(Mark One) | |
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
☒ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☐ | Smaller reporting company | ||
Emerging growth company |
Page | ||
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. | ||
• | 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 (DTC) 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. |
September 30, 2020 | March 31, 2020 | ||||||
ASSETS | (AUDITED) | ||||||
Cash and cash equivalents | $ | $ | |||||
Trade accounts receivable, net of allowances ($35,325 and $21,146 as of September 30, 2020 and March 31, 2020, respectively) | |||||||
Inventories, net of reserves ($18,735 and $12,227 as of September 30, 2020 and March 31,2020, respectively) | |||||||
Prepaid expenses | |||||||
Other current assets | |||||||
Income tax receivable | |||||||
Total current assets | |||||||
Property and equipment, net of accumulated depreciation ($246,835 and $242,138 as of September 30, 2020 and March 31, 2020, respectively) | |||||||
Operating lease assets | |||||||
Goodwill | |||||||
Other intangible assets, net of accumulated amortization ($76,484 and $74,421 as of September 30, 2020 and March 31, 2020, respectively) | |||||||
Deferred tax assets, net | |||||||
Other assets | |||||||
Total assets | $ | $ | |||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Short-term borrowings | $ | $ | |||||
Trade accounts payable | |||||||
Accrued payroll | |||||||
Operating lease liabilities | |||||||
Other accrued expenses | |||||||
Income taxes payable | |||||||
Value added tax payable | |||||||
Total current liabilities | |||||||
Mortgage payable | |||||||
Long-term operating lease liabilities | |||||||
Income tax liability | |||||||
Other long-term liabilities | |||||||
Total long-term liabilities | |||||||
Commitments and contingencies | |||||||
Stockholders' equity | |||||||
Common stock ($0.01 par value; 125,000 shares authorized; shares issued and outstanding of 28,082 and 27,999 as of September 30, 2020 and March 31, 2020, respectively) | |||||||
Additional paid-in capital | |||||||
Retained earnings | |||||||
Accumulated other comprehensive loss | ( | ) | ( | ) | |||
Total stockholders' equity | |||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net sales | $ | $ | $ | $ | |||||||||||
Cost of sales | |||||||||||||||
Gross profit | |||||||||||||||
Selling, general and administrative expenses | |||||||||||||||
Income from operations | |||||||||||||||
Interest income | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Interest expense | |||||||||||||||
Other income, net | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total other expense (income), net | ( | ) | ( | ) | |||||||||||
Income before income taxes | |||||||||||||||
Income tax expense | |||||||||||||||
Net income | |||||||||||||||
Other comprehensive income (loss) | |||||||||||||||
Unrealized (loss) gain on cash flow hedges, net of tax | ( | ) | ( | ) | |||||||||||
Foreign currency translation gain (loss) | ( | ) | ( | ) | |||||||||||
Total other comprehensive income (loss) | ( | ) | ( | ) | |||||||||||
Comprehensive income | $ | $ | $ | $ | |||||||||||
Net income per share | |||||||||||||||
Basic | $ | $ | $ | $ | |||||||||||
Diluted | $ | $ | $ | $ | |||||||||||
Weighted-average common shares outstanding | |||||||||||||||
Basic | |||||||||||||||
Diluted |
Six Months Ended September 30, 2020 | ||||||||||||||||||||||
Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||
Common Stock | ||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance, March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Stock-based compensation | — | — | — | |||||||||||||||||||
Shares issued upon vesting | — | — | — | — | ||||||||||||||||||
Exercise of stock options | — | — | — | |||||||||||||||||||
Shares withheld for taxes | — | — | ( | ) | — | — | ( | ) | ||||||||||||||
Net loss | — | — | — | ( | ) | — | ( | ) | ||||||||||||||
Total other comprehensive income | — | — | — | — | ||||||||||||||||||
Balance, June 30, 2020 | ( | ) | ||||||||||||||||||||
Stock-based compensation | — | — | — | |||||||||||||||||||
Shares issued upon vesting | — | — | ||||||||||||||||||||
Exercise of stock options | — | — | — | |||||||||||||||||||
Shares withheld for taxes | — | — | ( | ) | — | — | ( | ) | ||||||||||||||
Net income | — | — | — | — | ||||||||||||||||||
Total other comprehensive income | — | — | — | — | ||||||||||||||||||
Balance, September 30, 2020 | $ | $ | $ | $ | ( | ) | $ |
Six Months Ended September 30, 2019 | ||||||||||||||||||||||
Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||
Common Stock | ||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||
Balance, March 31, 2019 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||
Stock-based compensation | — | — | — | |||||||||||||||||||
Shares issued upon vesting | — | — | — | — | ||||||||||||||||||
Exercise of stock options | — | — | ||||||||||||||||||||
Cumulative adjustment from adoption of recent accounting pronouncements | — | — | — | ( | ) | — | ( | ) | ||||||||||||||
Shares withheld for taxes | — | — | ( | ) | — | — | ( | ) | ||||||||||||||
Repurchases of common stock | ( | ) | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||
Net loss | — | — | — | ( | ) | — | ( | ) | ||||||||||||||
Total other comprehensive loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Balance, June 30, 2019 | ( | ) | ||||||||||||||||||||
Stock-based compensation | — | — | — | |||||||||||||||||||
Shares issued upon vesting | — | — | ||||||||||||||||||||
Exercise of stock options | — | — | — | |||||||||||||||||||
Shares withheld for taxes | — | — | ( | ) | — | — | ( | ) | ||||||||||||||
Repurchases of common stock | ( | ) | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||
Net income | — | — | — | — | ||||||||||||||||||
Total other comprehensive loss | — | — | — | — | ( | ) | ( | ) | ||||||||||||||
Balance, September 30, 2019 | $ | $ | $ | $ | ( | ) | $ |
Six Months Ended September 30, | |||||||
2020 | 2019 | ||||||
OPERATING ACTIVITIES | |||||||
Net income | $ | $ | |||||
Reconciliation of net income to net cash used in operating activities: | |||||||
Depreciation, amortization and accretion | |||||||
Bad debt expense | |||||||
Deferred tax expense (benefit) | ( | ) | |||||
Stock-based compensation | |||||||
Excess tax benefit from stock-based compensation | ( | ) | ( | ) | |||
Loss on disposal of property and equipment | |||||||
Impairment of operating lease assets and other long-lived assets | |||||||
Changes in operating assets and liabilities: | |||||||
Trade accounts receivable, net | ( | ) | ( | ) | |||
Inventories, net | ( | ) | ( | ) | |||
Prepaid expenses and other current assets | ( | ) | ( | ) | |||
Income tax receivable | ( | ) | ( | ) | |||
Net operating lease assets and liabilities | ( | ) | ( | ) | |||
Other assets | ( | ) | ( | ) | |||
Trade accounts payable | |||||||
Other accrued expenses | ( | ) | |||||
Income taxes payable | ( | ) | |||||
Long-term liabilities | ( | ) | ( | ) | |||
Net cash used in operating activities | ( | ) | ( | ) | |||
INVESTING ACTIVITIES | |||||||
Purchases of property and equipment | ( | ) | ( | ) | |||
Proceeds from sales of property and equipment | |||||||
Net cash used in investing activities | ( | ) | ( | ) | |||
FINANCING ACTIVITIES | |||||||
Proceeds from short-term borrowings | |||||||
Repayments of short-term borrowings | ( | ) | |||||
Proceeds from issuance of stock | |||||||
Proceeds from exercise of stock options | |||||||
Repurchases of common stock | ( | ) | |||||
Cash paid for shares withheld for taxes | ( | ) | ( | ) | |||
Repayments of mortgage principal | ( | ) | ( | ) | |||
Net cash provided by (used in) financing activities | ( | ) | |||||
Effect of foreign currency exchange rates on cash and cash equivalents | ( | ) | |||||
Net change in cash and cash equivalents | ( | ) | ( | ) | |||
Cash and cash equivalents at beginning of period | |||||||
Cash and cash equivalents at end of period | $ | $ |
Six Months Ended September 30, | |||||||
2020 | 2019 | ||||||
SUPPLEMENTAL CASH FLOW DISCLOSURE | |||||||
Cash paid during the period | |||||||
Income taxes, net of refunds of $1,292 and $5,282, as of September 30, 2020 and 2019, respectively | $ | $ | |||||
Interest | |||||||
Operating leases | |||||||
Non-cash investing activities | |||||||
Accrued for purchases of property and equipment | |||||||
Accrued for asset retirement obligations |
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. |
Standard | Description | Planned Period of Adoption | Expected Impact on Adoption | |||
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. | Q3 FY 2023 | The Company is currently evaluating the impact of the adoption of this ASU on its condensed consolidated financial statements. |
Contract Asset | Contract Liability | ||||||
Balance, March 31, 2020 | $ | $ | ( | ) | |||
Net additions to sales return allowance* | ( | ) | |||||
Actual returns | ( | ) | |||||
Balance, September 30, 2020 | $ | $ | ( | ) |
Contract Asset | Contract Liability | ||||||
Balance, March 31, 2019 | $ | $ | ( | ) | |||
Net additions to sales return allowance* | ( | ) | |||||
Actual returns | ( | ) | |||||
Balance, September 30, 2019 | $ | $ | ( | ) |
September 30, 2020 | March 31, 2020 | ||||||
Goodwill | |||||||
UGG brand | $ | $ | |||||
HOKA brand | |||||||
Total goodwill | |||||||
Other intangible assets | |||||||
Indefinite-lived intangible assets | |||||||
Trademarks | |||||||
Definite-lived intangible assets | |||||||
Trademarks | |||||||
Other | |||||||
Total gross carrying amount | |||||||
Accumulated amortization | ( | ) | ( | ) | |||
Net definite-lived intangible assets | |||||||
Total other intangible assets, net | |||||||
Total | $ | $ |
Balance, March 31, 2020 | $ | ||
Amortization expense | ( | ) | |
Foreign currency translation net gain | |||
Balance, September 30, 2020 | $ |
• | 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 | |||||||||||||||
September 30, 2020 | Level 1 | Level 2 | Level 3 | ||||||||||||
Non-qualified deferred compensation asset | $ | $ | $ | — | $ | — | |||||||||
Non-qualified deferred compensation liability | ( | ) | ( | ) | — | — | |||||||||
Designated Derivative Contracts asset | — | — | |||||||||||||
Designated Derivative Contracts liability | ( | ) | — | ( | ) | — | |||||||||
Non-Designated Derivative Contracts asset | — | — |
Measured Using | |||||||||||||||
March 31, 2020 | Level 1 | Level 2 | Level 3 | ||||||||||||
Non-qualified deferred compensation asset | $ | $ | $ | — | $ | — | |||||||||
Non-qualified deferred compensation liability | ( | ) | ( | ) | — | — |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Income tax expense | $ | $ | $ | $ | |||||||||||
Effective income tax rate | % | % | % | % |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Non-cash operating activities | |||||||||||||||
Operating lease assets obtained in exchange for lease liabilities* | $ | $ | $ | $ | |||||||||||
Reductions to operating lease assets for reductions to lease liabilities* | ( | ) | ( | ) | ( | ) | ( | ) |
Six Months Ended September 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 | $ | $ | ||||||||||||
Annual PSUs | ||||||||||||||
Total | $ | $ |
Designated Derivative Contracts | Non-Designated Derivative Contracts | Total | |||||||||
Notional value | $ | $ | $ | ||||||||
Fair value recorded in other current assets | |||||||||||
Fair value recorded in other accrued expenses |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Loss) gain recorded in OCI | $ | ( | ) | $ | $ | ( | ) | $ | |||||||
Reclassifications from AOCL into net sales | ( | ) | ( | ) | |||||||||||
Income tax benefit (expense) in OCI | ( | ) | ( | ) | |||||||||||
Total | $ | ( | ) | $ | $ | ( | ) | $ |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Gain recorded in SG&A expenses | $ | $ | $ | $ |
September 30, 2020 | March 31, 2020 | ||||||
Unrealized loss on cash flow hedges, net of tax | $ | ( | ) | $ | |||
Cumulative foreign currency translation loss | ( | ) | ( | ) | |||
Total | $ | ( | ) | $ | ( | ) |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
Basic | |||||||||||
Dilutive effect of equity awards | |||||||||||
Diluted | |||||||||||
Excluded* | |||||||||||
Annual RSUs and Annual PSUs | |||||||||||
LTIP PSUs | |||||||||||
LTIP NQSOs | |||||||||||
Deferred Non-Employee Director Equity Awards |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net sales | |||||||||||||||
UGG brand wholesale | $ | $ | $ | $ | |||||||||||
HOKA brand wholesale | |||||||||||||||
Teva brand wholesale | |||||||||||||||
Sanuk brand wholesale | |||||||||||||||
Other brands wholesale | |||||||||||||||
Direct-to-Consumer | |||||||||||||||
Total | $ | $ | $ | $ |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Income (loss) from operations | |||||||||||||||
UGG brand wholesale | $ | $ | $ | $ | |||||||||||
HOKA brand wholesale | |||||||||||||||
Teva brand wholesale | |||||||||||||||
Sanuk brand wholesale | |||||||||||||||
Other brands wholesale | |||||||||||||||
Direct-to-Consumer | ( | ) | |||||||||||||
Unallocated overhead costs | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Total | $ | $ | $ | $ |
September 30, 2020 | March 31, 2020 | ||||||
Assets | |||||||
UGG brand wholesale | $ | $ | |||||
HOKA brand wholesale | |||||||
Teva brand wholesale | |||||||
Sanuk brand wholesale | |||||||
Other brands wholesale | |||||||
Direct-to-Consumer | |||||||
Total assets from reportable operating segments | |||||||
Unallocated cash and cash equivalents | |||||||
Unallocated deferred tax assets, net | |||||||
Unallocated other corporate assets | |||||||
Total | $ | $ |
Three Months Ended September 30, | Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
International net sales | $ | $ | $ | $ | |||||||||||
% of net sales | % | % | % | % | |||||||||||
Net sales in foreign currencies | $ | $ | $ | $ | |||||||||||
% of net sales | % | % | % | % | |||||||||||
Ten largest customers as % of net sales | % | % | % | % |
September 30, 2020 | March 31, 2020 | ||||||
US | $ | $ | |||||
Foreign* | |||||||
Total | $ | $ |
• | As a result of various government orders and restrictions imposed in connection with the pandemic, as well as changes in consumer behavior in response, we closed many of our company-owned-and-operated stores at the beginning of our first fiscal quarter ended June 30, 2020. However, approximately 95% of our global retail stores were open for the entire second fiscal quarter, although, in most cases, with limited capacity due to enhanced health and safety protocols. We expect some retail store closures for at least a portion of the third fiscal quarter based on recently imposed governmental restrictions and local authority mandates. In addition, given the ongoing and uncertain pandemic conditions, including the potential for additional waves of the pandemic and additional operating limitations based on expert agency guidance, there is a risk of ongoing or additional retail store closures and operating limitations. |
• | We expect the scope of allowable retail activities and retail consumer traffic patterns to vary by geographic region due to restrictions imposed by governmental authorities and expert agencies, the demand for our products and consumer response to the pandemic, and the actual and expected regional impact of the pandemic. In an attempt to mitigate the impact of operating our retail stores at limited capacity, we have expanded the use of technology at these locations, including the implementation of mobile point-of-sales systems. However, notwithstanding these efforts, we could experience decreased demand or capacity threshold constraints at our retail stores during the holiday season due to social distancing restrictions, limitations on staffing, or changes in consumer behavior in response to the pandemic. |
• | We believe that many of our wholesale customers and retail partners experienced retail store closures and re-openings similar to our company-owned retail stores during the six months ended September 30, 2020. Although many of our wholesale customers have reopened their retail stores, we believe that many of these stores continue to operate at limited capacity and could continue to experience limited operations or additional closures depending on the future impact of the pandemic. |
• | We operate our e-commerce business through various websites and platforms, which have remained operational throughout the pandemic, and we expect they will continue to remain operational. To help drive digital conversion in Europe, we have recently expanded consumer access and improved ease of use by offering additional languages, currencies, and local payment types to our e-commerce platform. |
• | Even prior to the retail store operating disruptions resulting from the 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 consumers accelerated their migration to online shopping. These trends have been positively impacting the performance of our e-commerce business, while creating headwinds for our traditional retail business, as well as the retail businesses of our wholesale customers and retail partners. |
• | During the six months ended September 30, 2020, we observed strong demand across all of our brands within our e-commerce business, particularly within the UGG and HOKA brands. We also observed that our wholesale customers with an established e-commerce presence, experienced similarly strong demand trends, although such 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 their e-commerce platforms. In future periods, we do not expect the growth rate that our e-commerce business experienced during the six months ended September 30, 2020 to continue to occur or that our e-commerce business will be able to offset a possible reduction in UGG brand sales within our wholesale and retail businesses during peak season resulting from the impacts of the 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 that our e-commerce business experienced during the six months ended September 30, 2020 will continue throughout the fiscal year. We believe the key factors impacting the growth rate of our e-commerce business will include consumer demand for our products, our ability to fulfill orders through our limited distribution center operations, the scope and duration of the pandemic, and the impact of the pandemic on unemployment rates, consumer confidence, discretionary spending, and economic conditions. |
• | In response to the pandemic, we are exercising discipline by focusing on key products that have achieved sustained success with consumers, delaying product launches, and consolidating seasonal collections. |
• | Our ongoing 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. |
• | Within the UGG brand, we have experienced strong sell-through of certain product lines, such as 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 with counter-seasonal products, such as spring and summer collections for Women's, Men's, and Kid's categories. The brand is also having success attracting new and younger consumers. However, the UGG brand is experiencing some softness within the wholesale channel globally, in part due to the pandemic, but also due to our marketplace reset strategy in Europe. |
• | 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 during the 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 the growth rate we have recently experienced. |
• | The Sanuk and Teva brands wholesale channel results of operations during the six months ended September 30, 2020 experienced 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. |
• | We maintain a network of strategic sourcing partners which includes material vendors and third-party manufacturers. We experienced certain capacity constraints within our sourcing network during the six months ended September 30, 2020, in addition to disruptions related to travel restrictions between countries 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 we will experience disruptions to our supply chain in the future. |
• | Our Moreno Valley, California, distribution center (DC), as well as our global third-party logistics providers (3PLs) and third-party carriers, remain open and continue to operate at reduced capacity and with limited and modified operations due to increased safety measures. These include inbound transportation such as ocean, air and ports, as well as outbound transportation, including truck and parcel. We are experiencing, and our 3PLs and third-party carriers are experiencing, certain operational and logistical challenges as a result of limited and modified operations, including challenges associated with shipping higher quantities of product through our e-commerce channel compared to prior periods, and a higher volume of wholesale shipments as we approach the peak selling season for the UGG brand. These impacts have had, and may continue to have, an adverse effect on our results of operations. Additionally, in order to promote the health and safety of our DC employees, we continue to adhere to enhanced safety measures and protocols at our DC, including strict social distancing requirements which is limiting our personnel capacity, as well as heightened cleaning of the facility in accordance with Center for Disease Control and Prevention guidelines. |
• | 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 certain wholesale shipments earlier than in previous fiscal years, which |
• | We are encountering challenges in 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 pandemic may result in a larger short-term pool of employee candidates, 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 and build a foundation of diversified product acceptance. We expect the 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 localized marketing activations, authentic collaborations, and product seeding to drive global brand heat. For example, we have begun applying these transformation efforts in Europe and Asia to drive UGG brand heat as we work to differentiate consumer experiences across various consumer touch points as part of our marketplace reset strategy. In addition, we have recently launched international loyalty programs in our DTC business. Further, and in response to the 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 pandemic. Notwithstanding the challenging environment, as of September 30, 2020, our cash and cash equivalents balance was $626,414, and we had available borrowings of $462,606 under our revolving credit facilities, providing a strong liquidity position of approximately $1,100,000. We are currently in compliance with, and expect to remain in compliance, with all financial and non-financial covenants under our revolving credit facilities and mortgage. Refer to sections “Liquidity” and “Capital Resources” below, within this Part I, Item 2, for further information. |
• | We did not repurchase any shares during the six months ended September 30, 2020. However, 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 pandemic may have on our business and operations, we expect to continue to manage expenses. In particular, we have implemented a number of temporary measures to reduce operating expenses during the six months ended September 30, 2020, 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 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 September 30, | ||||||||||||||||||||
2020 | 2019 | Change | ||||||||||||||||||
Amount | % | Amount | % | Amount | % | |||||||||||||||
Net sales | $ | 623,525 | 100.0 | % | $ | 542,205 | 100.0 | % | $ | 81,320 | 15.0 | % | ||||||||
Cost of sales | 304,548 | 48.8 | 269,181 | 49.6 | (35,367 | ) | (13.1 | ) | ||||||||||||
Gross profit | 318,977 | 51.2 | 273,024 | 50.4 | 45,953 | 16.8 | ||||||||||||||
Selling, general and administrative expenses | 190,373 | 30.6 | 175,893 | 32.4 | (14,480 | ) | (8.2 | ) | ||||||||||||
Income from operations | 128,604 | 20.6 | 97,131 | 18.0 | 31,473 | 32.4 | ||||||||||||||
Other expense (income), net | 640 | 0.1 | (92 | ) | — | (732 | ) | (795.7 | ) | |||||||||||
Income before income taxes | 127,964 | 20.5 | 97,223 | 18.0 | 30,741 | 31.6 | ||||||||||||||
Income tax expense | 26,410 | 4.2 | 19,413 | 3.6 | (6,997 | ) | (36.0 | ) | ||||||||||||
Net income | 101,554 | 16.3 | 77,810 | 14.4 | 23,744 | 30.5 | ||||||||||||||
Total other comprehensive income (loss), net of tax | 5,595 | 0.9 | (1,894 | ) | (0.4 | ) | 7,489 | 395.4 | ||||||||||||
Comprehensive income | $ | 107,149 | 17.2 | % | $ | 75,916 | 14.0 | % | $ | 31,233 | 41.1 | % | ||||||||
Net income per share | ||||||||||||||||||||
Basic | $ | 3.62 | $ | 2.73 | $ | 0.89 | ||||||||||||||
Diluted | $ | 3.58 | $ | 2.71 | $ | 0.87 |
Three Months Ended September 30, | ||||||||||||||
2020 | 2019 | Change | ||||||||||||
Amount | Amount | Amount | % | |||||||||||
Net sales by location | ||||||||||||||
US | $ | 427,412 | $ | 357,971 | $ | 69,441 | 19.4 | % | ||||||
International | 196,113 | 184,234 | 11,879 | 6.4 | ||||||||||
Total | $ | 623,525 | $ | 542,205 | $ | 81,320 | 15.0 | % | ||||||
Net sales by brand and channel | ||||||||||||||
UGG brand | ||||||||||||||
Wholesale | $ | 291,994 | $ | 332,020 | $ | (40,026 | ) | (12.1 | )% | |||||
Direct-to-Consumer | 123,083 | 72,856 | 50,227 | 68.9 | ||||||||||
Total | 415,077 | 404,876 | 10,201 | 2.5 | ||||||||||
HOKA brand | ||||||||||||||
Wholesale | 108,117 | 60,959 | 47,158 | 77.4 | ||||||||||
Direct-to-Consumer | 34,980 | 17,150 | 17,830 | 104.0 | ||||||||||
Total | 143,097 | 78,109 | 64,988 | 83.2 | ||||||||||
Teva brand | ||||||||||||||
Wholesale | 17,746 | 17,091 | 655 | 3.8 | ||||||||||
Direct-to-Consumer | 9,972 | 5,907 | 4,065 | 68.8 | ||||||||||
Total | 27,718 | 22,998 | 4,720 | 20.5 |
Three Months Ended September 30, | ||||||||||||||
2020 | 2019 | Change | ||||||||||||
Amount | Amount | Amount | % | |||||||||||
Sanuk brand | ||||||||||||||
Wholesale | 6,085 | 8,166 | (2,081 | ) | (25.5 | ) | ||||||||
Direct-to-Consumer | 3,396 | 2,538 | 858 | 33.8 | ||||||||||
Total | 9,481 | 10,704 | (1,223 | ) | (11.4 | ) | ||||||||
Other brands | ||||||||||||||
Wholesale | 27,672 | 25,282 | 2,390 | 9.5 | ||||||||||
Direct-to-Consumer | 480 | 236 | 244 | 103.4 | ||||||||||
Total | 28,152 | 25,518 | 2,634 | 10.3 | ||||||||||
Total | $ | 623,525 | $ | 542,205 | $ | 81,320 | 15.0 | % | ||||||
Total Wholesale | $ | 451,614 | $ | 443,518 | $ | 8,096 | 1.8 | % | ||||||
Total Direct-to-Consumer | 171,911 | 98,687 | 73,224 | 74.2 | ||||||||||
Total | $ | 623,525 | $ | 542,205 | $ | 81,320 | 15.0 | % |
• | Wholesale net sales of the HOKA brand increased due to the global expansion of market share, primarily due to increased brand awareness combined with key franchise updates and product launches during the second fiscal quarter that were delayed from the first fiscal quarter. |
• | Wholesale net sales of the UGG brand decreased primarily due to lower global sell-in of product. This was primarily driven by more conservative purchasing from our global wholesale partners due to the pandemic. International wholesale sales were also lower due to the continued marketplace strategies in Europe and Asia. On a constant currency basis, wholesale net sales of the UGG brand decreased by 13.0%, compared to the prior period. |
• | DTC net sales increased due to higher e-commerce net sales across all brands, primarily for the UGG and HOKA brands. Comparable DTC net sales for the 13 weeks ended September 27, 2020 increased by 86.2%, compared to the same prior period, primarily due to global growth through customer acquisition in our e-commerce business driven by an acceleration of the shift in the way consumers shop for products as a result of the pandemic. |
• | International sales, which are included in the reportable operating segment sales presented above, represented 31.5% and 34.0% of total net sales for the three months ended September 30, 2020 and 2019, respectively. The decrease in international net sales as a percentage of total sales was primarily driven by higher domestic sales as a percentage of worldwide sales due to higher e-commerce sales. However, international net sales increased by 6.4% compared to the prior period. The increase in international sales was primarily due to higher net sales for the HOKA brand primarily in Europe and Asia, partially offset by lower net sales in the wholesale channel for the UGG brand. |
• | Increased variable advertising and promotion expenses of approximately $8,900, primarily due to regional marketing development costs such as websites and other media. |
• | Increased payroll costs of approximately $6,500, primarily due to higher warehousing costs and headcount. |
• | Increased other variable net selling expenses of approximately $5,800, including transaction fees and warehousing and shipping costs, primarily due to higher DTC sales and commissions. |
• | Increased expenses for allowances for trade accounts receivable of approximately $2,600, primarily due to an increase in bad debt expense to account for the higher risk of wholesale customer payment defaults resulting from the pandemic. |
• | Decreased variable operating expenses of approximately $4,500, primarily due to lower travel expenses and professional fees. |
• | Decreased rent and occupancy expenses of approximately $3,000, primarily due to lower retail store operating costs, including due to a lower company-owned retail store count. |
• | Decreased foreign currency-related losses of $2,000, primarily driven by favorable changes in foreign currency exchange rates for Asian and European currencies. |
Three Months Ended September 30, | ||||||||||||||
2020 | 2019 | Change | ||||||||||||
Amount | Amount | Amount | % | |||||||||||
Income (loss) from operations | ||||||||||||||
UGG brand wholesale | $ | 106,726 | $ | 135,663 | $ | (28,937 | ) | (21.3 | )% | |||||
HOKA brand wholesale | 33,826 | 14,054 | 19,772 | 140.7 | ||||||||||
Teva brand wholesale | 4,762 | 3,523 | 1,239 | 35.2 | ||||||||||
Sanuk brand wholesale | 1,139 | 238 | 901 | 378.6 | ||||||||||
Other brands wholesale | 9,869 | 6,958 | 2,911 | 41.8 | ||||||||||
Direct-to-Consumer | 43,284 | 2,935 | 40,349 | 1,374.8 | ||||||||||
Unallocated overhead costs | (71,002 | ) | (66,240 | ) | (4,762 | ) | (7.2 | ) | ||||||
Total | $ | 128,604 | $ | 97,131 | $ | 31,473 | 32.4 | % |
• | The increase in income from operations of DTC was primarily due to higher net sales at higher gross margins, partially offset by higher variable marketing and selling expenses. |
• | The decrease in income from operations of UGG brand wholesale was due to lower net sales at lower gross margins and higher bad debt expense, partially offset by lower variable selling and marketing expenses. |
• | The increase in income from operations of HOKA brand wholesale was primarily due to higher net sales, partially offset by higher variable marketing expenses. |
• | The increase in unallocated overhead costs was primarily due to higher warehousing expenses, including for payroll and outside services, partially offset by lower travel expenses and lower foreign currency-related losses driven by favorable changes in foreign currency exchange rates for all operational foreign currencies. |
Three Months Ended September 30, | |||||||
2020 | 2019 | ||||||
Income tax expense | $ | 26,410 | $ | 19,413 | |||
Effective income tax rate | 20.6 | % | 20.0 | % |
Six Months Ended September 30, | ||||||||||||||||||||
2020 | 2019 | Change | ||||||||||||||||||
Amount | % | Amount | % | Amount | % | |||||||||||||||
Net sales | $ | 906,694 | 100.0 | % | $ | 819,044 | 100.0 | % | $ | 87,650 | 10.7 | % | ||||||||
Cost of sales | 445,151 | 49.1 | 416,001 | 50.8 | (29,150 | ) | (7.0 | ) | ||||||||||||
Gross profit | 461,543 | 50.9 | 403,043 | 49.2 | 58,500 | 14.5 | ||||||||||||||
Selling, general and administrative expenses | 340,638 | 37.6 | 337,329 | 41.2 | (3,309 | ) | (1.0 | ) | ||||||||||||
Income from operations | 120,905 | 13.3 | 65,714 | 8.0 | 55,191 | 84.0 | ||||||||||||||
Other expense (income), net | 1,013 | 0.1 | (1,904 | ) | (0.3 | ) | (2,917 | ) | (153.2 | ) | ||||||||||
Income before income taxes | 119,892 | 13.2 | 67,618 | 8.3 | 52,274 | 77.3 | ||||||||||||||
Income tax expense | 26,311 | 2.9 | 9,159 | 1.2 | (17,152 | ) | (187.3 | ) | ||||||||||||
Net income | 93,581 | 10.3 | 58,459 | 7.1 | 35,122 | 60.1 | ||||||||||||||
Total other comprehensive income (loss), net of tax | 6,601 | 0.7 | (2,143 | ) | (0.2 | ) | 8,744 | 408.0 | ||||||||||||
Comprehensive income | $ | 100,182 | 11.0 | % | $ | 56,316 | 6.9 | % | $ | 43,866 | 77.9 | % | ||||||||
Net income per share | ||||||||||||||||||||
Basic | $ | 3.34 | $ | 2.03 | $ | 1.31 | ||||||||||||||
Diluted | $ | 3.30 | $ | 2.01 | $ | 1.29 |
Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | Change | ||||||||||||
Amount | Amount | Amount | % | |||||||||||
Net sales by location | ||||||||||||||
US | $ | 611,712 | $ | 525,266 | $ | 86,446 | 16.5 | % | ||||||
International | 294,982 | 293,778 | 1,204 | 0.4 | ||||||||||
Total | $ | 906,694 | $ | 819,044 | $ | 87,650 | 10.7 | % | ||||||
Net sales by brand and channel | ||||||||||||||
UGG brand | ||||||||||||||
Wholesale | $ | 335,422 | $ | 417,420 | $ | (81,998 | ) | (19.6 | )% | |||||
Direct-to-Consumer | 204,395 | 125,986 | 78,409 | 62.2 | ||||||||||
Total | 539,817 | 543,406 | (3,589 | ) | (0.7 | ) | ||||||||
HOKA brand | ||||||||||||||
Wholesale | 178,736 | 124,965 | 53,771 | 43.0 | ||||||||||
Direct-to-Consumer | 73,379 | 32,668 | 40,711 | 124.6 | ||||||||||
Total | 252,115 | 157,633 | 94,482 | 59.9 | ||||||||||
Teva brand | ||||||||||||||
Wholesale | 39,157 | 47,922 | (8,765 | ) | (18.3 | ) | ||||||||
Direct-to-Consumer | 23,805 | 13,360 | 10,445 | 78.2 | ||||||||||
Total | 62,962 | 61,282 | 1,680 | 2.7 | ||||||||||
Sanuk brand | ||||||||||||||
Wholesale | 13,313 | 22,773 | (9,460 | ) | (41.5 | ) | ||||||||
Direct-to-Consumer | 9,402 | 6,629 | 2,773 | 41.8 | ||||||||||
Total | 22,715 | 29,402 | (6,687 | ) | (22.7 | ) |
Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | Change | ||||||||||||
Amount | Amount | Amount | % | |||||||||||
Other brands | ||||||||||||||
Wholesale | 28,307 | 27,009 | 1,298 | 4.8 | ||||||||||
Direct-to-Consumer | 778 | 312 | 466 | 149.4 | ||||||||||
Total | 29,085 | 27,321 | 1,764 | 6.5 | ||||||||||
Total | $ | 906,694 | $ | 819,044 | $ | 87,650 | 10.7 | % | ||||||
Total Wholesale | $ | 594,935 | $ | 640,089 | $ | (45,154 | ) | (7.1 | )% | |||||
Total Direct-to-Consumer | 311,759 | 178,955 | 132,804 | 74.2 | ||||||||||
Total | $ | 906,694 | $ | 819,044 | $ | 87,650 | 10.7 | % |
• | Wholesale net sales of the UGG brand decreased primarily due to lower global sell-in of product, primarily driven by pandemic related sales losses resulting from decreased store traffic and more conservative purchasing from our global wholesale partners. International wholesale sales were also lower due to the continued marketplace strategies in Europe and Asia. On a constant currency basis, wholesale net sales of the UGG brand decreased by 20.3%, compared to the prior period. |
• | Wholesale net sales of the HOKA brand increased due to global expansion of market share, primarily due to increased brand awareness combined with key franchise updates and new product launches. |
• | Wholesale net sales of the Teva and Sanuk brands decreased primarily due to the pandemic related sales losses during the first fiscal quarter causing decreased store traffic for our wholesale customers during the respective brands' peak sell-in period. |
• | DTC net sales increased due to higher e-commerce net sales across all brands, primarily for the UGG and HOKA brands, partially offset by negative impacts from company-owned retail store closures during the first fiscal quarter related to the pandemic. Due to the meaningful disruption of our retail store base during the first fiscal quarter, we are not reporting a comparable DTC net sales metric for the six months ended September 30, 2020. |
• | International net sales, which are included in the reportable operating segment net sales presented above, represented 32.5% and 35.9% of total net sales for the six months ended September 30, 2020 and 2019, respectively. The decrease in international net sales as a percentage of total sales was primarily driven by higher domestic sales as a percentage of worldwide sales due to higher e-commerce sales. However, international net sales increased by 0.4%, compared to the prior period, primarily due to higher net sales for the HOKA brand primarily in Europe and Asia, mostly offset by the lower net sales in the wholesale channel for the UGG brand. |
• | Increased expenses for allowances for trade accounts receivable of approximately $6,500, primarily due to an increase in bad debt expense to account for the higher risk of wholesale customer payment defaults resulting from the pandemic. |
• | Increased other variable net selling expenses of approximately $5,700, including transaction fees and warehousing and shipping costs, primarily due to higher DTC sales and commissions. |
• | Increased variable advertising and promotion expenses of approximately $5,600, primarily due to regional marketing development costs such as websites and other media. |
• | Increased payroll costs of approximately $4,100, primarily due to higher warehousing costs and headcount. |
• | Increased impairments of operating lease and fixed assets of approximately $2,700 due to early store closures. |
• | Decreased variable operating expenses of approximately $11,900, primarily due to lower travel expenses and professional fees. |
• | Decreased rent and occupancy expenses of approximately $6,000, primarily due to lower retail store operating costs, including due to a lower company-owned retail store count. |
• | Decreased foreign currency-related losses of $2,600, primarily driven by favorable changes in foreign currency exchange rates for Asian and European currencies. |
• | Decreased depreciation and amortization expenses of approximately $1,000, primarily due to certain property and equipment and intangible assets being fully amortized during the current period. |
Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | Change | ||||||||||||
Amount | Amount | Amount | % | |||||||||||
Income (loss) from operations | ||||||||||||||
UGG brand wholesale | $ | 102,991 | $ | 145,104 | $ | (42,113 | ) | (29.0 | )% | |||||
HOKA brand wholesale | 51,061 | 25,412 | 25,649 | 100.9 | ||||||||||
Teva brand wholesale | 8,964 | 11,839 | (2,875 | ) | (24.3 | ) | ||||||||
Sanuk brand wholesale | 1,627 | 2,173 | (546 | ) | (25.1 | ) | ||||||||
Other brands wholesale | 8,599 | 7,090 | 1,509 | 21.3 | ||||||||||
Direct-to-Consumer | 74,311 | (1,637 | ) | 75,948 | 4,639.5 | |||||||||
Unallocated overhead costs | (126,648 | ) | (124,267 | ) | (2,381 | ) | (1.9 | ) | ||||||
Total | $ | 120,905 | $ | 65,714 | $ | 55,191 | 84.0 | % |
• | The increase in income from our DTC business was primarily due to higher net sales at higher gross margins, as well as lower company-owned retail store operating costs primarily due to closures in the first fiscal quarter related to the pandemic, partially offset by higher variable marketing and selling expenses. |
• | The decrease in income from operations of UGG brand wholesale was due to lower net sales at lower gross margins and higher bad debt expense, partially offset by lower variable selling and marketing expenses. |
• | The increase in income from operations of HOKA brand wholesale was due to higher net sales, partially offset by lower gross margins. |
• | The increase in unallocated overhead costs was primarily due to higher warehousing expenses, including for payroll and outside services, partially offset by lower travel expenses and professional costs, as well as lower foreign currency-related losses driven by favorable changes in foreign currency exchange rates for all operational foreign currencies. |
Six Months Ended September 30, | |||||||
2020 | 2019 | ||||||
Income tax expense | $ | 26,311 | $ | 9,159 | |||
Effective income tax rate | 21.9 | % | 13.5 | % |
Six Months Ended September 30, | ||||||||||||||
2020 | 2019 | Change | ||||||||||||
Amount | Amount | Amount | % | |||||||||||
Net cash used in operating activities | $ | (15,961 | ) | $ | (216,156 | ) | $ | 200,195 | 92.6 | % | ||||
Net cash used in investing activities | (13,284 | ) | (14,704 | ) | 1,420 | 9.7 | ||||||||
Net cash provided by (used in) financing activities | 3,816 | (179,403 | ) | 183,219 | 102.1 |
Exhibit Number | Description of Exhibit | |
*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) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Deckers Outdoor Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
/s/ DAVID POWERS |
David Powers Chief Executive Officer, President and Director Deckers Outdoor Corporation (Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Deckers Outdoor Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
/s/ STEVEN J. FASCHING |
Steven J. Fasching Chief Financial Officer Deckers Outdoor Corporation (Principal Financial and Accounting Officer) |
/s/ DAVID POWERS | ||
David Powers | ||
Chief Executive Officer, President and Director | ||
Deckers Outdoor Corporation | ||
(Principal Executive Officer) | ||
/s/ STEVEN J. FASCHING | ||
Steven J. Fasching | ||
Chief Financial Officer | ||
Deckers Outdoor Corporation | ||
(Principal Financial and Accounting Officer) | ||
Date: | November 5, 2020 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Trade accounts receivable, allowances | $ 35,325 | $ 21,146 |
Inventory reserves | 18,735 | 12,227 |
Accumulated depreciation | 246,835 | 242,138 |
Accumulated amortization | $ 76,484 | $ 74,421 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares (in shares) | 125,000,000 | 125,000,000 |
Common stock, issued shares (in shares) | 28,082,000 | 27,999,000 |
Common stock, outstanding shares (in shares) | 28,082,000 | 27,999,000 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
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Income Statement [Abstract] | ||||
Net sales | $ 623,525 | $ 542,205 | $ 906,694 | $ 819,044 |
Cost of sales | 304,548 | 269,181 | 445,151 | 416,001 |
Gross profit | 318,977 | 273,024 | 461,543 | 403,043 |
Selling, general and administrative expenses | 190,373 | 175,893 | 340,638 | 337,329 |
Income from operations | 128,604 | 97,131 | 120,905 | 65,714 |
Interest income | (452) | (1,530) | (1,126) | (4,396) |
Interest expense | 1,205 | 1,524 | 2,395 | 2,670 |
Other income, net | (113) | (86) | (256) | (178) |
Total other expense (income), net | 640 | (92) | 1,013 | (1,904) |
Income before income taxes | 127,964 | 97,223 | 119,892 | 67,618 |
Income tax expense | 26,410 | 19,413 | 26,311 | 9,159 |
Net income | 101,554 | 77,810 | 93,581 | 58,459 |
Other comprehensive income (loss) | ||||
Unrealized (loss) gain on cash flow hedges, net of tax | (800) | 1,497 | (447) | 1,180 |
Foreign currency translation gain (loss) | 6,395 | (3,391) | 7,048 | (3,323) |
Total other comprehensive income (loss) | 5,595 | (1,894) | 6,601 | (2,143) |
Comprehensive income | $ 107,149 | $ 75,916 | $ 100,182 | $ 56,316 |
Net income per share | ||||
Basic (in dollars per share) | $ 3.62 | $ 2.73 | $ 3.34 | $ 2.03 |
Diluted (in dollars per share) | $ 3.58 | $ 2.71 | $ 3.30 | $ 2.01 |
Weighted-average common shares outstanding | ||||
Basic (in shares) | 28,046 | 28,483 | 28,024 | 28,785 |
Diluted (in shares) | 28,335 | 28,705 | 28,314 | 29,039 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (PARENTHETICAL) - USD ($) $ in Thousands |
6 Months Ended | |
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Sep. 30, 2020 |
Sep. 30, 2019 |
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Statement of Cash Flows [Abstract] | ||
Income tax refunds | $ 1,292 | $ 5,282 |
General |
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General | 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 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 September 30, 2020 and for the three and six months ended September 30, 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 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:
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:
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Revenue Recognition |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition | 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 six months ended September 30, 2020 related to estimated sales returns for the Company’s existing customer contracts for all channels:
The following table provides activity during the six months ended September 30, 2019 related to estimated sales returns for the Company’s existing customer contracts for all channels:
*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 September 30, 2020 and March 31, 2020, the Company's contract liability for loyalty programs was $8,417 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.
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Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Intangible Assets | 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:
Amortization Expense Aggregate amortization expense for definite-lived intangible assets during the six months ended September 30, 2020 and 2019 was $1,265 and $2,201, respectively. A reconciliation of the changes in total other intangible assets, net, recorded in the condensed consolidated balance sheets is as follows:
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | 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:
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:
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 September 30, 2020, the non-qualified deferred compensation asset of $7,889 was recorded in other assets in the condensed consolidated balance sheets. As of September 30, 2020, the non-qualified deferred compensation liability of $5,490 was recorded in the condensed consolidated balance sheets, with $715 in other accrued expenses and $4,775 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.
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Effective Income Tax Rate Income tax expense and the effective income tax rate were as follows:
The tax provisions during the six months ended September 30, 2020 and 2019 were computed using the estimated effective income tax rates applicable to each of the domestic and foreign taxable jurisdictions for the full fiscal year and were adjusted for discrete items that occurred within the periods presented. During the three months ended September 30, 2020, the slight increase in the effective income tax rate, compared to the prior period, was due to changes in the jurisdictional mix of worldwide income before income taxes forecasted for the fiscal year ending March 31, 2021, partially offset by lower net discrete tax expenses, primarily driven by reduced unrecognized tax benefits recorded in the current period. During the six months ended September 30, 2020, the increase in the effective income tax rate, compared to the prior period, was due to changes in the jurisdictional mix of worldwide income before income taxes forecasted for the fiscal year ending March 31, 2021 as well as a reduced tax benefit during the six months ended September 30, 2020, compared to the prior period, which recognized an increased tax benefit for the favorable settlement of a state income tax audit. These impacts were partially offset by reduced unrecognized tax benefits recorded for a prior year tax position in the current period. Unrecognized Tax Benefits |
Revolving Credit Facilities and Mortgage Payable |
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Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Revolving Credit Facilities and Mortgage Payable | Revolving Credit Facilities and Mortgage Payable Primary Credit Facility In September 2018, the Company entered into a credit agreement that provides for a five-year, $400,000 unsecured revolving credit facility (Primary Credit Facility), contains a $25,000 sublimit for the issuance of letters of credit, and matures on September 20, 2023. At the Company's election, interest under the Primary Credit Facility is tied to the adjusted LIBOR or the Alternate Base Rate (ABR). Interest for borrowings made in foreign currencies is based on currency-specific LIBOR or the Canadian deposit offered rate (CDOR) if made in Canadian dollars. As of September 30, 2020, the effective interest rates for US dollar LIBOR and ABR were 1.27% and 3.38%, respectively. During the six months ended September 30, 2020, the Company made no borrowings or repayments under the Primary Credit Facility. As of September 30, 2020, the Company had no outstanding balance, outstanding letters of credit of $549, and available borrowings of $399,451 under the Primary Credit Facility. China Credit Facility In August 2013, Deckers (Beijing) Trading Co., LTD, a wholly-owned subsidiary of the Company, entered into a credit agreement in China (as amended, the China Credit Facility) that provides for an uncommitted revolving line of credit of up to CNY 300,000, or $44,083, with an overdraft facility sublimit of CNY 100,000, or $14,694. The China Credit Facility is payable on demand and subject to annual review with a defined aggregate period of borrowing of up to 12 months. The obligations under the China Credit Facility are guaranteed by the Company for 108.5% of the facility amount in US dollars. Interest is based on the People’s Bank of China (PBOC) market rate multiplied by a variable liquidity factor. As of September 30, 2020, the effective interest rate was 4.45%. During the six months ended September 30, 2020, the Company made $9,311 in borrowings and no repayments under the China Credit Facility. As of September 30, 2020, the Company had an outstanding balance of $9,311, outstanding bank guarantees of $29, and available borrowings of $34,743 under the China Credit Facility. Japan Credit Facility In March 2016, Deckers Japan, G.K., a wholly-owned subsidiary of the Company, entered into a credit agreement in Japan (as amended, the Japan Credit Facility) that provides for an uncommitted revolving line of credit of up to JPY 3,000,000, or $28,412, for a maximum term of six months for each draw on the facility. The Japan Credit Facility can be renewed annually and is guaranteed by the Company. Interest is based on the Tokyo Interbank Offered Rate (TIBOR) plus 0.40%. As of September 30, 2020, the effective interest rate was 0.46%. During the six months ended September 30, 2020, the Company made no borrowings or repayments under the Japan Credit Facility. As of September 30, 2020, the Company had no outstanding balance and available borrowings of $28,412 under the Japan Credit Facility. Mortgage In July 2014, the Company obtained a mortgage secured by the property on which its corporate headquarters is located for a principal amount of $33,931. As of September 30, 2020, the outstanding principal balance under the mortgage was $30,592, which includes $654 in short-term borrowings and $29,938 in mortgage payable in the condensed consolidated balance sheets. The mortgage has a fixed interest rate of 4.928%. Payments include interest and principal in an amount that amortizes the principal balance over a 30-year period; however, the loan will mature and requires a balloon payment of $23,695, in addition to any then-outstanding balance, on July 1, 2029. Debt Covenants As of September 30, 2020, the Company was in compliance with all financial covenants under the revolving credit facilities and the mortgage. Foreign Currency Exchange Rates The amounts disclosed above for the China Credit Facility have been translated into US dollars using applicable foreign currency exchange spot rates in effect as of September 30, 2020. As a result, there are differences between the net borrowing amount within this footnote disclosure and that same amount recorded in the condensed consolidated statements of cash flows. Any amounts outstanding, including those amounts disclosed above, are recorded in short-term borrowings in the condensed consolidated balance sheets.
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Leases and Other Commitments |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases and Other Commitments | Leases and Other Commitments Leases The Company primarily leases retail stores, showrooms, offices, and distribution facilities under operating lease contracts. Some of the Company's operating leases contain extension options ranging from one to 15 years. Historically, the Company has not entered into finance leases and its lease agreements generally do not contain residual value guarantees, options to purchase underlying assets, or material restrictive covenants. Supplemental information for amounts presented in the condensed consolidated statements of cash flows related to operating leases is as follows:
* Amounts disclosed include non-cash additions or reductions, respectively, resulting from lease remeasurements. Litigation From time to time, the Company is involved in various legal proceedings and claims arising in the ordinary course of business. Although the results of legal proceedings and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters, including the matter outlined below, will not, individually or in the aggregate, have a material adverse effect on it business, results of operations, financial condition, or liquidity. On March 28, 2016, the Company filed a lawsuit alleging trademark infringement, patent infringement, unfair competition and violation of deceptive trade practices in the US District Court for the Northern District of Illinois Eastern Division against Australian Leather. Australian Leather counterclaimed alleging that the UGG trademark is invalid. On May 10, 2019, a jury returned a verdict in the Company's favor in its lawsuit against Australian Leather. The District Court entered judgments upholding the UGG trademark on February 6 and June 8, 2020. On August 12, 2020, Australian Leather filed an appeal to the US Court of Appeals for the Federal Circuit. While the Company believes there is no merit to the appeal, a judgment invalidating the UGG brand trademark would have a material adverse effect on the Company's business.
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Leases and Other Commitments | Leases and Other Commitments Leases The Company primarily leases retail stores, showrooms, offices, and distribution facilities under operating lease contracts. Some of the Company's operating leases contain extension options ranging from one to 15 years. Historically, the Company has not entered into finance leases and its lease agreements generally do not contain residual value guarantees, options to purchase underlying assets, or material restrictive covenants. Supplemental information for amounts presented in the condensed consolidated statements of cash flows related to operating leases is as follows:
* Amounts disclosed include non-cash additions or reductions, respectively, resulting from lease remeasurements. Litigation From time to time, the Company is involved in various legal proceedings and claims arising in the ordinary course of business. Although the results of legal proceedings and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters, including the matter outlined below, will not, individually or in the aggregate, have a material adverse effect on it business, results of operations, financial condition, or liquidity. On March 28, 2016, the Company filed a lawsuit alleging trademark infringement, patent infringement, unfair competition and violation of deceptive trade practices in the US District Court for the Northern District of Illinois Eastern Division against Australian Leather. Australian Leather counterclaimed alleging that the UGG trademark is invalid. On May 10, 2019, a jury returned a verdict in the Company's favor in its lawsuit against Australian Leather. The District Court entered judgments upholding the UGG trademark on February 6 and June 8, 2020. On August 12, 2020, Australian Leather filed an appeal to the US Court of Appeals for the Federal Circuit. While the Company believes there is no merit to the appeal, a judgment invalidating the UGG brand trademark would have a material adverse effect on the Company's business.
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Stock-Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation From time to time, the Company grants various types of stock-based compensation under the 2015 Stock Incentive Plan, as amended (2015 SIP), including time-based restricted stock units (RSUs), performance-based restricted stock units (PSUs), stock appreciation rights, and non-qualified stock options (NQSOs). The Company typically makes annual grants of RSUs (Annual RSUs) and PSUs (Annual PSUs), as well as long-term incentive plan (LTIP) awards, to certain executive officers and other key employees. During the six months ended September 30, 2020, except for the Annual RSU grant activity summarized below, no additional awards were granted under the 2015 SIP. Refer to Note 8, “Stock-Based Compensation,” in our 2020 Annual Report for further information on previously granted awards under the 2015 SIP. Annual Awards The Company granted Annual RSUs and Annual PSUs under the 2015 SIP, as summarized below:
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Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments | Derivative Instruments The Company may enter into foreign currency forward or option contracts (derivative contracts) to manage foreign currency risk on expected cash flows and certain existing assets and liabilities, primarily intercompany balances. Certain of these derivative contracts are designated as cash flow hedges of forecasted sales (Designated Derivative Contracts). The Company may also enter into derivative contracts that are not designated as cash flow hedges (Non-Designated Derivative Contracts), to offset a portion of anticipated gains and losses on certain intercompany balances until the expected time of repayment. The after-tax unrealized gains or losses from changes in the fair value of Designated Derivative Contracts are recorded as a component of accumulated other comprehensive loss (AOCL) and are reclassified to net sales in the condensed consolidated statements of comprehensive income in the same period or periods as the related sales are recognized. The Company includes all hedge components in its assessment of effectiveness for its derivative contracts. Changes in the fair value of Non-Designated Derivative Contracts are recorded in SG&A expenses in the condensed consolidated statements of comprehensive income. The changes in fair value for these contracts are generally offset by the remeasurement gains or losses associated with the underlying foreign currency-denominated intercompany balances, which are recorded in SG&A expenses in the condensed consolidated statements of comprehensive income. As of September 30, 2020, the Company had the following derivative contracts recorded at fair value in the condensed consolidated balance sheets:
As of September 30, 2020, the Company's outstanding derivative contracts were held by an aggregate of four counterparties, all with various maturity dates within the next six months. As of March 31, 2020, the Company had no outstanding derivative contracts. The following table summarizes the effect of Designated Derivative Contracts and the related income tax effects for unrealized gains or losses recorded in the condensed consolidated statements of comprehensive income for changes in AOCL:
The following table summarizes the effect of Non-Designated Derivative Contracts:
The non-performance risk of the Company and the counterparties did not have a material impact on the fair value of its derivative contracts. As of September 30, 2020, the amount of unrealized losses on derivative contracts recorded in AOCL is expected to be reclassified into net sales within the next six months. Refer to Note 10, “Stockholders' Equity,” for further information on the components of AOCL.
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Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders' Equity Stock Repurchase Programs The Company's Board of Directors has authorized various stock repurchase programs pursuant to which the Company may repurchase shares of its common stock. The Company's stock repurchase programs do not obligate it to acquire any amount of common stock and may be suspended at any time at the Company's discretion. During the six months ended September 30, 2020, the Company made no stock repurchases. As of September 30, 2020, the aggregate remaining approved amount under the Company's stock repurchase programs was $159,807. Accumulated Other Comprehensive Loss The components within AOCL recorded in the condensed consolidated balance sheets, were as follows:
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Basic and Diluted Shares |
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Basic and Diluted Shares | Basic and Diluted Shares The reconciliation of basic to diluted weighted-average common shares outstanding was as follows:
* The equity awards excluded from the calculation of the dilutive effect have been excluded due to one of the following: (1) the shares were anti-dilutive; (2) the necessary conditions had not been satisfied for the shares to be deemed issuable based on the Company's performance for the relevant performance period; or (3) the Company recorded a net loss during the period presented (such that inclusion of these equity awards in the calculation would have been anti-dilutive). The number of shares stated for each of these excluded awards is the maximum number of shares issuable pursuant to these awards. For those awards subject to the achievement of performance criteria, the actual number of shares to be issued pursuant to such awards will be based on Company performance in future periods, net of forfeitures, and may be materially lower than the number of shares presented (which could result in a lesser dilutive effect). Refer to Note 8, “Stock-Based Compensation,” in our 2020 Annual Report for further information on previously granted awards under the Company's equity incentive plans.
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Reportable Operating Segments |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reportable Operating Segments | Reportable Operating Segments Information reported to the Chief Operating Decision Maker (CODM), who is the Company's Principal Executive Officer (PEO), is organized into the Company's six reportable operating segments and is consistent with how the CODM evaluates performance and allocates resources. The Company does not consider international operations to be a separate reportable operating segment, and the CODM reviews such operations in the aggregate with the reportable operating segments. The Company evaluates reportable operating segment performance primarily based on net sales and income (loss) from operations. The wholesale operations of each brand are generally managed separately because each requires different marketing, research and development, design, sourcing, and sales strategies. The income (loss) from operations of each of the reportable operating segments includes only those costs which are specifically related to each reportable operating segment, which consist primarily of cost of sales, research and development, design, sales and marketing, depreciation, amortization, and the direct costs of employees within those reportable operating segments. The Company does not allocate corporate overhead costs or non-operating income and expenses to reportable operating segments, which include unallocable overhead costs associated with distribution centers, certain executive and stock-based compensation, accounting, finance, legal, information technology, human resources, and facilities, among others. Inter-segment sales from the Company’s wholesale reportable operating segments to the DTC reportable operating segment are at the Company’s cost, and there is no inter-segment profit on these inter-segment sales, nor are they reflected in income (loss) from operations of the wholesale reportable operating segments. Reportable operating segment information, with a reconciliation to the condensed consolidated statements of comprehensive income, was as follows:
Assets allocated to each reportable operating segment include trade accounts receivable, net, inventories, net, property and equipment, net, operating lease assets, goodwill, other intangible assets, net, and certain other assets that are specifically identifiable for one of the Company's reportable operating segments. Unallocated assets are those assets not directly related to a specific reportable operating segment and generally include cash and cash equivalents, deferred tax assets, net, and various other corporate assets shared by the Company's reportable operating segments. Assets allocated to each reportable operating segment, with a reconciliation to the condensed consolidated balance sheets, were as follows:
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Concentration of Business |
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Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration of Business | Concentration of Business Regions and Customers The Company sells its products to customers throughout the US and to foreign customers in various countries, with concentrations that were as follows:
For the three and six months ended September 30, 2020 and 2019, no single foreign country comprised 10.0% or more of the Company's total net sales. No single customer comprised 10.0% or more of the Company's total net sales during the three and six months ended September 30, 2020 and 2019. The Company sells its products to customers for trade accounts receivable and, as of September 30, 2020, had two customers that individually exceeded 10.0% of trade accounts receivable, net, compared to no single customer that exceeded 10.0% of trade accounts receivable, net, as of March 31, 2020. Management performs regular evaluations concerning the ability of the Company’s customers to satisfy their obligations to the Company and recognizes an allowance for doubtful accounts based on these evaluations. Suppliers The Company's production is concentrated at a limited number of independent manufacturing factories, primarily in Asia. Sheepskin is the principal raw material for certain UGG brand products and most of the Company's sheepskin is purchased from two tanneries in China, which is sourced primarily from Australia and the United Kingdom. The Company believes significant factors affecting the price of sheepskin include weather patterns, harvesting decisions, incidence of disease, the price of other commodities such as wool and leather, the demand for the Company's products and the products of its competitors, the use of substitute products or components, and global economic conditions. Long-Lived Assets Long-lived assets, which consist of property and equipment, net, recorded in the condensed consolidated balance sheets, were as follows:
*No single foreign country’s property and equipment, net, comprised 10.0% or more of the Company’s total property and equipment, net, as of September 30, 2020 and March 31, 2020.
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General (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements and accompanying notes thereto (referred to herein as condensed consolidated financial statements) as of September 30, 2020 and for the three and six months ended September 30, 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).
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Consolidation | 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.
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Reclassifications | Reclassifications. Certain reclassifications were made for prior periods presented to conform to the current period presentation. |
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Use of Estimates | 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 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. |
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Reportable Operating Segments | Reportable Operating Segments Information reported to the Chief Operating Decision Maker (CODM), who is the Company's Principal Executive Officer (PEO), is organized into the Company's six reportable operating segments and is consistent with how the CODM evaluates performance and allocates resources. The Company does not consider international operations to be a separate reportable operating segment, and the CODM reviews such operations in the aggregate with the reportable operating segments. The Company evaluates reportable operating segment performance primarily based on net sales and income (loss) from operations. The wholesale operations of each brand are generally managed separately because each requires different marketing, research and development, design, sourcing, and sales strategies. The income (loss) from operations of each of the reportable operating segments includes only those costs which are specifically related to each reportable operating segment, which consist primarily of cost of sales, research and development, design, sales and marketing, depreciation, amortization, and the direct costs of employees within those reportable operating segments. The Company does not allocate corporate overhead costs or non-operating income and expenses to reportable operating segments, which include unallocable overhead costs associated with distribution centers, certain executive and stock-based compensation, accounting, finance, legal, information technology, human resources, and facilities, among others. Inter-segment sales from the Company’s wholesale reportable operating segments to the DTC reportable operating segment are at the Company’s cost, and there is no inter-segment profit on these inter-segment sales, nor are they reflected in income (loss) from operations of the wholesale reportable operating segments. |
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Recent Accounting Pronouncements | 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:
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:
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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.
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Fair Value Measurement | 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:
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. 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.
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Deferred Compensation | 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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation | Stock-based compensation is recorded net of estimated forfeitures in selling, general and administrative (SG&A) expenses in the condensed consolidated statements of comprehensive income. The Annual RSUs typically vest in equal annual installments over three years following the date of grant. The Annual PSUs are typically earned based on the achievement of pre-established Company performance criteria measured over the fiscal year during which they are granted and, to the extent the performance criteria are met, vest in equal annual installments over three years thereafter. |
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Derivatives | The Company may enter into foreign currency forward or option contracts (derivative contracts) to manage foreign currency risk on expected cash flows and certain existing assets and liabilities, primarily intercompany balances. Certain of these derivative contracts are designated as cash flow hedges of forecasted sales (Designated Derivative Contracts). The Company may also enter into derivative contracts that are not designated as cash flow hedges (Non-Designated Derivative Contracts), to offset a portion of anticipated gains and losses on certain intercompany balances until the expected time of repayment. The after-tax unrealized gains or losses from changes in the fair value of Designated Derivative Contracts are recorded as a component of accumulated other comprehensive loss (AOCL) and are reclassified to net sales in the condensed consolidated statements of comprehensive income in the same period or periods as the related sales are recognized. The Company includes all hedge components in its assessment of effectiveness for its derivative contracts. Changes in the fair value of Non-Designated Derivative Contracts are recorded in SG&A expenses in the condensed consolidated statements of comprehensive income. The changes in fair value for these contracts are generally offset by the remeasurement gains or losses associated with the underlying foreign currency-denominated intercompany balances, which are recorded in SG&A expenses in the condensed consolidated statements of comprehensive income. |
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Net Income Per Share | The equity awards excluded from the calculation of the dilutive effect have been excluded due to one of the following: (1) the shares were anti-dilutive; (2) the necessary conditions had not been satisfied for the shares to be deemed issuable based on the Company's performance for the relevant performance period; or (3) the Company recorded a net loss during the period presented (such that inclusion of these equity awards in the calculation would have been anti-dilutive). The number of shares stated for each of these excluded awards is the maximum number of shares issuable pursuant to these awards. For those awards subject to the achievement of performance criteria, the actual number of shares to be issued pursuant to such awards will be based on Company performance in future periods, net of forfeitures, and may be materially lower than the number of shares presented (which could result in a lesser dilutive effect). |
General (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | The following is a summary of each standard and the impact on the Company:
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:
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Revenue Recognition (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contract with Customer, Asset and Liability | The following table provides activity during the six months ended September 30, 2020 related to estimated sales returns for the Company’s existing customer contracts for all channels:
The following table provides activity during the six months ended September 30, 2019 related to estimated sales returns for the Company’s existing customer contracts for all channels:
*Net additions to sales return allowance include provision for anticipated sales returns which consists of both contractual return rights and discretionary authorized returns.
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Goodwill and Other Intangible Assets (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill and Other Intangible Assets | The Company's goodwill and other intangible assets are recorded in the condensed consolidated balance sheets, as follows:
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Schedule of Finite-lived Intangible Assets | A reconciliation of the changes in total other intangible assets, net, recorded in the condensed consolidated balance sheets is as follows:
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Fair Value Measurements (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | Assets and liabilities that are measured on a recurring basis at fair value in the condensed consolidated balance sheets were as follows:
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Income Taxes - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation | Income tax expense and the effective income tax rate were as follows:
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Leases and Other Commitments - (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease, Cost | Supplemental information for amounts presented in the condensed consolidated statements of cash flows related to operating leases is as follows:
* Amounts disclosed include non-cash additions or reductions, respectively, resulting from lease remeasurements. |
Stock Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Nonvested Stock Units Activity | The Company granted Annual RSUs and Annual PSUs under the 2015 SIP, as summarized below:
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Derivative Instruments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments | As of September 30, 2020, the Company had the following derivative contracts recorded at fair value in the condensed consolidated balance sheets:
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Schedule of Location and Amount of Gains and Losses Related to Derivatives Designated as Hedging Instruments | The following table summarizes the effect of Designated Derivative Contracts and the related income tax effects for unrealized gains or losses recorded in the condensed consolidated statements of comprehensive income for changes in AOCL:
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Schedule of Location and Amount of Gains and Losses Related to Derivatives Not Designated as Hedging Instruments | The following table summarizes the effect of Non-Designated Derivative Contracts:
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Stockholders' Equity (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Components of Accumulated Other Comprehensive Loss | The components within AOCL recorded in the condensed consolidated balance sheets, were as follows:
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Basic and Diluted Shares (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Number of Shares | The reconciliation of basic to diluted weighted-average common shares outstanding was as follows:
* The equity awards excluded from the calculation of the dilutive effect have been excluded due to one of the following: (1) the shares were anti-dilutive; (2) the necessary conditions had not been satisfied for the shares to be deemed issuable based on the Company's performance for the relevant performance period; or (3) the Company recorded a net loss during the period presented (such that inclusion of these equity awards in the calculation would have been anti-dilutive). The number of shares stated for each of these excluded awards is the maximum number of shares issuable pursuant to these awards. For those awards subject to the achievement of performance criteria, the actual number of shares to be issued pursuant to such awards will be based on Company performance in future periods, net of forfeitures, and may be materially lower than the number of shares presented (which could result in a lesser dilutive effect). Refer to Note 8, “Stock-Based Compensation,” in our 2020 Annual Report for further information on previously granted awards under the Company's equity incentive plans.
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Reportable Operating Segments (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Segments Information | Reportable operating segment information, with a reconciliation to the condensed consolidated statements of comprehensive income, was as follows:
Assets allocated to each reportable operating segment, with a reconciliation to the condensed consolidated balance sheets, were as follows:
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Concentration of Business (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risks and Uncertainties [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue Concentration of Risk | The Company sells its products to customers throughout the US and to foreign customers in various countries, with concentrations that were as follows:
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Schedule of Long-lived Assets | Long-lived assets, which consist of property and equipment, net, recorded in the condensed consolidated balance sheets, were as follows:
*No single foreign country’s property and equipment, net, comprised 10.0% or more of the Company’s total property and equipment, net, as of September 30, 2020 and March 31, 2020.
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General - Narrative (Details) |
6 Months Ended |
---|---|
Sep. 30, 2020
segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of reportable segments | 6 |
Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2020 |
Mar. 31, 2020 |
Sep. 30, 2019 |
Mar. 31, 2019 |
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SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | ||||
Contract length | 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 liability | $ 33,793 | $ 25,667 | $ 19,311 | $ 24,787 |
Minimum | ||||
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | ||||
Payment terms | 30 days | |||
Maximum | ||||
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | ||||
Payment terms | 60 days | |||
Loyalty Programs | ||||
SEC Schedule, 12-09, Valuation and Qualifying Accounts Disclosure [Line Items] | ||||
Contract liability | $ 8,417 | $ 6,950 |
Revenue Recognition - Schedule of Contract Assets and Contract Liabilities (Details) - USD ($) $ in Thousands |
6 Months Ended | |
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Sep. 30, 2020 |
Sep. 30, 2019 |
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Contract Asset | ||
Beginning Balance | $ 9,663 | $ 10,441 |
Net additions to sales return allowance | 17,984 | 12,297 |
Actual returns | (16,386) | (14,763) |
Ending Balance | 11,261 | 7,975 |
Contract Liability | ||
Beginning Balance | (25,667) | (24,787) |
Net additions to sales return allowance | (59,811) | (37,604) |
Actual returns | 51,685 | 43,080 |
Ending Balance | $ (33,793) | $ (19,311) |
Goodwill and Other Intangible Assets (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Indefinite-lived intangible assets | ||
Goodwill | $ 13,990 | $ 13,990 |
Trademarks | 15,454 | 15,454 |
Definite-lived intangible assets | ||
Total gross carrying amount | 107,794 | 106,983 |
Accumulated amortization | (76,484) | (74,421) |
Net definite-lived intangible assets | 31,310 | 32,562 |
Total other intangible assets, net | 46,764 | 48,016 |
Total | 60,754 | 62,006 |
UGG brand wholesale | ||
Indefinite-lived intangible assets | ||
Goodwill | 6,101 | 6,101 |
HOKA brand wholesale | ||
Indefinite-lived intangible assets | ||
Goodwill | 7,889 | 7,889 |
Trademarks | ||
Definite-lived intangible assets | ||
Total gross carrying amount | 55,245 | 55,245 |
Other Intangible Assets | ||
Definite-lived intangible assets | ||
Total gross carrying amount | $ 52,549 | $ 51,738 |
Goodwill and Other Intangible Assets Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 1,265 | $ 2,201 |
Goodwill and Other Intangible Assets Schedule of Changes in Intangible Assets (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Finite-lived Intangible Assets [Roll Forward] | ||
Intangible assets, net, beginning balance | $ 48,016 | |
Amortization expense | (1,265) | $ (2,201) |
Foreign currency translation net gain | 13 | |
Intangible assets, net, ending balance | $ 46,764 |
Income Taxes - Effective Income Tax Rate (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 26,410 | $ 19,413 | $ 26,311 | $ 9,159 |
Effective income tax rate | 20.60% | 20.00% | 21.90% | 13.50% |
Income Taxes - Narrative (Details) $ in Thousands |
6 Months Ended |
---|---|
Sep. 30, 2020
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Increase in unrecognized tax benefits | $ 577 |
Unrecognized tax benefits and penalties and interest | $ 18,215 |
Revolving Credit Facilities and Mortgage Payable - Primary Credit Facility (Details) - Primary Credit Facility - Line of Credit - Revolving Credit Facility - USD ($) |
1 Months Ended | 6 Months Ended |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2020 |
|
Notes Payable and Long-Term Debt | ||
Debt instrument term | 5 years | |
Maximum borrowing capacity | $ 400,000,000 | |
Proceeds from lines of credit | $ 0 | |
Repayments of lines of credit | 0 | |
Long-term line of credit | 0 | |
Outstanding letters of credit | 549,000 | |
Amount available under the credit agreement | $ 399,451,000 | |
LIBOR based interest rates | ||
Notes Payable and Long-Term Debt | ||
Interest rate, effective percentage | 1.27% | |
Alternate Base Rate based interest rates | ||
Notes Payable and Long-Term Debt | ||
Interest rate, effective percentage | 3.38% | |
Maximum | ||
Notes Payable and Long-Term Debt | ||
Capacity available for letters of credit | $ 25,000,000 |
Revolving Credit Facilities and Mortgage Payable - China Line of Credit (Details) - Line of Credit - Revolving Credit Facility |
1 Months Ended | 6 Months Ended | |
---|---|---|---|
Aug. 31, 2013
CNY (¥)
|
Sep. 30, 2020
USD ($)
|
Aug. 31, 2013
USD ($)
|
|
Second Amended China Credit Facility | |||
Debt Instrument [Line Items] | |||
Maximum borrowing capacity | ¥ 300,000,000 | $ 44,083,000 | |
Interest rate, effective percentage | 4.45% | ||
Proceeds from lines of credit | $ 9,311,000 | ||
Repayments of lines of credit | 0 | ||
Long-term line of credit | 9,311,000 | ||
Outstanding bank guarantees | 29,000 | ||
Amount available under the credit agreement | $ 34,743,000 | ||
Second Amended China Credit Facility, Overdraft Sublimit | |||
Debt Instrument [Line Items] | |||
Line of credit facility overdraft facility sublimit | ¥ 100,000,000 | $ 14,694,000 | |
China Credit Agreement | |||
Debt Instrument [Line Items] | |||
Guarantor obligation | 108.50% | ||
Maximum | Second Amended China Credit Facility | |||
Debt Instrument [Line Items] | |||
Debt instrument term | 12 months |
Revolving Credit Facilities and Mortgage Payable - Japan Line of Credit (Details) - Revolving Credit Facility - Line of Credit - Japan Credit Facility |
1 Months Ended | 6 Months Ended | |
---|---|---|---|
Mar. 31, 2016
JPY (¥)
|
Sep. 30, 2020
USD ($)
|
Mar. 31, 2016
USD ($)
|
|
Notes Payable and Long-Term Debt | |||
Maximum borrowing capacity | ¥ 3,000,000,000 | $ 28,412,000 | |
Proceeds from lines of credit | $ 0 | ||
Repayments of lines of credit | 0 | ||
Long-term line of credit | 0 | ||
Amount available under the credit agreement | $ 28,412,000 | ||
Maximum | |||
Notes Payable and Long-Term Debt | |||
Debt instrument term | 6 months | ||
Tokyo Interbank Offered Rate (TIBOR) | |||
Notes Payable and Long-Term Debt | |||
Spread on variable interest rate (as a percent) | 0.40% | ||
Interest rate, effective percentage | 0.46% |
Revolving Credit Facilities and Mortgage Payable - Mortgage (Details) - USD ($) $ in Thousands |
1 Months Ended | ||
---|---|---|---|
Jul. 31, 2014 |
Sep. 30, 2020 |
Mar. 31, 2020 |
|
Debt Instrument [Line Items] | |||
Short-term borrowings | $ 9,965 | $ 638 | |
Mortgage payable | 29,938 | $ 30,263 | |
Mortgages | |||
Debt Instrument [Line Items] | |||
Debt instrument face amount | $ 33,931 | ||
Long-term debt gross | 30,592 | ||
Short-term borrowings | 654 | ||
Mortgage payable | $ 29,938 | ||
Fixed interest rate | 4.928% | ||
Debt amortization period | 30 years | ||
Balloon payment to be paid | $ 23,695 |
Leases and Other Commitments - Leases Narrative (Details) |
Sep. 30, 2020 |
---|---|
Minimum | |
Lessee, Lease, Description [Line Items] | |
Operating lease renewal term | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Operating lease renewal term | 15 years |
Leases and Other Commitments - Schedule of Supplemental Lease Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Operating lease assets obtained in exchange for lease liabilities | $ 3,378 | $ 11,715 | $ 5,869 | $ 28,137 |
Reductions to operating lease assets for reductions to lease liabilities | $ (476) | $ (2,120) | $ (2,413) | $ (4,669) |
Stock-Based Compensation - Annual Awards (Details) - Stock Incentive Plan 2015 - $ / shares |
6 Months Ended | |
---|---|---|
Sep. 30, 2020 |
Sep. 30, 2019 |
|
Annual RSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted (in shares) | 34,211 | 38,307 |
Weighted-average grant date fair value (in dollars per share) | $ 200.83 | $ 173.65 |
Annual PSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted (in shares) | 0 | 19,938 |
Weighted-average grant date fair value (in dollars per share) | $ 0 | $ 174.36 |
Annual RSUs and Annual PSUs | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Granted (in shares) | 34,211 | 58,245 |
Weighted-average grant date fair value (in dollars per share) | $ 200.83 | $ 173.89 |
Stockholders' Equity - Repurchase Programs (Details) $ in Thousands |
6 Months Ended |
---|---|
Sep. 30, 2020
USD ($)
shares
| |
Stockholders' Equity Note [Abstract] | |
Total number of shares repurchased (in shares) | shares | 0 |
Dollar value of shares remaining for repurchase | $ | $ 159,807 |
Stockholders' Equity - Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
Sep. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Stockholders' Equity Note [Abstract] | ||
Unrealized loss on cash flow hedges, net of tax | $ (447) | $ 0 |
Cumulative foreign currency translation loss | (18,511) | (25,559) |
Total | $ (18,958) | $ (25,559) |
Concentration of Business (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2020
USD ($)
tannery
|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2020
USD ($)
tannery
|
Sep. 30, 2019
USD ($)
|
Mar. 31, 2020
USD ($)
|
|
Concentration Risk [Line Items] | |||||
Net sales | $ 623,525 | $ 542,205 | $ 906,694 | $ 819,044 | |
Number of tanneries | tannery | 2 | 2 | |||
Long-lived assets | $ 207,912 | $ 207,912 | $ 209,037 | ||
Sales Revenue, Net | International net sales | |||||
Concentration Risk [Line Items] | |||||
Net sales | $ 196,113 | $ 184,234 | $ 294,982 | $ 293,778 | |
Concentration risk | 31.50% | 34.00% | 32.50% | 35.90% | |
Sales Revenue, Net | Net sales in foreign currencies | |||||
Concentration Risk [Line Items] | |||||
Net sales | $ 156,671 | $ 159,059 | $ 212,354 | $ 218,416 | |
Concentration risk | 25.10% | 29.30% | 23.40% | 26.70% | |
Sales Revenue, Net | Customer Concentration Risk | |||||
Concentration Risk [Line Items] | |||||
Concentration risk | 31.90% | 36.60% | 27.30% | 30.40% | |
US | |||||
Concentration Risk [Line Items] | |||||
Long-lived assets | $ 194,185 | $ 194,185 | 194,679 | ||
Foreign | |||||
Concentration Risk [Line Items] | |||||
Long-lived assets | $ 13,727 | $ 13,727 | $ 14,358 |
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