Company Quick10K Filing
Deckers Outdoor
Price136.25 EPS10
Shares29 P/E14
MCap3,957 P/FCF-29
Net Debt-178 EBIT382
TTM 2019-09-30, in MM, except price, ratios
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8-K 2018-02-01

DECK 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Note 1. General
Note 2. Revenue Recognition
Note 3. Goodwill and Other Intangible Assets
Note 4. Fair Value Measurements
Note 5. Income Taxes
Note 6. Revolving Credit Facilities and Mortgage Payable
Note 7. Leases and Other Commitments
Note 8. Stock - Based Compensation
Note 9. Derivative Instruments
Note 10. Stockholders' Equity
Note 11. Basic and Diluted Shares
Note 12. Reportable Operating Segments
Note 13. Concentration of Business
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 deck12312020exhibit311.htm
EX-31.2 deck12312020exhibit312.htm
EX-32 deck12312020exhibit32.htm

Deckers Outdoor Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
Assets, Equity
Rev, G Profit, Net Income
Ops, Inv, Fin


Washington, D.C. 20549


(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended December 31, 2020
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-36436

(Exact name of registrant as specified in its charter)

(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

250 Coromar Drive, Goleta, California 93117
(Address of principal executive offices and zip code)
(805) 967-7611
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Name of each exchange on which registered
Common Stock, par value $0.01 per shareDECKNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of the close of business on January 28, 2021, the number of outstanding shares of the registrant's common stock, par value $0.01 per share, was 28,169,920.

For the Three and Nine Months Ended December 31, 2020

Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.Defaults Upon Senior Securities*
Item 4.Mine Safety Disclosures*
Item 5.Other Information*
Item 6.

*Not applicable.


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This Quarterly Report on Form 10-Q for our third fiscal quarter ended December 31, 2020 (Quarterly Report), and the information and documents incorporated by reference within this Quarterly Report, contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements other than statements of historical fact contained in, or incorporated by reference within, this Quarterly Report. We have attempted to identify forward-looking statements by using words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” or “would,” and similar expressions or the negative of these expressions. Specifically, this Quarterly Report, and the information and documents incorporated by reference within this Quarterly Report, contains forward-looking statements relating to, among other things:

the impacts of the COVID-19 global pandemic on our business, financial condition, results of operations and liquidity, and the business, financial condition, results of operations and liquidity of our customers, suppliers, and business partners;
changes to our business resulting from changes in discretionary spending, consumer confidence, unemployment rates, retail store activity, tourist activity, or governmental restrictions;
the impact of government orders, local authority mandates and expert agency guidance on retail store closures and operating restrictions;
our business, operating, investing, capital allocation, marketing, and financing plans and strategies;
the expansion of our brands and product offerings;
changes to the geographic and seasonal mix of our brands and products;
changes to our product distribution strategies, including the implementation of our product allocation and segmentation strategies;
changes in consumer preferences impacting our brands and products, and the footwear and fashion industries;
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 capabilities, including our e-commerce platforms;
the operational challenges faced by our distribution center, our global third-party logistics providers, and third-party carriers, 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.

Forward-looking statements represent management’s current expectations and predictions about trends affecting our business and industry and are based on information available at the time such statements are made. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy or completeness. Forward-looking statements involve numerous known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements predicted, assumed, or implied by the forward-looking statements. Some of the risks and uncertainties that may cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in Part II, Item 1A, "Risk Factors," and Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," within this Quarterly Report, as well as in our other filings with the Securities and Exchange Commission (SEC). You should read this Quarterly Report, including the information and documents incorporated by reference herein, in its entirety and with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements. Moreover, new risks and uncertainties emerge from time to time and it is not possible for management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual future results to be materially different from any results expressed or implied by any forward-looking statements. Except as required by applicable law or the listing rules of the New York Stock Exchange, we expressly disclaim any intent or obligation to update any forward-looking statements. We qualify all our forward-looking statements with these cautionary statements.

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References within this Quarterly Report to "Deckers," "we," "our," "us," "management," or the "Company" refer to Deckers Outdoor Corporation, together with its consolidated subsidiaries. UGG® (UGG), HOKA ONE ONE® (HOKA), Teva® (Teva), Sanuk® (Sanuk), and Koolaburra® (Koolaburra) are some of the Company's trademarks. Other trademarks or trade names appearing elsewhere within this Quarterly Report are the property of their respective owners. Solely for convenience, the trademarks and trade names within this Quarterly Report are referred to without the ® and ™ symbols, but such references should not be construed as any indication that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

Unless otherwise indicated, all dollar amounts herein are expressed in thousands.


Table of Contents

(dollar and share data amounts in thousands, except par value)

December 31, 2020March 31, 2020
Cash and cash equivalents$1,156,556 $649,436 
Trade accounts receivable, net of allowances ($37,777 and $21,146 as of December 31, 2020 and March 31, 2020, respectively)
312,913 185,596 
Inventories, net of reserves ($17,382 and $12,227 as of December 31, 2020 and March 31, 2020, respectively)
305,298 311,620 
Prepaid expenses21,117 17,760 
Other current assets51,099 21,548 
Income tax receivable10,456 8,151 
Total current assets1,857,439 1,194,111 
Property and equipment, net of accumulated depreciation ($258,177 and $242,138 as of December 31, 2020 and March 31, 2020, respectively)
205,695 209,037 
Operating lease assets206,299 243,522 
Goodwill13,990 13,990 
Other intangible assets, net of accumulated amortization ($77,783 and $74,421 as of December 31, 2020 and March 31, 2020, respectively)
46,068 48,016 
Deferred tax assets, net27,546 28,233 
Other assets30,813 28,209 
Total assets$2,387,850 $1,765,118 
Short-term borrowings$663 $638 
Trade accounts payable303,013 147,892 
Accrued payroll58,410 42,309 
Operating lease liabilities47,774 49,091 
Other accrued expenses92,749 46,281 
Income taxes payable56,947 11,104 
Value added tax payable12,294 3,631 
Total current liabilities571,850 300,946 
Mortgage payable29,768 30,263 
Long-term operating lease liabilities186,934 215,724 
Income tax liability60,525 63,547 
Other long-term liabilities18,652 14,518 
Total long-term liabilities295,879 324,052 
Commitments and contingencies
Stockholders' equity
Common stock ($0.01 par value; 125,000 shares authorized; shares issued and outstanding of 28,152 and 27,999 as of December 31, 2020 and March 31, 2020, respectively)
282 280 
Additional paid-in capital208,064 191,451 
Retained earnings1,323,065 973,948 
Accumulated other comprehensive loss(11,290)(25,559)
Total stockholders' equity1,520,121 1,140,120 
Total liabilities and stockholders' equity$2,387,850 $1,765,118 

See accompanying notes to the condensed consolidated financial statements.

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(dollar and share data amounts in thousands, except per share data)
Three Months Ended December 31,Nine Months Ended December 31,
Net sales$1,077,759 $938,735 $1,984,453 $1,757,779 
Cost of sales463,862 431,103 909,013 847,104 
Gross profit613,897 507,632 1,075,440 910,675 
Selling, general, and administrative expenses285,242 251,866 625,880 589,195 
Income from operations328,655 255,766 449,560 321,480 
Interest income(593)(848)(1,719)(5,244)
Interest expense959 128 3,354 2,798 
Other income, net(267)(117)(523)(295)
Total other expense (income), net99 (837)1,112 (2,741)
Income before income taxes328,556 256,603 448,448 324,221 
Income tax expense73,020 55,010 99,331 64,169 
Net income255,536 201,593 349,117 260,052 
Other comprehensive income (loss)
Unrealized (loss) gain on cash flow hedges, net of tax(279)(973)(726)207 
Foreign currency translation gain (loss)7,947 2,667 14,995 (656)
Total other comprehensive income (loss)7,668 1,694 14,269 (449)
Comprehensive income$263,204 $203,287 $363,386 $259,603 
Net income per share
Basic$9.09 $7.21 $12.44 $9.12 
Diluted$8.99 $7.14 $12.30 $9.02 
Weighted-average common shares outstanding
Basic28,114 27,978 28,054 28,515 
Diluted28,410 28,249 28,375 28,832 

See accompanying notes to the condensed consolidated financial statements.

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(amounts in thousands)
Nine Months Ended December 31, 2020
Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders'
Common Stock
Balance, March 31, 202027,999 $280 $191,451 $973,948 $(25,559)$1,140,120 
Stock-based compensation1 — 3,618 — — 3,618 
Shares issued upon vesting1 — — — — — 
Exercise of stock options4 — 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, 202028,005 280 195,226 965,975 (24,553)1,136,928 
Stock-based compensation1 — 4,019 — — 4,019 
Shares issued upon vesting60 1 697 — — 698 
Exercise of stock options16 — 1,134 — — 1,134 
Shares withheld for taxes— — (6,964)— — (6,964)
Net income— — — 101,554 — 101,554 
Total other comprehensive income— — — — 5,595 5,595 
Balance, September 30, 202028,082 281 194,112 1,067,529 (18,958)1,242,964 
Stock-based compensation1 — 9,900 — — 9,900 
Shares issued upon vesting1 — — — — — 
Exercise of stock options68 1 4,201 — — 4,202 
Shares withheld for taxes— — (149)— — (149)
Net income— — — 255,536 — 255,536 
Total other comprehensive income— — — — 7,668 7,668 
Balance, December 31, 202028,152 $282 $208,064 $1,323,065 $(11,290)$1,520,121 

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(amounts in thousands)
Nine Months Ended December 31, 2019
Additional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Stockholders'
Common Stock
Balance, March 31, 201929,141 $291 $178,227 $889,266 $(22,654)$1,045,130 
Stock-based compensation 1 — 3,424 — — 3,424 
Shares issued upon vesting4 — — — — — 
Exercise of stock options46 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, 201928,965 290 184,049 833,843 (22,903)995,279 
Stock-based compensation 3 — 5,075 — — 5,075 
Shares issued upon vesting73 1 617 — — 618 
Exercise of stock options3 — 186 — — 186 
Shares withheld for taxes— — (5,370)— — (5,370)
Repurchases of common stock(1,069)(11)— (155,389)— (155,400)
Net income— — — 77,810 — 77,810 
Total other comprehensive loss— — — — (1,894)(1,894)
Balance, September 30, 201927,975 280 184,557 756,264 (24,797)916,304 
Stock-based compensation 1 — 4,221 — — 4,221 
Shares issued upon vesting3 — — — — — 
Exercise of stock options3 — 186 — — 186 
Shares withheld for taxes— — (251)— — (251)
Net income— — — 201,593 — 201,593 
Total other comprehensive income— — — — 1,694 1,694 
Balance, December 31, 201927,982 $280 $188,713 $957,857 $(23,103)$1,123,747 

See accompanying notes to the condensed consolidated financial statements.

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(amounts in thousands)
Nine Months Ended December 31,
Net income$349,117 $260,052 
Reconciliation of net income to net cash used in operating activities:
Depreciation, amortization, and accretion30,637 29,437 
Amortization on cloud computing arrangements420  
Bad debt expense6,392 693 
Deferred tax expense (benefit)1,859 (1,020)
Stock-based compensation17,559 12,766 
Excess tax benefit from stock-based compensation(1,687)(1,755)
Loss on disposal of property and equipment259 679 
Impairment of operating lease assets and other long-lived assets4,060 1,382 
Gain on settlement of asset retirement obligations(207) 
Changes in operating assets and liabilities:
Trade accounts receivable, net(133,708)(108,982)
Inventories, net6,321 (87,104)
Prepaid expenses and other current assets(32,387)(19,970)
Income tax receivable(2,305)(5,781)
Net operating lease assets and liabilities1,652 (1,692)
Other assets(3,023)(5,924)
Trade accounts payable152,797 119,794 
Other accrued expenses75,658 21,504 
Income taxes payable47,530 23,545 
Long-term liabilities1,318 1,101 
Net cash provided by operating activities522,262 238,725 
Purchases of property and equipment(21,300)(23,664)
Proceeds from sales of property and equipment49 266 
Net cash used in investing activities(21,251)(23,398)
Proceeds from short-term borrowings9,100 69,336 
Repayments of short-term borrowings(9,478)(63,178)
Proceeds from issuance of stock698 618 
Proceeds from exercise of stock options5,583 3,145 
Repurchases of common stock (190,405)
Cash paid for shares withheld for taxes(7,203)(5,995)
Repayments of mortgage principal(470)(448)
Net cash used in financing activities(1,770)(186,927)
Effect of foreign currency exchange rates on cash and cash equivalents7,879 (1,228)
Net change in cash and cash equivalents507,120 27,172 
Cash and cash equivalents at beginning of period649,436 589,692 
Cash and cash equivalents at end of period$1,156,556 $616,864 


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(amounts in thousands)
Nine Months Ended December 31,
Cash paid during the period
Income taxes, net of refunds of $1,489 and $5,302, as of December 31, 2020 and 2019, respectively
$56,957 $47,482 
Interest2,336 1,749 
Operating leases43,263 45,732 
Non-cash investing activities
Accrued for purchases of property and equipment1,900 1,444 
Accrued for asset retirement obligations1,595 38 

See accompanying notes to the condensed consolidated financial statements.

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For the Three and Nine Months Ended December 31, 2020 and 2019
(dollar amounts in thousands, except share and per share data)
Note 1. General

The Company

Deckers Outdoor Corporation and its wholly-owned subsidiaries (collectively, the Company) is a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyles use and high-performance activities. As part of its omni-channel platform, the Company's proprietary brands are aligned across its Fashion Lifestyle group, including the UGG and Koolaburra brands, and Performance Lifestyle group, including the HOKA, Teva, and Sanuk brands.

The Company sells its products through domestic and international retailers, international distributors, and directly to its global consumers through its Direct-to-Consumer (DTC) business, which is comprised of its retail stores and e‑commerce websites. Independent third-party contractors manufacture all of the Company's products. A significant part of the Company's business is seasonal, requiring it to build inventory levels during certain quarters in its fiscal year to support higher selling seasons, which contributes to the variation in its results from quarter to quarter.

Basis of Presentation

The unaudited condensed consolidated financial statements and accompanying notes thereto (referred to herein as condensed consolidated financial statements) as of December 31, 2020 and for the three and nine months ended December 31, 2020 and 2019 were prepared in accordance with accounting principles generally accepted in the United States (US GAAP) for interim financial information pursuant to Rule 10-01 of Regulation S-X issued by the SEC. Accordingly, they do not include all the information and disclosures required by US GAAP for annual financial statements and accompanying notes thereto. The condensed consolidated balance sheet as of March 31, 2020 was derived from the Company's audited consolidated financial statements. In the opinion of management, the condensed consolidated financial statements include all normal and recurring entries necessary to fairly present the results of the interim periods presented but are not necessarily indicative of results to be achieved for full fiscal years or other interim periods. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2020, which was filed with the SEC on June 1, 2020 (2020 Annual Report).

Consolidation. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Reclassifications. Certain reclassifications were made for prior periods presented to conform to the current period presentation.

Use of Estimates. The preparation of the Company's condensed consolidated financial statements in accordance with US GAAP requires management to make estimates and assumptions that affect the amounts reported. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting pronouncements, and other factors that management believes to be reasonable. In addition, the Company has considered the potential impact of the COVID-19 global pandemic (pandemic) on its business and operations. Although the full impact of the pandemic is unknown and cannot be reasonably estimated, the Company believes it has made appropriate accounting estimates and assumptions based on the facts and circumstances available as of the reporting date. However, actual results could differ materially from these estimates and assumptions, which may result in material effects on the Company's financial condition, results of operations, and liquidity. Actual results could differ as a result of a number of factors, including, without limitation, the severity and duration of the pandemic (including the potential for additional waves of the pandemic that may vary by geographic region); the timing and extent of governmental actions taken to control the spread and mitigate the impact of the pandemic; the impact of the pandemic on discretionary spending, consumer confidence, unemployment rates, and retail store security; the scope and timing of any governmental assistance provided in

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For the Three and Nine Months Ended December 31, 2020 and 2019
(dollar amounts in thousands, except share and per share data)
response to the impacts of the pandemic; and the impact of the pandemic on global economic conditions and financial markets.

Significant areas requiring the use of management estimates and assumptions relate to inventory write-downs; trade accounts receivable allowances, including variable consideration for net sales provided to customers; contract assets and liabilities; stock-based compensation; impairment assessments, including for goodwill, other intangible assets, and long-lived assets; depreciation and amortization; income tax receivables and liabilities; uncertain tax positions; the fair value of financial instruments; the reasonably certain lease term; lease classification; and the Company's incremental borrowing rate utilized to discount its unpaid lease payments to measure its operating lease assets and liabilities.

There is uncertainty as to the nature and scope of the continued impacts of the pandemic over time. This uncertainty has affected, and is expected to continue to affect, management’s accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions as additional information becomes available.

Reportable Operating Segments

The Company's six reportable operating segments include the worldwide wholesale operations for each of the UGG brand, HOKA brand, Teva brand, Sanuk brand, and Other brands, as well as DTC (referred to herein as reportable operating segments). Refer to Note 12, “Reportable Operating Segments,” for further information on the Company's reportable operating segments.

Recent Accounting Pronouncements

Recently Adopted. The Financial Accounting Standards Board (FASB) has issued Accounting Standard Updates (ASUs) that have been adopted by the Company for its annual and interim reporting periods as stated below. The following is a summary of each standard and the impact on the Company:
StandardDescriptionImpact on Adoption
ASU No. 2017-04, Intangibles—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.


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For the Three and Nine Months Ended December 31, 2020 and 2019
(dollar amounts in thousands, except share and per share data)
Not Yet Adopted. The FASB has issued the following ASUs that have not yet been adopted by the Company. The following is a summary of each standard, planned period of adoption, and the expected impact on the Company:
StandardDescriptionPlanned Period of AdoptionExpected 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 2022The 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
(as amended by ASU 2021-01)
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.
Q3 FY 2023The Company is currently evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements.

Note 2. Revenue Recognition

Revenue is recognized when a performance obligation is completed at a point in time and when the customer has obtained control. Control passes to the customer when they have the ability to direct the use of, and obtain substantially all the remaining benefits from, the goods transferred. The amount of revenue recognized is based on the transaction price, which represents the invoiced amount less known actual amounts or estimates of variable consideration. Components of variable consideration include estimated discounts, markdowns or chargebacks, and sales returns. Estimated variable consideration is included in the transaction price to the extent it is probable that a significant reversal of the cumulative revenue recognized will not occur in a future period.

The Company's customer contracts do not have a significant financing component due to their short durations, which are typically effective for one year or less and have payment terms that are generally 30-60 days.

Contract Assets and Liabilities

Contract assets represent the Company’s right to consideration subject to conditions other than the passage of time, such as additional performance obligations to be satisfied. Contract liabilities are performance obligations that the Company expects to satisfy or relieve within the next 12 months, advance consideration obtained prior to satisfying a performance obligation, or unconditional obligations to provide goods or services under non-cancelable contracts before the transfer of goods or services to the customer has occurred. Contract assets and liabilities are recorded in other current assets and other accrued expenses, respectively, in the condensed consolidated balance sheets.

Sales Returns. The following table provides activity during the nine months ended December 31, 2020 related to estimated sales returns for the Company’s existing customer contracts for all channels:
Contract AssetContract Liability
Balance, March 31, 2020$9,663 $(25,667)
Net additions to sales return allowance*33,883 (122,069)
Actual returns(27,234)93,787 
Balance, December 31, 2020$16,312 $(53,949)


Table of Contents
For the Three and Nine Months Ended December 31, 2020 and 2019
(dollar amounts in thousands, except share and per share data)
The following table provides activity during the nine months ended December 31, 2019 related to estimated sales returns for the Company’s existing customer contracts for all channels:
Contract AssetContract Liability
Balance, March 31, 2019$10,441 $(24,787)
Net additions to sales return allowance*28,186 (92,694)
Actual returns(25,415)78,437 
Balance, December 31, 2019$13,212 $(39,044)

*Net additions to sales return allowance include provision for anticipated sales returns which consists of both contractual return rights and discretionary authorized returns.

Loyalty Programs. The Company has a customer loyalty program for the UGG brand in its DTC channel where customers can earn rewards from qualifying purchases or activities. As of December 31, 2020 and March 31, 2020, the Company's contract liability for loyalty programs was $16,148 and $6,950, respectively.

Refer to Note 12, “Reportable Operating Segments,” for further information on the Company's disaggregation of revenue by reportable operating segment.

Note 3. Goodwill and Other Intangible Assets

Goodwill and Other Intangible Assets

The Company's goodwill and other intangible assets are recorded in the condensed consolidated balance sheets, as follows:
December 31, 2020March 31, 2020
UGG brand$6,101 $6,101 
HOKA brand7,889 7,889 
Total goodwill13,990 13,990 
Other intangible assets
Indefinite-lived intangible assets
Trademarks15,454 15,454 
Definite-lived intangible assets
Trademarks55,245 55,245 
Other53,152 51,738 
Total gross carrying amount108,397 106,983 
Accumulated amortization(77,783)(74,421)
Net definite-lived intangible assets30,614 32,562 
Total other intangible assets, net46,068 48,016 
Total $60,058 $62,006 

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For the Three and Nine Months Ended December 31, 2020 and 2019
(dollar amounts in thousands, except share and per share data)

Amortization Expense

Aggregate amortization expense for definite-lived intangible assets during the nine months ended December 31, 2020 and 2019 was $1,966 and $2,839, respectively. A reconciliation of the changes in total other intangible assets, net, recorded in the condensed consolidated balance sheets is as follows:
Balance, March 31, 2020$48,016 
Amortization expense(1,966)
Foreign currency translation net gain18 
Balance, December 31, 2020$46,068 

Note 4. Fair Value Measurements
The accounting standard for fair value measurements provides a framework for measuring fair value, which is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy under this accounting standard requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:

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.

The carrying amount of the Company’s financial instruments, which principally include cash and cash equivalents, trade accounts receivable, net, trade accounts payable, accrued payroll, and other accrued expenses, approximates fair value due to their short-term nature. The carrying amount of the Company’s short-term borrowings and mortgage payable, which are considered Level 2 liabilities, approximates fair value based upon current rates and terms available to the Company for similar debt.

Assets and liabilities that are measured on a recurring basis at fair value in the condensed consolidated balance sheets were as follows:
Measured Using
December 31, 2020Level 1Level 2Level 3
Non-qualified deferred compensation asset $7,771 $7,771 $ $ 
Non-qualified deferred compensation liability(6,288)(6,288)  
Designated Derivative Contracts liability(956) (956) 
Non-Designated Derivative Contracts liability(255) (255) 
Measured Using
March 31, 2020Level 1Level 2Level 3
Non-qualified deferred compensation asset $6,164 $6,164 $ $ 
Non-qualified deferred compensation liability(3,756)(3,756)  


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For the Three and Nine Months Ended December 31, 2020 and 2019
(dollar amounts in thousands, except share and per share data)
The Company sponsors a non-qualified deferred compensation plan that permits a select group of management employees to defer earnings to a future date on a non-qualified basis. Deferred compensation is recognized based on the fair value of the participants' accounts. A rabbi trust was established as a reserve for benefits payable under this plan, with the assets invested in Company-owned life insurance policies. As of December 31, 2020, the non-qualified deferred compensation asset of $7,771 was recorded in other assets in the condensed consolidated balance sheets. As of December 31, 2020, the non-qualified deferred compensation liability of $6,288 was recorded in the condensed consolidated balance sheets, with $806 in other accrued expenses and $5,482 in other long-term liabilities.

The Level 2 inputs consist of forward spot rates at the end of the applicable reporting period. The fair values of assets and liabilities associated with derivative instruments and hedging activities are recorded in other current assets and other accrued expenses, respectively, in the condensed consolidated balance sheets. Refer to Note 9, “Derivative Instruments,” for further information, including definitions of the terms Designated Derivative Contracts and Non-Designated Derivative Contracts.

Note 5. Income Taxes

Effective Income Tax Rate

Income tax expense and the effective income tax rate were as follows:
Three Months Ended December 31,Nine Months Ended December 31,
Income tax expense$73,020 $