|
47
|
|
|
—
|
|
||
Net cash used in investing activities
|
(7,239
|
)
|
|
(3,835
|
)
|
||
|
|
|
|
||||
FINANCING ACTIVITIES
|
|
|
|
||||
Cash paid for shares withheld for taxes
|
(499
|
)
|
|
(893
|
)
|
||
Cash paid for repurchases of common stock
|
(10,000
|
)
|
|
—
|
|
||
Repayment of mortgage principal
|
(139
|
)
|
|
(133
|
)
|
||
Net cash used in financing activities
|
(10,638
|
)
|
|
(1,026
|
)
|
||
|
|
|
|
||||
Effect of foreign currency exchange rates on cash
|
(2,315
|
)
|
|
385
|
|
||
Net change in cash and cash equivalents
|
(12,119
|
)
|
|
(11,824
|
)
|
||
Cash and cash equivalents at beginning of period
|
429,970
|
|
|
291,764
|
|
||
Cash and cash equivalents at end of period
|
$
|
417,851
|
|
|
$
|
279,940
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
SUPPLEMENTAL CASH FLOW DISCLOSURE
|
|
|
|
||||
Cash paid during the period
|
|
|
|
||||
Income taxes paid, net of refunds ($2,744 and $886 as of June 30, 2018 and 2017, respectively)
|
$
|
1,961
|
|
|
$
|
2,266
|
|
Interest
|
1,494
|
|
|
580
|
|
||
Non-cash investing and financing activities
|
|
|
|
||||
Accrued for purchases of property and equipment
|
2,315
|
|
|
1,557
|
|
||
Accrued for asset retirement obligations
|
27
|
|
|
113
|
|
|
Cumulative Restructuring Charges
|
||
|
|||
UGG brand wholesale
|
$
|
2,238
|
|
Sanuk brand wholesale
|
3,068
|
|
|
Other brands wholesale
|
2,263
|
|
|
Direct-to-Consumer
|
23,454
|
|
|
Unallocated overhead costs
|
24,301
|
|
|
Total restructuring charges
|
$
|
55,324
|
|
|
Lease Terminations
|
|
Other*
|
|
Total
|
||||||
Balance as of March 31, 2018
|
$
|
3,645
|
|
|
$
|
1,083
|
|
|
$
|
4,728
|
|
Paid in cash
|
(232
|
)
|
|
—
|
|
|
(232
|
)
|
|||
Balance as of June 30, 2018
|
$
|
3,413
|
|
|
$
|
1,083
|
|
|
$
|
4,496
|
|
•
|
Prior to adoption, the Company deferred recognition of revenue for certain wholesale and E-Commerce sales arrangements until the product was delivered. However, the Company elected the practical expedient allowed under the new revenue standard to define shipping and handling costs as a fulfillment service, not a performance obligation. Accordingly, the Company will now recognize revenue for these arrangements upon shipment rather than delivery. As a result, on adoption of this ASU, the Company recorded a cumulative effect adjustment for a net after-tax increase to opening retained earnings of approximately
$1,000
in the
condensed consolidated balance sheets
.
|
•
|
The Company historically recorded a trade accounts receivable allowance for sales returns (allowance for sales returns) related to its wholesale channel sales and the cost of sales for the product-related inventory was recorded in inventories, net of reserves, in its
condensed consolidated balance sheets
.
As of March 31, 2018
, the Company recorded an allowance for sales returns for the wholesale channel of
$20,848
and product-related inventory for all channels of
$11,251
in its
condensed consolidated balance sheets
.
As of June 30, 2018
, and in connection with the adoption of the new revenue standard, the Company reclassified the allowance for sales returns for the wholesale channel of
$9,816
to other accrued expenses and the product-related inventory for all channels of
$4,819
to other current assets in its
condensed consolidated b
|
•
|
The comparative condensed consolidated financial statements have not been adjusted and continue to be reported under historical US GAAP.
|
•
|
Refer to
Note 2, "Revenue Recognition,"
for expanded disclosures regarding our change in accounting policy and refer to
Note 12, "Reportable Operating Segments,"
for the Company's disaggregation of revenue by distribution channel and region.
|
|
Contract Asset
|
|
Contract Liability
|
||||
Balance as of March 31, 2018
|
$
|
11,251
|
|
|
$
|
23,156
|
|
Change in estimate of sales returns, net of sales recognized
|
1,780
|
|
|
10,965
|
|
||
Actual returns
|
(8,212
|
)
|
|
(22,604
|
)
|
||
Balance as of June 30, 2018
|
$
|
4,819
|
|
|
$
|
11,517
|
|
|
June 30, 2018
|
|
March 31, 2018
|
||||
Goodwill
|
|
|
|
||||
UGG brand
|
$
|
6,101
|
|
|
$
|
6,101
|
|
HOKA brand
|
7,889
|
|
|
7,889
|
|
||
Total goodwill
|
13,990
|
|
|
13,990
|
|
||
Other intangible assets
|
|
|
|
||||
Indefinite-lived intangible assets
|
|
|
|
||||
Trademarks
|
15,454
|
|
|
15,454
|
|
||
Definite-lived intangible assets
|
|
|
|
||||
Trademarks
|
55,245
|
|
|
55,245
|
|
||
Other
|
52,500
|
|
|
53,216
|
|
||
Total gross carrying amount
|
107,745
|
|
|
108,461
|
|
||
Accumulated amortization
|
(67,413
|
)
|
|
(66,065
|
)
|
||
Net definite-lived intangible assets
|
40,332
|
|
|
42,396
|
|
||
Total other intangible assets
|
55,786
|
|
|
57,850
|
|
||
Total goodwill and other intangible assets
|
$
|
69,776
|
|
|
$
|
71,840
|
|
Balance as of March 31, 2018
|
$
|
57,850
|
|
Amortization expense
|
(1,978
|
)
|
|
Foreign currency exchange rate fluctuations, net
|
(86
|
)
|
|
Balance as of June 30, 2018
|
$
|
55,786
|
|
•
|
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 as of June 30, 2018
|
|
Measured Using
|
||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
Assets (liabilities) at fair value
|
|
|
|
|
|
|
|
||||||||
Non-qualified deferred compensation asset
|
$
|
7,320
|
|
|
$
|
7,320
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-qualified deferred compensation liability
|
(4,402
|
)
|
|
(4,402
|
)
|
|
—
|
|
|
—
|
|
||||
Designated Derivative Contracts asset
|
8,182
|
|
|
—
|
|
|
8,182
|
|
|
—
|
|
||||
Non-Designated Derivative Contracts asset
|
478
|
|
|
—
|
|
|
478
|
|
|
—
|
|
|
Fair Value as of March 31, 2018
|
|
Measured Using
|
||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||||
Assets (liabilities) at fair value
|
|
|
|
|
|
|
|
||||||||
Non-qualified deferred compensation asset
|
$
|
7,172
|
|
|
$
|
7,172
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-qualified deferred compensation liability
|
(4,296
|
)
|
|
(4,296
|
)
|
|
—
|
|
|
—
|
|
||||
Designated Derivative Contracts asset
|
950
|
|
|
—
|
|
|
950
|
|
|
—
|
|
||||
Designated Derivative Contracts liability
|
(143
|
)
|
|
—
|
|
|
(143
|
)
|
|
—
|
|
||||
Non-Designated Derivative Contracts liability
|
(10
|
)
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
Three Months Ended June 30, 2018
|
||
Approximate dollar value of shares purchased
|
$
|
10,000
|
|
Total number of shares purchased*
|
85,792
|
|
|
Average price paid per share
|
$
|
116.56
|
|
Balance as of March 31, 2018
|
$
|
785,871
|
|
Net loss
|
(30,407
|
)
|
|
Repurchase of common stock*
|
(9,999
|
)
|
|
Impact from adoption of ASUs, net of tax
|
720
|
|
|
Balance as of June 30, 2018
|
$
|
746,185
|
|
|
Designated Derivative Contracts
|
|
Non-Designated Derivative Contracts
|
|
Total
|
||||||
Notional value
|
$
|
126,332
|
|
|
$
|
18,802
|
|
|
$
|
145,134
|
|
Fair value recorded in other current assets
|
8,182
|
|
|
478
|
|
|
8,660
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Amount of gain (loss) on derivative instruments (effective portion) recognized in other comprehensive loss
|
$
|
6,770
|
|
|
$
|
(5,890
|
)
|
Amount of gain excluded from effectiveness testing recognized in SG&A expenses
|
846
|
|
|
333
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Amount of gain (loss) on derivative instruments recognized in SG&A expenses
|
$
|
487
|
|
|
$
|
(1,603
|
)
|
|
June 30, 2018
|
|
March 31, 2018
|
||||
Unrealized gain on foreign currency exchange rate hedges
|
$
|
5,566
|
|
|
$
|
243
|
|
Cumulative foreign currency translation loss
|
(20,689
|
)
|
|
(13,226
|
)
|
||
Accumulated other comprehensive loss
|
$
|
(15,123
|
)
|
|
$
|
(12,983
|
)
|
|
Three Months Ended June 30,
|
||||
|
2018
|
|
2017
|
||
Weighted-average shares used in basic computation
|
30,423,000
|
|
|
31,991,000
|
|
Dilutive effect of stock-based awards and options
|
—
|
|
|
—
|
|
Weighted-average shares used for diluted computation
|
30,423,000
|
|
|
31,991,000
|
|
|
|
|
|
||
Excluded*:
|
|
|
|
||
Annual RSUs and Annual PSUs
|
306,000
|
|
|
389,000
|
|
2007 LTIP SARs
|
—
|
|
|
240,000
|
|
LTIP PSUs
|
—
|
|
|
269,000
|
|
LTIP NQSOs
|
377,000
|
|
|
397,000
|
|
Deferred Non-Employee Director Equity Awards
|
7,000
|
|
|
7,000
|
|
Employee Stock Purchase Plan
|
7,000
|
|
|
9,000
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Net sales
|
|
|
|
||||
UGG brand wholesale
|
$
|
81,353
|
|
|
$
|
63,273
|
|
HOKA brand wholesale
|
39,954
|
|
|
26,538
|
|
||
Teva brand wholesale
|
33,196
|
|
|
32,123
|
|
||
Sanuk brand wholesale
|
20,503
|
|
|
22,220
|
|
||
Other brands wholesale
|
2,637
|
|
|
427
|
|
||
Direct-to-Consumer
|
72,951
|
|
|
65,136
|
|
||
Total net sales
|
$
|
250,594
|
|
|
$
|
209,717
|
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Income (loss) from operations
|
|
|
|
||||
UGG brand wholesale
|
$
|
5,869
|
|
|
$
|
(1,021
|
)
|
HOKA brand wholesale
|
5,728
|
|
|
1,259
|
|
||
Teva brand wholesale
|
8,064
|
|
|
4,943
|
|
||
Sanuk brand wholesale
|
4,200
|
|
|
4,417
|
|
||
Other brands wholesale
|
350
|
|
|
(233
|
)
|
||
Direct-to-Consumer
|
(7,424
|
)
|
|
(12,102
|
)
|
||
Unallocated overhead costs
|
(56,201
|
)
|
|
(53,519
|
)
|
||
Total loss from operations
|
$
|
(39,414
|
)
|
|
$
|
(56,256
|
)
|
|
June 30, 2018
|
|
March 31, 2018
|
||||
UGG brand wholesale
|
$
|
375,499
|
|
|
$
|
229,894
|
|
HOKA brand wholesale
|
77,230
|
|
|
65,943
|
|
||
Teva brand wholesale
|
64,282
|
|
|
85,980
|
|
||
Sanuk brand wholesale
|
61,676
|
|
|
79,322
|
|
||
Other brands wholesale
|
30,283
|
|
|
8,866
|
|
||
Direct-to-Consumer
|
96,319
|
|
|
112,355
|
|
||
Total assets from reportable operating segments
|
705,289
|
|
|
582,360
|
|
||
Unallocated cash and cash equivalents
|
417,851
|
|
|
429,970
|
|
||
Unallocated deferred tax assets
|
37,443
|
|
|
38,381
|
|
||
Unallocated other corporate assets
|
226,137
|
|
|
213,668
|
|
||
Total assets
|
$
|
1,386,720
|
|
|
$
|
1,264,379
|
|
|
June 30, 2018
|
|
March 31, 2018
|
||||
US
|
$
|
203,029
|
|
|
$
|
203,956
|
|
All other countries*
|
14,624
|
|
|
16,206
|
|
||
Total
|
$
|
217,653
|
|
|
$
|
220,162
|
|
|
Cumulative Restructuring Charges
|
||
Lease terminations
|
$
|
17,987
|
|
Retail store fixed asset impairment
|
9,372
|
|
|
Severance costs
|
9,776
|
|
|
Software and office fixed asset impairment
|
6,987
|
|
|
Other*
|
11,202
|
|
|
Total restructuring charges
|
$
|
55,324
|
|
|
Cumulative Annualized SG&A Expense Savings
|
||
UGG brand wholesale
|
$
|
1,000
|
|
Sanuk brand wholesale
|
1,000
|
|
|
Other brands wholesale
|
1,000
|
|
|
Direct-to-Consumer
|
37,000
|
|
|
Unallocated overhead costs
|
17,000
|
|
|
Total
|
$
|
57,000
|
|
•
|
Sales of our products are highly seasonal and are sensitive to weather conditions, which are unpredictable and beyond our control. To address seasonality, we are continuing to drive our strategy of introducing counter-seasonal products through category expansion, including the UGG brand’s spring and summer products, and the active lifestyle products of the HOKA brand. Even though we continue to expand our product lines with the goal of creating more year-round styles for our brands to drive sales and offset the impact of weather conditions, the effect of favorable or unfavorable weather on our aggregate sales and operating results may continue to be significant.
|
•
|
We believe there has been a meaningful shift in the way consumers shop for products and make purchasing decisions. In particular, brick and mortar retail stores are experiencing significant and prolonged decreases in consumer traffic as customers continue to migrate to shopping online. This
|
•
|
In light of the shift in consumer shopping behavior, we are seeking to optimize our brick and mortar retail footprint. In pursuing retail store closures, we have been impacted by costs related to lease terminations, retail store fixed asset impairments, severance costs, and other closure costs. However, we currently do not anticipate incurring material incremental retail store closure costs, primarily because remaining store closures are expected to occur as retail store leases expire to avoid incurring potentially significant lease termination costs, as well as through conversions to partner retail stores.
|
•
|
We expect our E-Commerce business will continue to be a driver of long-term growth, although we expect the year-over-year growth rate will decline over time as the size of our E-Commerce business increases.
|
•
|
Beginning in fall 2018, we will be implementing an allocation and segmentation distribution strategy for the UGG brand's Classics franchise in the US wholesale channel.
|
•
|
We believe consumers are buying product closer to the particular wearing occasion ("buy now, wear now"), which tends to shorten the purchasing windows for weather-dependent product. Not only does this trend impact our DTC business, we believe it is also impacting the purchasing behavior of our large wholesale customers. In particular, these customers appear to be shortening their purchasing windows to address the evolving behavior of retail consumers and to manage their own product-related inventories.
|
•
|
Foreign currency exchange rate fluctuations have the potential to cause variations in our operating results. While we seek to hedge some of the risks associated with foreign currency exchange rate fluctuations, these changes are largely outside of our control. We expect these changes will continue to impact the future purchasing patterns of our customers, as well as our operating results.
|
•
|
High consumer brand loyalty due to consistently delivering quality and luxuriously comfortable footwear, apparel, and accessories.
|
•
|
Diversification of our product lines, including women's spring and summer, men's, and lifestyle offerings. Our strategy of product diversification aims to decrease our reliance on sheepskin and mitigate the impacts of seasonality.
|
•
|
Continued enhancement of our Omni-Channel and digital marketing capabilities to enable us to better engage existing and prospective consumers and expose them to our brands.
|
|
Three Months Ended June 30,
|
|||||||||||||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||||
Net sales
|
$
|
250,594
|
|
|
100.0
|
%
|
|
$
|
209,717
|
|
|
100.0
|
%
|
|
$
|
40,877
|
|
|
19.5
|
%
|
Cost of sales
|
135,629
|
|
|
54.1
|
|
|
119,092
|
|
|
56.8
|
|
|
(16,537
|
)
|
|
(13.9
|
)
|
|||
Gross profit
|
114,965
|
|
|
45.9
|
|
|
90,625
|
|
|
43.2
|
|
|
24,340
|
|
|
26.9
|
|
|||
Selling, general and administrative expenses
|
154,379
|
|
|
61.6
|
|
|
146,881
|
|
|
70.0
|
|
|
(7,498
|
)
|
|
(5.1
|
)
|
|||
Loss from operations
|
(39,414
|
)
|
|
(15.7
|
)
|
|
(56,256
|
)
|
|
(26.8
|
)
|
|
16,842
|
|
|
29.9
|
|
|||
Other (income) expense, net
|
(363
|
)
|
|
(0.1
|
)
|
|
331
|
|
|
0.2
|
|
|
694
|
|
|
209.7
|
|
|||
Loss before income taxes
|
(39,051
|
)
|
|
(15.6
|
)
|
|
(56,587
|
)
|
|
(27.0
|
)
|
|
17,536
|
|
|
31.0
|
|
|||
Income tax benefit
|
(8,644
|
)
|
|
(3.5
|
)
|
|
(14,466
|
)
|
|
(6.9
|
)
|
|
(5,822
|
)
|
|
(40.2
|
)
|
|||
Net loss
|
$
|
(30,407
|
)
|
|
(12.1
|
)%
|
|
$
|
(42,121
|
)
|
|
(20.1
|
)%
|
|
$
|
11,714
|
|
|
27.8
|
%
|
|
Three Months Ended June 30,
|
|||||||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|||||||
Net sales by location
|
|
|
|
|
|
|
|
|||||||
US
|
$
|
141,707
|
|
|
$
|
120,714
|
|
|
$
|
20,993
|
|
|
17.4
|
%
|
International
|
108,887
|
|
|
89,003
|
|
|
19,884
|
|
|
22.3
|
|
|||
Total
|
$
|
250,594
|
|
|
$
|
209,717
|
|
|
$
|
40,877
|
|
|
19.5
|
%
|
|
|
|
|
|
|
|
|
|||||||
Net sales by brand and channel
|
|
|
|
|
|
|
|
|
|
|||||
UGG brand
|
|
|
|
|
|
|
|
|
|
|||||
Wholesale
|
$
|
81,353
|
|
|
$
|
63,273
|
|
|
$
|
18,080
|
|
|
28.6
|
%
|
Direct-to-Consumer
|
55,118
|
|
|
51,459
|
|
|
3,659
|
|
|
7.1
|
|
|||
Total
|
136,471
|
|
|
114,732
|
|
|
21,739
|
|
|
18.9
|
|
|||
HOKA brand
|
|
|
|
|
|
|
|
|||||||
Wholesale
|
39,954
|
|
|
26,538
|
|
|
13,416
|
|
|
50.6
|
|
|||
Direct-to-Consumer
|
7,050
|
|
|
4,170
|
|
|
2,880
|
|
|
69.1
|
|
|||
Total
|
47,004
|
|
|
30,708
|
|
|
16,296
|
|
|
53.1
|
|
|||
Teva brand
|
|
|
|
|
|
|
|
|
|
|||||
Wholesale
|
33,196
|
|
|
32,123
|
|
|
1,073
|
|
|
3.3
|
|
|||
Direct-to-Consumer
|
6,805
|
|
|
5,539
|
|
|
1,266
|
|
|
22.9
|
|
|||
Total
|
40,001
|
|
|
37,662
|
|
|
2,339
|
|
|
6.2
|
|
|||
Sanuk brand
|
|
|
|
|
|
|
|
|
|
|||||
Wholesale
|
20,503
|
|
|
22,220
|
|
|
(1,717
|
)
|
|
(7.7
|
)
|
|||
Direct-to-Consumer
|
3,935
|
|
|
3,955
|
|
|
(20
|
)
|
|
(0.5
|
)
|
|||
Total
|
24,438
|
|
|
26,175
|
|
|
(1,737
|
)
|
|
(6.6
|
)
|
|||
Other brands
|
|
|
|
|
|
|
|
|
|
|||||
Wholesale
|
2,637
|
|
|
427
|
|
|
2,210
|
|
|
517.6
|
|
|||
Direct-to-Consumer
|
43
|
|
|
13
|
|
|
30
|
|
|
230.8
|
|
|||
Total
|
2,680
|
|
|
440
|
|
|
2,240
|
|
|
509.1
|
|
|||
Total
|
$
|
250,594
|
|
|
$
|
209,717
|
|
|
$
|
40,877
|
|
|
19.5
|
%
|
|
|
|
|
|
|
|
|
|||||||
Total Wholesale
|
$
|
177,643
|
|
|
$
|
144,581
|
|
|
$
|
33,062
|
|
|
22.9
|
%
|
Total Direct-to-Consumer
|
72,951
|
|
|
65,136
|
|
|
7,815
|
|
|
12.0
|
|
|||
Total
|
$
|
250,594
|
|
|
$
|
209,717
|
|
|
$
|
40,877
|
|
|
19.5
|
%
|
•
|
increased compensation costs of approximately $5,400, primarily due to higher long-term incentive compensation, costs related to our in-house converted sales team, as well as a higher global headcount;
|
•
|
increased advertising, promotion, and other operating expenses of approximately $3,600, primarily due to higher international variable sales-related expenses;
|
•
|
increased foreign currency-related losses of approximately $2,600 driven by unfavorable foreign currency exchange rates for European and Asian currencies;
|
•
|
increased warehouse-related expenses of approximately $1,800, primarily due to costs associated with a new North American third-party logistic provider, and higher warehouse costs in Europe in the current period which are variable based upon the increase in regional sales;
|
•
|
decreased professional and consulting service costs of approximately $2,700, primarily due to lower restructuring charges related to corporate reorganization costs and lower strategic alternative and proxy-related legal costs;
|
•
|
decreased bad debt expense of approximately $2,500, primarily due to improved customer collections; and
|
•
|
decreased impairment and depreciation charges of approximately $1,100, primarily due to lower retail store related impairments and closure costs.
|
|
Three Months Ended June 30,
|
|||||||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|||||||
UGG brand wholesale
|
$
|
5,869
|
|
|
$
|
(1,021
|
)
|
|
$
|
6,890
|
|
|
674.8
|
%
|
HOKA brand wholesale
|
5,728
|
|
|
1,259
|
|
|
4,469
|
|
|
355.0
|
|
|||
Teva brand wholesale
|
8,064
|
|
|
4,943
|
|
|
3,121
|
|
|
63.1
|
|
|||
Sanuk brand wholesale
|
4,200
|
|
|
4,417
|
|
|
(217
|
)
|
|
(4.9
|
)
|
|||
Other brands wholesale
|
350
|
|
|
(233
|
)
|
|
583
|
|
|
250.2
|
|
|||
Direct-to-Consumer
|
(7,424
|
)
|
|
(12,102
|
)
|
|
4,678
|
|
|
38.7
|
|
|||
Unallocated overhead costs
|
(56,201
|
)
|
|
(53,519
|
)
|
|
(2,682
|
)
|
|
(5.0
|
)
|
|||
Total
|
$
|
(39,414
|
)
|
|
$
|
(56,256
|
)
|
|
$
|
16,842
|
|
|
29.9
|
%
|
|
Three Months Ended June 30,
|
||||||
|
2018
|
|
2017
|
||||
Income tax benefit
|
$
|
(8,644
|
)
|
|
$
|
(14,466
|
)
|
Effective income tax rate
|
22.1
|
%
|
|
25.6
|
%
|
|
Three Months Ended June 30,
|
|||||||||||||
|
2018
|
|
2017
|
|
Change
|
|||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|||||||
Net cash provided by (used in) operating activities
|
$
|
8,073
|
|
|
$
|
(7,348
|
)
|
|
$
|
15,421
|
|
|
209.9
|
%
|
Net cash used in investing activities
|
(7,239
|
)
|
|
(3,835
|
)
|
|
(3,404
|
)
|
|
(88.8
|
)
|
|||
Net cash used in financing activities
|
(10,638
|
)
|
|
(1,026
|
)
|
|
(9,612
|
)
|
|
(936.8
|
)
|
Exhibit
Number
|
|
Description of Exhibit
|
*#10.1
|
|
|
*#10.2
|
|
|
*31.1
|
|
|
*31.2
|
|
|
**32
|
|
|
*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
(Registrant)
|
/s/ STEVEN J. FASCHING
|
Steven J. Fasching
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
Name of Participant (“
Awardee
”):
|
___________________________________
|
Total Number of Stock Units Granted:
|
___________________________________
|
Date of Grant:
|
___________________________________
|
Vesting Schedule:
|
August 15, 2019 33.33%
August 15, 2020 33.33%
August 15, 2021 33.34%
|
Performance Period:
|
Fiscal Year Ending March 31, 2019 (the “
Performance Period
”)
|
Performance Criteria:
|
The percentage of unvested Stock Units that may vest will be based on the value of 2019 EPS for the Performance Period as set forth in
Exhibit A
attached hereto (the “
Performance Criteria
”).
|
Name of Participant (“
Awardee
”):
|
____________________________________
|
Total Number of Stock Units Granted:
|
____________________________________
|
Date of Grant:
|
____________________________________
|
Vesting Schedule:
|
August 15, 2019: 33.33%
August 15, 2020: 33.33%
August 15, 2021: 33.34%
|
AWARDEE:
_________________________________
Signature _________________________________ Printed Name _________________________________ Residence Address
_________________________________
_________________________________
______________________________
Date
|
DECKERS OUTDOOR CORPORATION
By: _________________________________
Its: _________________________________
______________________________
Date
|
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:
|
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):
|
/s/ DAVID POWERS
|
David Powers
Chief Executive Officer, President and Director
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:
|
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):
|
/s/ STEVEN J. FASCHING
|
Steven J. Fasching
Chief Financial Officer
Deckers Outdoor Corporation
(Principal Financial and Accounting Officer)
|
/s/ DAVID POWERS
|
|
|
David Powers
|
|
|
Chief Executive Officer, President and Director
|
|
|
Deckers Outdoor Corporation
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
/s/ STEVEN J. FASCHING
|
|
|
Steven J. Fasching
|
|
|
Chief Financial Officer
|
|
|
Deckers Outdoor Corporation
|
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
Date:
|
August 9, 2018
|
|