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(Mark One)
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|
☒
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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☐
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Delaware
|
95-3015862
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Title of each class
|
Trading
Symbol(s)
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Name of each exchange on which registered
|
Common Stock, par value $0.01 per share
|
DECK
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New York Stock Exchange
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Large accelerated filer
|
☒
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|
Accelerated filer
|
☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☐
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|
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Emerging growth company
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☐
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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||
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Item 1.
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||
Item 1A.
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||
Item 2.
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||
Item 3.
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Defaults Upon Senior Securities
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*
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Item 4.
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Mine Safety Disclosures
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*
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Item 5.
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Other Information
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*
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Item 6.
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||
|
•
|
the impacts of the COVID-19 global pandemic (referred to herein as COVID-19, the COVID-19 pandemic, or the pandemic) on our business, financial condition and results of operations, and the business, financial condition and results of operations of our customers and business partners;
|
•
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changes to our business resulting from changes in discretionary spending, consumer confidence, unemployment rates, retail store activity, tourist activity, or governmental restrictions;
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•
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our business, operating, investing, capital allocation, marketing, and financing plans and strategies;
|
•
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the expansion of our brands and product offerings;
|
•
|
changes to the geographic and seasonal mix of our brands and products;
|
•
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changes to our product distribution strategies, including the implementation of our product allocation and segmentation strategies and our decision to exit the warehouse channel for the Sanuk brand;
|
•
|
changes in consumer tastes and preferences impacting our brands and products, and the fashion industry generally;
|
•
|
trends impacting the purchasing behavior of wholesale customers and retail consumers, including those impacting retail and e-commerce businesses;
|
•
|
bankruptcies or other financial difficulties impacting our wholesale customers or other business partners;
|
•
|
the impact of seasonality and weather on consumer behavior, demand for our products, and our results of operations;
|
•
|
the impact of our efforts to continue to advance sustainable and socially conscious business operations;
|
•
|
expansion of and investments in our Direct-to-Consumer (DTC) capabilities, including our e-commerce platforms;
|
•
|
the operational challenges faced by our distribution center, and our global third-party logistics providers, and the related impacts on our ability to deliver products;
|
•
|
availability of raw materials and manufacturing capacity, and reliability of overseas production and storage;
|
•
|
commitments and contingencies, including with respect to operating leases, purchase obligations for product and raw materials, and legal or regulatory proceedings;
|
•
|
the impacts of new or proposed legislation, tariffs, regulatory enforcement actions, or legal proceedings;
|
•
|
the value of goodwill and other intangible assets, and potential write-downs or impairment charges;
|
•
|
changes impacting our tax liability and effective tax rates;
|
•
|
repatriation of earnings of non-United States subsidiaries and any related tax impacts;
|
•
|
the impact from adoption of recent accounting pronouncements; and
|
•
|
overall global economic and political trends, including foreign currency exchange rate fluctuations, changes in interest rates, and changes in commodity pricing.
|
|
June 30, 2020
|
|
March 31, 2020
|
||||
ASSETS
|
|
|
(AUDITED)
|
||||
Cash and cash equivalents
|
$
|
661,941
|
|
|
$
|
649,436
|
|
Trade accounts receivable, net of allowances ($25,084 and $21,146 as of June 30, 2020 and March 31, 2020, respectively)
|
135,225
|
|
|
185,596
|
|
||
Inventories, net of reserves ($17,759 and $12,227 as of June 30, 2020 and March 31,2020, respectively)
|
434,974
|
|
|
311,620
|
|
||
Prepaid expenses
|
18,286
|
|
|
17,760
|
|
||
Other current assets
|
24,381
|
|
|
21,548
|
|
||
Income tax receivable
|
15,003
|
|
|
8,151
|
|
||
Total current assets
|
1,289,810
|
|
|
1,194,111
|
|
||
Property and equipment, net of accumulated depreciation ($237,898 and $242,138 as of June 30, 2020 and March 31, 2020, respectively)
|
209,074
|
|
|
209,037
|
|
||
Operating lease assets
|
230,578
|
|
|
243,522
|
|
||
Goodwill
|
13,990
|
|
|
13,990
|
|
||
Other intangible assets, net of accumulated amortization ($75,305 and $74,421 as of June 30, 2020 and March 31, 2020, respectively)
|
47,388
|
|
|
48,016
|
|
||
Deferred tax assets, net
|
28,243
|
|
|
28,233
|
|
||
Other assets
|
29,483
|
|
|
28,209
|
|
||
Total assets
|
$
|
1,848,566
|
|
|
$
|
1,765,118
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Short-term borrowings
|
$
|
646
|
|
|
$
|
638
|
|
Trade accounts payable
|
253,557
|
|
|
147,892
|
|
||
Accrued payroll
|
27,278
|
|
|
42,309
|
|
||
Operating lease liabilities
|
48,009
|
|
|
49,091
|
|
||
Other accrued expenses
|
49,247
|
|
|
46,281
|
|
||
Income taxes payable
|
12,662
|
|
|
11,104
|
|
||
Value added tax payable
|
3,599
|
|
|
3,631
|
|
||
Total current liabilities
|
394,998
|
|
|
300,946
|
|
||
Mortgage payable
|
30,101
|
|
|
30,263
|
|
||
Long-term operating lease liabilities
|
205,555
|
|
|
215,724
|
|
||
Income tax liability
|
64,918
|
|
|
63,547
|
|
||
Other long-term liabilities
|
16,066
|
|
|
14,518
|
|
||
Total long-term liabilities
|
316,640
|
|
|
324,052
|
|
||
Commitments and contingencies
|
|
|
|
||||
Stockholders' equity
|
|
|
|
||||
Common stock ($0.01 par value; 125,000 shares authorized; shares issued and outstanding of 28,005 and 27,999 as of June 30, 2020 and March 31, 2020, respectively)
|
280
|
|
|
280
|
|
||
Additional paid-in capital
|
195,226
|
|
|
191,451
|
|
||
Retained earnings
|
965,975
|
|
|
973,948
|
|
||
Accumulated other comprehensive loss
|
(24,553
|
)
|
|
(25,559
|
)
|
||
Total stockholders' equity
|
1,136,928
|
|
|
1,140,120
|
|
||
Total liabilities and stockholders' equity
|
$
|
1,848,566
|
|
|
$
|
1,765,118
|
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Net sales
|
$
|
283,169
|
|
|
$
|
276,839
|
|
Cost of sales
|
140,603
|
|
|
146,820
|
|
||
Gross profit
|
142,566
|
|
|
130,019
|
|
||
Selling, general and administrative expenses
|
150,265
|
|
|
161,436
|
|
||
Loss from operations
|
(7,699
|
)
|
|
(31,417
|
)
|
||
|
|
|
|
||||
Interest income
|
(674
|
)
|
|
(2,866
|
)
|
||
Interest expense
|
1,190
|
|
|
1,146
|
|
||
Other income, net
|
(143
|
)
|
|
(92
|
)
|
||
Total other expense (income), net
|
373
|
|
|
(1,812
|
)
|
||
Loss before income taxes
|
(8,072
|
)
|
|
(29,605
|
)
|
||
Income tax benefit
|
(99
|
)
|
|
(10,254
|
)
|
||
Net loss
|
(7,973
|
)
|
|
(19,351
|
)
|
||
|
|
|
|
||||
Other comprehensive income (loss)
|
|
|
|
||||
Unrealized gain (loss) on cash flow hedges, net of tax
|
353
|
|
|
(317
|
)
|
||
Foreign currency translation gain
|
653
|
|
|
68
|
|
||
Total other comprehensive income (loss)
|
1,006
|
|
|
(249
|
)
|
||
Comprehensive loss
|
$
|
(6,967
|
)
|
|
$
|
(19,600
|
)
|
|
|
|
|
||||
Net loss per share
|
|
|
|
||||
Basic
|
$
|
(0.28
|
)
|
|
$
|
(0.67
|
)
|
Diluted
|
$
|
(0.28
|
)
|
|
$
|
(0.67
|
)
|
Weighted-average common shares outstanding
|
|
|
|
||||
Basic
|
28,001
|
|
|
29,089
|
|
||
Diluted
|
28,001
|
|
|
29,089
|
|
|
Three Months Ended June 30, 2020
|
|||||||||||||||||||||
|
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Total Stockholders'
Equity |
|||||||||||||
|
Common Stock
|
|
|
|
|
|||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
Balance, March 31, 2020
|
27,999
|
|
|
$
|
280
|
|
|
$
|
191,451
|
|
|
$
|
973,948
|
|
|
$
|
(25,559
|
)
|
|
$
|
1,140,120
|
|
Stock-based compensation
|
1
|
|
|
—
|
|
|
3,618
|
|
|
—
|
|
|
—
|
|
|
3,618
|
|
|||||
Shares issued upon vesting
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Exercise of stock options
|
4
|
|
|
—
|
|
|
247
|
|
|
—
|
|
|
—
|
|
|
247
|
|
|||||
Shares withheld for taxes
|
—
|
|
|
—
|
|
|
(90
|
)
|
|
—
|
|
|
—
|
|
|
(90
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,973
|
)
|
|
—
|
|
|
(7,973
|
)
|
|||||
Total other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,006
|
|
|
1,006
|
|
|||||
Balance, June 30, 2020
|
28,005
|
|
|
$
|
280
|
|
|
$
|
195,226
|
|
|
$
|
965,975
|
|
|
$
|
(24,553
|
)
|
|
$
|
1,136,928
|
|
|
Three Months Ended June 30, 2019
|
|||||||||||||||||||||
|
|
|
Additional Paid-in Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Total Stockholders'
Equity |
|||||||||||||
|
Common Stock
|
|
|
|
|
|||||||||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
|||||||||||||||
Balance, March 31, 2019
|
29,141
|
|
|
$
|
291
|
|
|
$
|
178,227
|
|
|
$
|
889,266
|
|
|
$
|
(22,654
|
)
|
|
$
|
1,045,130
|
|
Stock-based compensation
|
1
|
|
|
—
|
|
|
3,424
|
|
|
—
|
|
|
—
|
|
|
3,424
|
|
|||||
Shares issued upon vesting
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Exercise of stock options
|
46
|
|
|
1
|
|
|
2,772
|
|
|
—
|
|
|
—
|
|
|
2,773
|
|
|||||
Cumulative adjustment from adoption of recent accounting pronouncements
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,069
|
)
|
|
—
|
|
|
(1,069
|
)
|
|||||
Shares withheld for taxes
|
—
|
|
|
—
|
|
|
(374
|
)
|
|
—
|
|
|
—
|
|
|
(374
|
)
|
|||||
Repurchases of common stock
|
(227
|
)
|
|
(2
|
)
|
|
—
|
|
|
(35,003
|
)
|
|
—
|
|
|
(35,005
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,351
|
)
|
|
—
|
|
|
(19,351
|
)
|
|||||
Total other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(249
|
)
|
|
(249
|
)
|
|||||
Balance, June 30, 2019
|
28,965
|
|
|
$
|
290
|
|
|
$
|
184,049
|
|
|
$
|
833,843
|
|
|
$
|
(22,903
|
)
|
|
$
|
995,279
|
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
OPERATING ACTIVITIES
|
|
|
|
||||
Net loss
|
$
|
(7,973
|
)
|
|
$
|
(19,351
|
)
|
Reconciliation of net loss to net cash provided by (used in) operating activities:
|
|||||||
Depreciation, amortization and accretion
|
9,276
|
|
|
10,345
|
|
||
Bad debt expense (benefit)
|
2,664
|
|
|
(937
|
)
|
||
Deferred tax benefit
|
(14
|
)
|
|
(1,646
|
)
|
||
Stock-based compensation
|
3,687
|
|
|
3,473
|
|
||
Excess tax benefit from stock-based compensation
|
(15
|
)
|
|
(580
|
)
|
||
(Gain) Loss on disposal of property and equipment
|
(22
|
)
|
|
59
|
|
||
Impairment of operating lease assets and other long-lived assets
|
2,680
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Trade accounts receivable, net
|
47,709
|
|
|
19,860
|
|
||
Inventories, net
|
(123,355
|
)
|
|
(194,552
|
)
|
||
Prepaid expenses and other current assets
|
(2,895
|
)
|
|
(7,172
|
)
|
||
Income tax receivable
|
(6,852
|
)
|
|
(1,499
|
)
|
||
Net operating lease assets and liabilities
|
(1,051
|
)
|
|
(1,033
|
)
|
||
Other assets
|
(1,273
|
)
|
|
(547
|
)
|
||
Trade accounts payable
|
106,203
|
|
|
175,129
|
|
||
Other accrued expenses
|
(12,091
|
)
|
|
(8,598
|
)
|
||
Income taxes payable
|
1,573
|
|
|
(18,625
|
)
|
||
Long-term liabilities
|
2,918
|
|
|
(955
|
)
|
||
Net cash provided by (used in) operating activities
|
21,169
|
|
|
(46,629
|
)
|
||
INVESTING ACTIVITIES
|
|
|
|
||||
Purchases of property and equipment
|
(9,253
|
)
|
|
(7,393
|
)
|
||
Proceeds from sales of property and equipment
|
41
|
|
|
227
|
|
||
Net cash used in investing activities
|
(9,212
|
)
|
|
(7,166
|
)
|
||
FINANCING ACTIVITIES
|
|
|
|
||||
Proceeds from exercise of stock options
|
247
|
|
|
2,773
|
|
||
Repurchases of common stock
|
—
|
|
|
(35,005
|
)
|
||
Cash paid for shares withheld for taxes
|
(90
|
)
|
|
(374
|
)
|
||
Repayments of mortgage principal
|
(154
|
)
|
|
(146
|
)
|
||
Net cash provided by (used in) financing activities
|
3
|
|
|
(32,752
|
)
|
||
Effect of foreign currency exchange rates on cash and cash equivalents
|
545
|
|
|
(519
|
)
|
||
Net change in cash and cash equivalents
|
12,505
|
|
|
(87,066
|
)
|
||
Cash and cash equivalents at beginning of period
|
649,436
|
|
|
589,692
|
|
||
Cash and cash equivalents at end of period
|
$
|
661,941
|
|
|
$
|
502,626
|
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
SUPPLEMENTAL CASH FLOW DISCLOSURE
|
|
|
|
||||
Cash paid during the period
|
|
|
|
||||
Income taxes, net of refunds of $797 and $4,293, as of June 30, 2020 and 2019, respectively
|
$
|
4,216
|
|
|
$
|
11,833
|
|
Interest
|
756
|
|
|
563
|
|
||
Operating leases
|
14,185
|
|
|
15,265
|
|
||
Non-cash investing activities
|
|
|
|
||||
Accrued for purchases of property and equipment
|
514
|
|
|
1,116
|
|
Standard
|
|
Description
|
|
Impact on Adoption
|
ASU No. 2017-04, Goodwill and Other: Simplifying the Test for Goodwill Impairment (as amended by ASU 2019-06)
|
|
Requires annual and interim goodwill impairment tests be performed by comparing the fair value of a reporting unit with its carrying amount, effectively eliminating step two of the goodwill impairment test under legacy US GAAP. The amount by which the carrying amount exceeds the reporting unit’s fair value will continue to be recognized as an impairment charge.
|
|
The Company adopted this ASU beginning April 1, 2020 on a prospective basis, which did not have a material impact on its condensed consolidated financial statements.
|
ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (as amended by ASUs 2018-19, 2019-04, 2019-05, 2019-11, 2020-02, and 2020-03)
|
|
Replaces the incurred loss impairment methodology in legacy US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.
|
|
The Company adopted this ASU beginning April 1, 2020 on a prospective basis, which did not have a material impact on its condensed consolidated financial statements.
|
Standard
|
|
Description
|
|
Planned Period of Adoption
|
|
Expected Impact on Adoption
|
ASU No. 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes
|
|
Removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods, as well as reduces complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.
|
|
Q1 FY 2022
|
|
The Company is currently evaluating the impact on adoption of this ASU; however, the Company does not expect that the adoption will have a material impact on its condensed consolidated financial statements.
|
ASU No. 2020-04,
Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting
|
|
London Interbank Offered Rate (LIBOR) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. At the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons.
This ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. Guidance is limited for adoption through December 31, 2022.
|
|
Q4 FY 2021
|
|
The Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements.
|
|
Contract Asset
|
|
Contract Liability
|
||||
Balance, March 31, 2020
|
$
|
9,663
|
|
|
$
|
(25,667
|
)
|
Net additions to sales return allowance*
|
8,553
|
|
|
(25,782
|
)
|
||
Actual returns
|
(7,801
|
)
|
|
23,573
|
|
||
Balance, June 30, 2020
|
$
|
10,415
|
|
|
$
|
(27,876
|
)
|
|
Contract Asset
|
|
Contract Liability
|
||||
Balance, March 31, 2019
|
$
|
10,441
|
|
|
$
|
(24,787
|
)
|
Net additions to sales return allowance*
|
3,776
|
|
|
(14,632
|
)
|
||
Actual returns
|
(8,713
|
)
|
|
24,447
|
|
||
Balance, June 30, 2019
|
$
|
5,504
|
|
|
$
|
(14,972
|
)
|
|
June 30, 2020
|
|
March 31, 2020
|
||||
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
|
51,994
|
|
|
51,738
|
|
||
Total gross carrying amount
|
107,239
|
|
|
106,983
|
|
||
Accumulated amortization
|
(75,305
|
)
|
|
(74,421
|
)
|
||
Net definite-lived intangible assets
|
31,934
|
|
|
32,562
|
|
||
Total other intangible assets, net
|
47,388
|
|
|
48,016
|
|
||
Total
|
$
|
61,378
|
|
|
$
|
62,006
|
|
Balance, March 31, 2020
|
$
|
48,016
|
|
Amortization expense
|
(632
|
)
|
|
Foreign currency translation net gain
|
4
|
|
|
Balance, June 30, 2020
|
$
|
47,388
|
|
•
|
Level 1: Quoted prices in active markets for identical assets and 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 Company to develop its own assumptions.
|
|
|
|
Measured Using
|
||||||||||||
|
June 30, 2020
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Non-qualified deferred compensation asset
|
$
|
7,362
|
|
|
$
|
7,362
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-qualified deferred compensation liability
|
(5,191
|
)
|
|
(5,191
|
)
|
|
—
|
|
|
—
|
|
||||
Designated Derivative Contracts asset
|
464
|
|
|
—
|
|
|
464
|
|
|
—
|
|
|
|
|
Measured Using
|
||||||||||||
|
March 31, 2020
|
Level 1
|
|
Level 2
|
|
Level 3
|
|||||||||
Non-qualified deferred compensation asset
|
$
|
6,164
|
|
|
$
|
6,164
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-qualified deferred compensation liability
|
(3,756
|
)
|
|
(3,756
|
)
|
|
—
|
|
|
—
|
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Income tax benefit
|
$
|
(99
|
)
|
|
$
|
(10,254
|
)
|
Effective income tax rate
|
1.2
|
%
|
|
34.6
|
%
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Non-cash operating activities
|
|
|
|
||||
Operating lease assets obtained in exchange for lease liabilities*
|
$
|
2,491
|
|
|
$
|
16,422
|
|
Reductions to operating lease assets for reductions to lease liabilities*
|
(1,937
|
)
|
|
(2,549
|
)
|
|
|
Three Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
||||||||||
|
|
Shares Granted
|
|
Weighted-average grant date fair value per share
|
|
Shares Granted
|
|
Weighted-average grant date fair value per share
|
||||||
Annual RSUs
|
|
33,895
|
|
|
$
|
200.71
|
|
|
11,334
|
|
|
$
|
173.77
|
|
Annual PSUs
|
|
—
|
|
|
—
|
|
|
10,764
|
|
|
173.69
|
|
||
Total
|
|
33,895
|
|
|
$
|
200.71
|
|
|
22,098
|
|
|
$
|
173.73
|
|
|
Designated
Derivative Contracts
|
||
Notional value
|
$
|
42,183
|
|
Fair value recorded in other current assets
|
464
|
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Gain (loss) recognized in OCI
|
$
|
464
|
|
|
$
|
(417
|
)
|
Income tax (expense) benefit in OCI
|
(111
|
)
|
|
100
|
|
||
Total
|
$
|
353
|
|
|
$
|
(317
|
)
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Loss recognized in SG&A expenses
|
$
|
—
|
|
|
$
|
(356
|
)
|
|
June 30, 2020
|
|
March 31, 2020
|
||||
Unrealized gain on cash flow hedges, net of tax
|
$
|
353
|
|
|
$
|
—
|
|
Cumulative foreign currency translation loss
|
(24,906
|
)
|
|
(25,559
|
)
|
||
Total
|
$
|
(24,553
|
)
|
|
$
|
(25,559
|
)
|
|
Three Months Ended June 30,
|
||||
|
2020
|
|
2019
|
||
Basic
|
28,001,000
|
|
|
29,089,000
|
|
Dilutive effect of equity awards
|
—
|
|
|
—
|
|
Diluted
|
28,001,000
|
|
|
29,089,000
|
|
|
|
|
|
||
Excluded*
|
|
|
|
||
Annual RSUs and Annual PSUs
|
194,000
|
|
|
245,000
|
|
LTIP PSUs
|
153,000
|
|
|
77,000
|
|
LTIP NQSOs
|
299,000
|
|
|
317,000
|
|
Deferred Non-Employee Director Equity Awards
|
5,000
|
|
|
7,000
|
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Net sales
|
|
|
|
||||
UGG brand wholesale
|
$
|
43,428
|
|
|
$
|
85,400
|
|
HOKA brand wholesale
|
70,619
|
|
|
64,006
|
|
||
Teva brand wholesale
|
21,411
|
|
|
30,831
|
|
||
Sanuk brand wholesale
|
7,228
|
|
|
14,607
|
|
||
Other brands wholesale
|
635
|
|
|
1,727
|
|
||
Direct-to-Consumer
|
139,848
|
|
|
80,268
|
|
||
Total
|
$
|
283,169
|
|
|
$
|
276,839
|
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Income (loss) from operations
|
|
|
|
||||
UGG brand wholesale
|
$
|
(3,735
|
)
|
|
$
|
9,441
|
|
HOKA brand wholesale
|
17,235
|
|
|
11,358
|
|
||
Teva brand wholesale
|
4,202
|
|
|
8,316
|
|
||
Sanuk brand wholesale
|
488
|
|
|
1,935
|
|
||
Other brands wholesale
|
(1,270
|
)
|
|
132
|
|
||
Direct-to-Consumer
|
31,027
|
|
|
(4,572
|
)
|
||
Unallocated overhead costs
|
(55,646
|
)
|
|
(58,027
|
)
|
||
Total
|
$
|
(7,699
|
)
|
|
$
|
(31,417
|
)
|
|
June 30, 2020
|
|
March 31, 2020
|
||||
Assets
|
|
|
|
||||
UGG brand wholesale
|
$
|
328,583
|
|
|
$
|
245,239
|
|
HOKA brand wholesale
|
142,393
|
|
|
124,958
|
|
||
Teva brand wholesale
|
64,957
|
|
|
90,305
|
|
||
Sanuk brand wholesale
|
46,423
|
|
|
50,314
|
|
||
Other brands wholesale
|
24,145
|
|
|
21,535
|
|
||
Direct-to-Consumer
|
232,151
|
|
|
243,489
|
|
||
Total assets from reportable operating segments
|
838,652
|
|
|
775,840
|
|
||
Unallocated cash and cash equivalents
|
661,941
|
|
|
649,436
|
|
||
Unallocated deferred tax assets, net
|
28,243
|
|
|
28,233
|
|
||
Unallocated other corporate assets
|
319,730
|
|
|
311,609
|
|
||
Total
|
$
|
1,848,566
|
|
|
$
|
1,765,118
|
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
International net sales
|
$
|
98,869
|
|
|
$
|
109,544
|
|
% of net sales
|
34.9
|
%
|
|
39.6
|
%
|
||
Net sales in foreign currencies
|
$
|
55,683
|
|
|
$
|
59,358
|
|
% of net sales
|
19.7
|
%
|
|
21.4
|
%
|
||
Ten largest customers as % of net sales
|
22.1
|
%
|
|
27.2
|
%
|
|
June 30, 2020
|
|
March 31, 2020
|
||||
US
|
$
|
195,023
|
|
|
$
|
194,679
|
|
Foreign*
|
14,051
|
|
|
14,358
|
|
||
Total
|
$
|
209,074
|
|
|
$
|
209,037
|
|
•
|
Primarily as a result of government orders and restrictions imposed in connection with the COVID-19 pandemic, many of our company-owned and operated stores were initially closed for the start of our first fiscal quarter ended June 30, 2020. Approximately 20% of our global retail stores were open for the entire fiscal quarter. The average company-owned retail store was open for roughly half of the fiscal quarter. Subsequent to June 30, 2020 and through July 30, 2020, approximately 95% of our global retail stores are open but, in most cases, with limited operations.
|
•
|
During the first fiscal quarter ended June 30, 2020, significant civil unrest, looting, and rioting in several major cities across the United States resulted in varying degrees of damage to certain of our retail stores, including some recently reopened stores. As a result, we temporarily closed some of these stores and identified three retail stores for permanent closure.
|
•
|
We are monitoring guidance provided by health officials, expert agencies, and local authorities to evaluate the current operation of our retail stores at limited capacity, as well as the reopening of our retail stores. Our decision regarding the appropriate timing to fully reopen our retail stores will depend on a number of factors, including the safety of our customers and employees, our ability to comply with government orders and restrictions, and our ability to deliver products to our customers. We expect the scope of allowable retail activities and retail consumer traffic patterns to vary by geographic region due to localized restrictions imposed by governmental authorities, the demand for our products varying between regions, and the actual and expected impact of the COVID-19 pandemic on each region. In an attempt to mitigate the impact of operating our retail stores at limited capacity, we are expanding the use of technology at these locations, including implementing mobile point-of-sales systems.
|
•
|
Given the ongoing COVID-19 pandemic conditions, including continued uncertainty around governmental responses to emerging trends, as well as changes in economic conditions and consumer sentiment, there is potential risk of additional closures or limitations as we approach our peak selling season.
|
•
|
Similar to our company-owned retail stores, many of the retail stores of our wholesale customers and retail partners were closed for part of the first fiscal quarter. While many of our wholesale customers have reopened their retail stores during the first fiscal quarter, we believe many of them have limited operations. We are working with our wholesale partners to identify areas of risk and make relevant adjustments to our order-book. However, given the uncertain conditions due to the COVID-19 pandemic, as well as the significant amount of business remaining for the fiscal year, we anticipate that our order-book cancellations will outweigh reorders with our wholesale partners.
|
•
|
Even prior to the mandatory retail store closures and limited retail store operations resulting from the COVID-19 pandemic, we observed a meaningful shift in the way consumers shop for products and make purchasing decisions, evidenced by significant and prolonged decreases in consumer retail store activity as customers accelerated their migration to online shopping. These trends have been positively impacting the performance of our e-commerce business, while creating challenges and headwinds for our traditional retail business, as well as the retail businesses of our wholesale customers and retail partners.
|
•
|
We operate our e-commerce business through various websites and platforms, which have remained operational throughout the COVID-19 pandemic, and we expect they will continue to remain operational.
|
•
|
During our first fiscal quarter ended June 30, 2020, we observed strong demand across our brands within our e-commerce business, especially for the UGG and HOKA brands. We also observed that our wholesale customers, which had an established e-commerce presence, experienced similarly strong demand trends as those we have experienced, although the trends vary from customer to customer. We continue to see demand for our products, especially within the UGG and HOKA brands, from a number of these wholesale customers as their sell-through of our products remains strong within our partners’ e-commerce platforms. We expect our wholesale customers that have a greater reliance on their retail store presence may experience more significant adverse impacts from the COVID-19 pandemic.
|
•
|
We expect our e-commerce business will continue to be a driver of long-term growth, although the growth rate will be unpredictable and may not be in line with our historical experience. Additionally, we do not expect that the growth rate of our e-commerce business experienced in the first fiscal quarter ended June 30, 2020 will continue throughout the fiscal year. We believe the key factors impacting the growth rate will include consumer demand for our products, our ability to fulfill orders through our limited distribution center operations, the scope and duration of the COVID-19 pandemic, and the impact of the COVID-19 pandemic on unemployment rates, consumer confidence, discretionary spending, and economic conditions.
|
•
|
In future periods, we do not expect the increased demand we experienced in the first fiscal quarter within our e-commerce businesses to be able to similarly offset peak season UGG brand sales within our wholesale and retail businesses. During our second fiscal quarter we would normally begin to ship higher volumes of product to meet peak demand but due to the current retail environment, we may experience softer than normal sales.
|
•
|
In response to the COVID-19 pandemic, we are exercising discipline by focusing on key products that have achieved sustained success with consumers, reducing the number and types of products offered, delaying product launches, and consolidating seasonal collections.
|
•
|
Our ongoing and strategic efforts to reduce the impact of seasonality on our results of operations have had a meaningful positive impact on the year-round performance of the HOKA and UGG brands. While we expect to continue to focus on reducing the impact of seasonality through innovation and the expansion of our product offerings over the long-term, and while HOKA brand net sales continue to increase as a percentage of our aggregate net sales, given the magnitude of the UGG brand relative to our other brands, the effect of seasonality on our aggregate net sales and results of operations may continue to be significant. However, it is unclear whether seasonal impacts will be minimized or exaggerated in future periods as a result of the disruptions and uncertainties caused by the COVID-19 pandemic. This uncertainty makes it more difficult for us to predict future demand for our products and manage our manufacturing and inventory, especially as we approach the typical peak season for the UGG brand.
|
•
|
Within the UGG brand, we have experienced strong sell-through of certain product lines, including the slipper category, as we believe consumers are seeking out luxurious comfort in the current work-from-home environment. In addition, the UGG brand continues to experience success through the introduction of counter-seasonal products, including the spring and summer collections, improving the UGG brand’s overall year-round performance. However, we are experiencing softness within the UGG wholesale channel, especially within geographies impacted by extensive retail store closures, and within international markets due to our marketplace reset strategy in Europe, and the UGG brand having a smaller e-commerce presence internationally.
|
•
|
Within the HOKA brand, we continue to see strong demand across our product offerings through both wholesale and DTC channels, which we believe is being fueled by consumer demand for our products and an even greater emphasis on running and outdoor exercise as consumers seek to find healthy outlets in response to the COVID-19 pandemic. The significant growth of the HOKA brand’s year-round performance product offerings as a percentage of our aggregate net sales has had a meaningful positive impact on our seasonality trends, as well as our overall financial results. However, despite the recent growth and success of the HOKA brand, the impacts of the pandemic may cause a lower growth rate of HOKA brand sales in future periods than we have experienced recently.
|
•
|
For the first fiscal quarter ended June 30, 2020, net sales for the HOKA brand increased relative to the net sales for the UGG brand and as a percentage of our aggregate net sales. However, we do not expect the level of penetration of HOKA brand sales mix observed in the first fiscal quarter to continue.
|
•
|
The Sanuk and Teva brands are experiencing a disproportionate negative impact from the pandemic as the highest percentage of net sales for these brands typically occur during our fourth fiscal quarter and first fiscal quarter. We are actively monitoring the cost structures associated with these brands.
|
•
|
The Company maintains a network of strategic sourcing partners which includes material vendors and third-party manufacturers. The Company experienced certain capacity constraints within its sourcing network during the first fiscal quarter ended June 30, 2020, in addition to disruptions related to travel restrictions between country borders and production facilities. While the effects of these disruptions have been mitigated thus far, and we are not experiencing any major sourcing or manufacturing disruptions at this time, it is possible that there will be disruptions in the future.
|
•
|
Our Moreno Valley, California, distribution center (DC), as well as our global third-party logistics providers (3PLs), remains open and continues to operate at reduced capacity and with limited and modified operations due to increased safety measures. In order to promote the health and safety of our distribution center employees, we continue to adhere to enhanced safety measures and protocols at our distribution center, including strict social distancing requirements and heightened cleaning of the facility in accordance with Center for Disease Control and Prevention guidelines. Due to these requirements, we are limiting the number of employees on-site relative to our available personnel capacity. We are experiencing, and our 3PLs are experiencing, certain operational and logistical challenges as a result of limited and modified operations, including challenges associated with shipping higher levels of product through our e-commerce channel than in prior periods, and increasing volume of wholesale shipments as we approach the peak selling season for the UGG brand. We are also experiencing higher costs for DC employee safety and payroll costs, as well as some delays in the shipments of our products.
|
•
|
We are working to mitigate the anticipated impact of limited and modified operations on our peak selling season, including the potential for loss of sales and reputational harm with wholesale customers. These efforts include phasing some wholesale shipments earlier than in previous fiscal years, which could result in changes in the timing of the realization of net sales as compared to prior periods, as well as prioritizing and potentially limiting certain operations within our warehouse to accommodate social distancing measures. However, we may be unsuccessful in these efforts, which could have a negative impact on our results of operations in future periods.
|
•
|
We are encountering challenges attracting and retaining quality candidates to staff our DC operations as we increasingly compete with other companies with growing e-commerce operations. For example, during the past two fiscal years, we have significantly increased certain DC employee wages in an effort to attract and retain talent. Although growing unemployment rates resulting from the COVID-19 pandemic may result in a larger short-term candidate pool, we may face ongoing challenges with recruiting and training employees as our competitors grow their e-commerce channels and require additional warehouse and DC staff.
|
•
|
We have implemented a product segmentation strategy, as well as an allocation strategy for the UGG brand’s core Classics franchise in the US wholesale marketplace. These strategies are designed to assist us in controlling product inventory, reducing the impact of discounts and closeouts on our sales and gross margins, and increasing full-priced selling across our product offerings. Similarly, we are implementing a multi-year marketplace reset strategy in Europe to drive UGG brand heat. We expect the COVID-19 pandemic will delay or mitigate the benefits we may receive from these strategies. In addition, notwithstanding the implementation of these strategies, in light of the current marketplace environment, we are approaching the planning for the UGG brand's peak selling season with caution as we expect it may be highly competitive and feature increased levels of promotional activity relative to recent periods.
|
•
|
As a result of changes in consumer purchasing behavior, we continue to invest in and enhance our omni-channel strategy to bolster our e-commerce capabilities and enable us to better engage existing and prospective consumers and expose them to our brands. Our strategy is transforming the way we approach marketing, including through a sustained focus on our targeted digital marketing efforts, as well as marketing activations and product seeding to drive global brand heat. For example, we have begun applying these transformation efforts in Europe to drive UGG brand heat as we work to differentiate consumer experiences across various consumer touch points as part of our marketplace reset strategy. We have also started to apply this marketing strategy shift in Asia.
|
•
|
In response to the COVID-19 pandemic, we have enhanced our focus on adaptive digital marketing, including virtual events and programs, as we seek to target consumers within the work-from-home environment and promote products that are desirable based on current consumer preferences, working conditions, and lifestyle choices.
|
•
|
We believe we are in a strong financial position to respond to the disruptions and uncertainties caused by the COVID-19 pandemic. Notwithstanding the challenging environment, we experienced positive cash flow from operations for the first fiscal quarter ended June 30, 2020. In addition, as of June 30, 2020, our cash and cash equivalents balance was $661,941, and we had available borrowings of $469,679 under our revolving credit facilities, providing a strong liquidity position of over $1,100,000. We are currently in compliance with, and expect to remain in compliance, with all financial debt covenants under our revolving credit facilities and mortgage. For additional information, see the sections entitled “Liquidity” and “Capital Resources” below.
|
•
|
We did not repurchase any shares during the first fiscal quarter ended June 30, 2020. We are continuing the temporary pause of repurchases under our stock repurchase programs due to the disruption and uncertainty caused by the COVID-19 pandemic and our focus on liquidity and cash management, although we may recommence repurchase activity under our stock repurchase programs in future periods at our discretion.
|
•
|
We are working closely with our wholesale customers, as well as our manufacturers and suppliers, to manage accounts receivable and accounts payable to maximize the availability of working capital as well as leveraging government relief packages that provide certain payroll tax credits and deferrals.
|
•
|
To mitigate the adverse impact the COVID-19 pandemic may have on our business and operations, we expect to continue to manage expenses to preserve liquidity. In particular, we have implemented a number of temporary measures to reduce operating expenses, including:
|
◦
|
restricting employee travel;
|
◦
|
canceling or postponing certain events, trainings, and conferences;
|
◦
|
converting meetings with current and prospective customers to a virtual platform;
|
◦
|
suspending hiring of certain non-essential employees and annual salary increases;
|
◦
|
eliminating or deferring discretionary expenditures;
|
◦
|
seeking payment accommodations or deferrals; and
|
◦
|
furloughing certain retail employees while stores are closed.
|
•
|
We also believe the significant changes we implemented in connection with our previously completed restructuring and operating profit improvement plans will help mitigate potential negative impacts on our gross margins resulting from the COVID-19 pandemic.
|
•
|
High consumer brand loyalty due to consistent delivery of quality and luxuriously comfortable footwear, apparel, and accessories.
|
•
|
Diversification of our footwear product offerings, such as women's spring and summer lines, as well as expanded category offerings for men's, apparel, and accessories.
|
•
|
Leading product innovation and key franchise management.
|
•
|
Increased brand awareness through enhanced marketing activations.
|
•
|
Category extensions in authentic performance footwear offerings.
|
|
Three Months Ended June 30,
|
|||||||||||||||||||
|
2020
|
|
2019
|
|
Change
|
|||||||||||||||
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|||||||||
Net sales
|
$
|
283,169
|
|
|
100.0
|
%
|
|
$
|
276,839
|
|
|
100.0
|
%
|
|
$
|
6,330
|
|
|
2.3
|
%
|
Cost of sales
|
140,603
|
|
|
49.7
|
|
|
146,820
|
|
|
53.0
|
|
|
6,217
|
|
|
4.2
|
|
|||
Gross profit
|
142,566
|
|
|
50.3
|
|
|
130,019
|
|
|
47.0
|
|
|
12,547
|
|
|
9.7
|
|
|||
Selling, general and administrative expenses
|
150,265
|
|
|
53.0
|
|
|
161,436
|
|
|
58.3
|
|
|
11,171
|
|
|
6.9
|
|
|||
Loss from operations
|
(7,699
|
)
|
|
(2.7
|
)
|
|
(31,417
|
)
|
|
(11.3
|
)
|
|
23,718
|
|
|
75.5
|
|
|||
Other expense (income), net
|
373
|
|
|
0.2
|
|
|
(1,812
|
)
|
|
(0.6
|
)
|
|
(2,185
|
)
|
|
(120.6
|
)
|
|||
Loss before income taxes
|
(8,072
|
)
|
|
(2.9
|
)
|
|
(29,605
|
)
|
|
(10.7
|
)
|
|
21,533
|
|
|
72.7
|
|
|||
Income tax benefit
|
(99
|
)
|
|
(0.1
|
)
|
|
(10,254
|
)
|
|
(3.7
|
)
|
|
(10,155
|
)
|
|
(99.0
|
)
|
|||
Net loss
|
(7,973
|
)
|
|
(2.8
|
)
|
|
(19,351
|
)
|
|
(7.0
|
)
|
|
11,378
|
|
|
58.8
|
|
|||
Total other comprehensive income (loss), net of tax
|
1,006
|
|
|
0.3
|
|
|
(249
|
)
|
|
(0.1
|
)
|
|
1,255
|
|
|
504.0
|
|
|||
Comprehensive loss
|
$
|
(6,967
|
)
|
|
(2.5
|
)%
|
|
$
|
(19,600
|
)
|
|
(7.1
|
)%
|
|
$
|
12,633
|
|
|
64.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Net loss per share
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Basic
|
$
|
(0.28
|
)
|
|
|
|
$
|
(0.67
|
)
|
|
|
|
$
|
0.39
|
|
|
|
|||
Diluted
|
$
|
(0.28
|
)
|
|
|
|
$
|
(0.67
|
)
|
|
|
|
$
|
0.39
|
|
|
|
|
Three Months Ended June 30,
|
|||||||||||||
|
2020
|
|
2019
|
|
Change
|
|||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|||||||
Net sales by location
|
|
|
|
|
|
|
|
|||||||
US
|
$
|
184,300
|
|
|
$
|
167,295
|
|
|
$
|
17,005
|
|
|
10.2
|
%
|
International
|
98,869
|
|
|
109,544
|
|
|
(10,675
|
)
|
|
(9.7
|
)
|
|||
Total
|
$
|
283,169
|
|
|
$
|
276,839
|
|
|
$
|
6,330
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|||||||
Net sales by brand and channel
|
|
|
|
|
|
|
|
|
|
|||||
UGG brand
|
|
|
|
|
|
|
|
|
|
|||||
Wholesale
|
$
|
43,428
|
|
|
$
|
85,400
|
|
|
$
|
(41,972
|
)
|
|
(49.1
|
)%
|
Direct-to-Consumer
|
81,312
|
|
|
53,130
|
|
|
28,182
|
|
|
53.0
|
|
|||
Total
|
124,740
|
|
|
138,530
|
|
|
(13,790
|
)
|
|
(10.0
|
)
|
|||
HOKA brand
|
|
|
|
|
|
|
|
|||||||
Wholesale
|
70,619
|
|
|
64,006
|
|
|
6,613
|
|
|
10.3
|
|
|||
Direct-to-Consumer
|
38,399
|
|
|
15,518
|
|
|
22,881
|
|
|
147.4
|
|
|||
Total
|
109,018
|
|
|
79,524
|
|
|
29,494
|
|
|
37.1
|
|
|||
Teva brand
|
|
|
|
|
|
|
|
|
|
|||||
Wholesale
|
21,411
|
|
|
30,831
|
|
|
(9,420
|
)
|
|
(30.6
|
)
|
|||
Direct-to-Consumer
|
13,833
|
|
|
7,453
|
|
|
6,380
|
|
|
85.6
|
|
|||
Total
|
35,244
|
|
|
38,284
|
|
|
(3,040
|
)
|
|
(7.9
|
)
|
|
Three Months Ended June 30,
|
|||||||||||||
|
2020
|
|
2019
|
|
Change
|
|||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|||||||
Sanuk brand
|
|
|
|
|
|
|
|
|
|
|||||
Wholesale
|
7,228
|
|
|
14,607
|
|
|
(7,379
|
)
|
|
(50.5
|
)
|
|||
Direct-to-Consumer
|
6,006
|
|
|
4,091
|
|
|
1,915
|
|
|
46.8
|
|
|||
Total
|
13,234
|
|
|
18,698
|
|
|
(5,464
|
)
|
|
(29.2
|
)
|
|||
Other brands
|
|
|
|
|
|
|
|
|
|
|||||
Wholesale
|
635
|
|
|
1,727
|
|
|
(1,092
|
)
|
|
(63.2
|
)
|
|||
Direct-to-Consumer
|
298
|
|
|
76
|
|
|
222
|
|
|
292.1
|
|
|||
Total
|
933
|
|
|
1,803
|
|
|
(870
|
)
|
|
(48.3
|
)
|
|||
Total
|
$
|
283,169
|
|
|
$
|
276,839
|
|
|
$
|
6,330
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|||||||
Total Wholesale
|
$
|
143,321
|
|
|
$
|
196,571
|
|
|
$
|
(53,250
|
)
|
|
(27.1
|
)%
|
Total Direct-to-Consumer
|
139,848
|
|
|
80,268
|
|
|
59,580
|
|
|
74.2
|
|
|||
Total
|
$
|
283,169
|
|
|
$
|
276,839
|
|
|
$
|
6,330
|
|
|
2.3
|
%
|
•
|
Wholesale net sales of the UGG brand decreased primarily due to COVID-19 related sales losses due to store closures impacting our wholesale customers. On a constant currency basis, wholesale net sales of the UGG brand decreased by 48.5%, compared to the prior period.
|
•
|
Wholesale net sales of the HOKA brand increased due to the expansion of international distributor volume as well as continued sales growth driven by key franchise updates and new product launches.
|
•
|
Wholesale net sales of the Teva brand and the Sanuk brand decreased primarily due to COVID-19 related sales losses due to store closures impacting our wholesale customers.
|
•
|
DTC net sales increased due to higher e-commerce net sales, primarily for the UGG brand and HOKA brand, partially offset by negative impacts from company-owned retail store closures due to the COVID-19 pandemic. Due to the meaningful disruption of our retail store base throughout the quarter, we are not reporting a comparable DTC net sales metric for the first fiscal quarter.
|
•
|
International net sales, which are included in the reportable operating segment net sales presented above, decreased by 9.7%, compared to the prior period. International net sales represented 34.9% and 39.6% of total net sales for the three months ended June 30, 2020 and 2019, respectively. The decrease was primarily due to lower net sales in the wholesale channel for the UGG brand in Europe and Asia, including COVID-19 related sales losses, partially offset by higher net sales for the HOKA brand in our international markets, primarily in Europe.
|
•
|
Decreased variable operating expenses of approximately $8,100, primarily due to lower travel expenses and professional fees.
|
•
|
Decreased variable advertising and promotion expenses of approximately $3,300, primarily due to shifting the timing of regional marketing development costs.
|
•
|
Decreased rent and occupancy expenses of approximately $3,100, primarily due lower retail store operating costs.
|
•
|
Decreased payroll costs of approximately $2,300, primarily due to payroll tax credits, lower retail employee costs, and lower performance-based compensation for cash bonuses.
|
•
|
Decreased depreciation and amortization expenses of approximately $1,200, primarily due to certain property and equipment and intangible assets being fully amortized during the current period.
|
•
|
Increased expenses for allowances for trade accounts receivable of approximately $2,900, primarily due to an increase in bad debt expense to account for the higher risk of wholesale customer payment defaults resulting from the COVID-19 pandemic.
|
•
|
Increased impairments of operating lease and fixed assets of approximately $2,700 due to early store closures.
|
•
|
Increased other variable net selling expenses of approximately $1,200, including transaction fees and warehousing and shipping costs, primarily due to higher DTC sales and commissions.
|
|
Three Months Ended June 30,
|
|||||||||||||
|
2020
|
|
2019
|
|
Change
|
|||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|||||||
Income (loss) from operations
|
|
|
|
|
|
|
|
|||||||
UGG brand wholesale
|
$
|
(3,735
|
)
|
|
$
|
9,441
|
|
|
$
|
(13,176
|
)
|
|
(139.6
|
)%
|
HOKA brand wholesale
|
17,235
|
|
|
11,358
|
|
|
5,877
|
|
|
51.7
|
|
|||
Teva brand wholesale
|
4,202
|
|
|
8,316
|
|
|
(4,114
|
)
|
|
(49.5
|
)
|
|||
Sanuk brand wholesale
|
488
|
|
|
1,935
|
|
|
(1,447
|
)
|
|
(74.8
|
)
|
|||
Other brands wholesale
|
(1,270
|
)
|
|
132
|
|
|
(1,402
|
)
|
|
(1,062.1
|
)
|
|||
Direct-to-Consumer
|
31,027
|
|
|
(4,572
|
)
|
|
35,599
|
|
|
778.6
|
|
|||
Unallocated overhead costs
|
(55,646
|
)
|
|
(58,027
|
)
|
|
2,381
|
|
|
4.1
|
|
|||
Total
|
$
|
(7,699
|
)
|
|
$
|
(31,417
|
)
|
|
$
|
23,718
|
|
|
75.5
|
%
|
•
|
The increase in income from our DTC business was primarily due to higher net sales at higher gross margins and lower SG&A expenses as a percentage of net sales, primarily driven by lower retail store operating costs due to closures related to the COVID-19 pandemic, partially offset by higher variable marketing and selling expenses and retail store-related asset impairment charges.
|
•
|
The increase in loss from operations of UGG brand wholesale was due to lower net sales at lower gross margins and higher SG&A expenses as a percentage of net sales due to lower wholesale sales driven by the COVID-19 pandemic, partially offset by lower variable marketing and selling expenses.
|
•
|
The increase in income from operations of HOKA brand wholesale was due to higher net sales and lower SG&A expenses as a percentage of net sales, partially offset by lower gross margins.
|
•
|
The decrease in income from operations of Teva brands wholesale was due to lower sales at lower gross margins, partially offset by lower SG&A expenses as a percentage of net sales.
|
•
|
The decrease in unallocated overhead costs was primarily due to lower operating expenses, primarily for corporate travel expenses and professional costs.
|
|
Three Months Ended June 30,
|
||||||
|
2020
|
|
2019
|
||||
Income tax benefit
|
$
|
(99
|
)
|
|
$
|
(10,254
|
)
|
Effective income tax rate
|
1.2
|
%
|
|
34.6
|
%
|
|
Three Months Ended June 30,
|
|||||||||||||
|
2020
|
|
2019
|
|
Change
|
|||||||||
|
Amount
|
|
Amount
|
|
Amount
|
|
%
|
|||||||
Net cash provided by (used in) operating activities
|
$
|
21,169
|
|
|
$
|
(46,629
|
)
|
|
$
|
67,798
|
|
|
145.4
|
%
|
Net cash used in investing activities
|
(9,212
|
)
|
|
(7,166
|
)
|
|
(2,046
|
)
|
|
(28.6
|
)
|
|||
Net cash provided by (used in) financing activities
|
3
|
|
|
(32,752
|
)
|
|
32,755
|
|
|
100.0
|
|
|
|
Total number of shares repurchased*
|
|
Average price paid per share
|
|
Dollar value of shares repurchased
|
|
Dollar value of shares remaining for repurchase
|
|||||||
April 1 - April 30, 2020
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
159,807
|
|
May 1 - May 31, 2020
|
|
—
|
|
|
—
|
|
|
—
|
|
|
159,807
|
|
|||
June 1 - June 30, 2020
|
|
—
|
|
|
—
|
|
|
—
|
|
|
159,807
|
|
Exhibit
Number
|
|
Description of Exhibit
|
*10.1
|
|
|
*10.2
|
|
|
*31.1
|
|
|
*31.2
|
|
|
**32
|
|
|
*101.INS
|
|
XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
|
*101.SCH
|
|
Inline XBRL Taxonomy Extension Schema Document
|
*101.CAL
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
*101.DEF
|
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
|
*101.LAB
|
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
*101.PRE
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
*104
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
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, 2021: 33.33%
August 15, 2022: 33.33%
August 15, 2023: 33.34%
|
AWARDEE:
|
AWARDEE:
|
_______________________________________
Signature
|
By: ________________________________________
|
_______________________________________
Printed Name
|
Its: ________________________________________
|
_______________________________________
Residence Address
|
________________________________________
Date
|
_______________________________________
Date
|
|
If to the Company:
|
Deckers Outdoor Corporation
|
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
|
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(Principal Executive Officer)
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/s/ STEVEN J. FASCHING
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Steven J. Fasching
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Chief Financial Officer
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Deckers Outdoor Corporation
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(Principal Financial and Accounting Officer)
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Date:
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August 6, 2020
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