UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company”company,” and “emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

As of the close of business on February 2, 2018,October 31, 2019, the number of outstanding shares of the registrant's common stock, par value $0.01 per share, was 31,762,862.27,976,092.

*Not applicable.

This Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (SEC) on February 9, 2018for our second fiscal quarter ended September 30, 2019 (Quarterly Report on Form 10-Q)Report), and the information and documents incorporated by reference ininto this Quarterly Report, on Form 10-Q, containscontain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements other than statements of historical fact contained in, or incorporated by reference into, this Quarterly Report on Form 10-Q, including statements regarding our future or assumed condition, results of operations, business plans and strategies, competitive position, and market opportunities.Report. We have attempted to identify forward-looking statements by using words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” or “would,” and similar expressions or the negative of these expressions. Specifically, this Quarterly Report, on Form 10-Q, and the information and documents incorporated by reference ininto this Quarterly Report, on Form 10-Q, containscontain forward-looking statements relating to, among other things:

Forward-looking statements represent our management'smanagement’s current expectations and predictions about trends affecting our business and industry and are based on information available at the time such statements are made. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy or completeness. Forward-looking statements involve numerous known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements predicted, assumed or implied by the forward-looking statements. Some of the risks and uncertainties that may cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in Part II, Item 1A, "Risk Factors," and Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," ofin this Quarterly Report, on Form 10-Q, as well as in our other filings with the SEC.Securities and Exchange Commission (SEC). You should read this Quarterly Report, on Form 10-Q, including the information and documents incorporated by reference herein, in its entirety and with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements. Moreover, we operate in an evolving environment. Newnew risks and uncertainties emerge from time to time and it is not possible for management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual future results to be materially different from any results expressed or implied by any forward-looking statements. Except as required by applicable law or the listing rules of the New York Stock Exchange, we expressly disclaim any intent or obligation to update any forward-looking statements. We qualify all of our forward-looking statements with these cautionary statements.

See accompanying notes to the condensed consolidated financial statements.

The Company and Basis of Presentation

Deckers Outdoor Corporation together withand its consolidatedwholly-owned subsidiaries (the(collectively, the Company), is a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyle use and high performancehigh-performance activities. As part of its Omni-Channel platform, the Company's proprietary brands are aligned across its Fashion Lifestyle group, including the UGG® (UGG)UGG and Koolaburra® by UGG (Koolaburra)Koolaburra brands, and Performance Lifestyle group, including the Teva® (Teva), Sanuk® (Sanuk),HOKA, Teva, and Hoka One One® (Hoka)Sanuk brands.

The Company sells its products through quality domestic and international retailers, international distributors, and directly to its end-userglobal consumers both domestically and internationally through its Direct-to-Consumer (DTC)DTC business, which is comprised of its retail stores and E-CommerceE‑Commerce websites. Independent third partythird-party contractors manufacture all of the Company's products.

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 the customer can 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 that it is probable that a significant reversal of the cumulative restructuring charges incurred through December 31, 2017, $5,077 remainedrevenue recognized will not occur in a future period.

Note 3. Goodwill and Other Intangible Assets

The Company's goodwill and other intangible assets are recorded in the condensed consolidated balance sheets, as follows:

The assets and liabilities that are measured on a recurring basis at fair value are summarizedin the condensed consolidated balance sheets were as follows:

Note 5. Income Taxes

The tax regime from a worldwide tax system to a territorial tax system, and provisions aimed at preventing base erosion of the US tax base.

ForDuring the fiscal year ending March 31, 2018,three months ended September 30, 2019, the Company has considered the impact of the Tax Reform Act on its blended consolidated annual effective tax rate. The Tax Reform Act resulted in an increase in the Company's annual effective tax rate of $8,802, driven by a provisional estimate associated with the deemed repatriation of foreign earnings forecasted for the nine months ended December 31, 2017, of which $756 is payable within 12 months and recorded in current income taxes payable in the condensed consolidated balance sheets. This was partially offset by a reduction of the US federal income tax rate, to 31.5%.

Due to the enactment of the Tax Cuts and Jobs Act (Tax Reform Act) in various state and foreign tax jurisdictions and regularly assesses tax positions taken in years open to examination. As of December 31, 2017, the Company had $10,250is subject to US taxation of its foreign subsidiary earnings considered global intangible low-taxed income, as well as limitations on the deductibility of executive compensation, which are included in income tax expense in the condensed consolidated statements of comprehensive income for the periods presented above. The Company continues to evaluate new guidance and legislation as it is issued.

Note 6. Revolving Credit Facilities and Mortgage Payable

DomesticPrimary Credit Facility

In November 2014,September 2018, the Company amended itsentered into a credit agreement that provides for a five-year, $400,000 unsecured revolving credit facility agreement with JPMorgan Chase Bank, National Association as(Primary Credit Facility), contains a $25,000 sublimit for the administrative agent, Comericaissuance of letters of credit, and HSBC as co-syndication agents, and the lenders party thereto (as amended, the Domestic Credit Facility). The Domestic Credit Facility is a five-year, $400,000 secured revolving credit facility which matures on November 13, 2019.September 20, 2023.

At the Company's election, interest under the DomesticPrimary Credit Facility is tied to the adjusted London Interbank Offered Rate (LIBOR) or the AlternativeAlternate Base Rate (ABR), and. Interest for borrowings made in foreign currencies is variable based on currency-specific LIBOR or the Company's total adjusted leverage ratio.Canadian deposit offered rate (CDOR) if made in Canadian dollars. As of December 31, 2017,September 30, 2019, the adjustedeffective interest rates for US dollar LIBOR and ABR, rateswith relevant spreads for borrowings made during the reporting period, were 3.06%3.14% and 5.00%5.13%, respectively.

During the ninesix months ended December 31, 2017,September 30, 2019, the Company made borrowingsborrowed and repayments of $185,000repaid $16,000 under the DomesticPrimary Credit Facility. As of December 31, 2017,September 30, 2019, the Company had no0 outstanding balance under the

China Credit Facility

In August 2013, Deckers (Beijing) Trading Co., LTD, (DBTC), a wholly-owned subsidiary of the Company, entered into a revolving credit facility agreement in China (as amended, the China Credit Facility) that providedprovides for an uncommitted revolving line of credit. In October 2016, the China Credit Facility was amended to include an increase in the uncommitted revolving line of credit of up to CNY 300,000, or $46,065, and to remove the sublimit of CNY 50,000, or $7,678, for the Company's wholly-owned subsidiary, Deckers Footwear (Shanghai) Co., LTD (DFSC). In March 2017, the China Credit Facility was amended to remove DFSC, leaving DBTC as the only remaining borrower, and to add$42,012, with an overdraft facility sublimit of CNY 100,000, or $15,355.$14,004.

to September 30, 2019 through October 31, 2019, the Company borrowed $5,874, had an outstanding balance of $18,855, outstanding bank guarantees of $28, and had available borrowings of approximately $23,129 under the China Credit Facility.

Mortgage

Operating lease assets are subsequently measured throughout the lease term at the carrying amount of December 31, 2017,the associated lease liabilities, plus initial direct costs, plus or minus any prepaid or accrued lease payments, less the unamortized balance of lease incentives received. Rent expense for operating lease payments is recognized on a straight-line basis over the lease term in SG&A expenses in the condensed consolidated statements of comprehensive income. Lease payments recognized in the operating lease liability are (1) fixed payments, including in-substance fixed payments, owed over the lease term, as well as fixed rate increases and (2) exclude any lease prepayments as of the period presented.

Operating lease liabilities recorded in the condensed consolidated balance sheets exclude $38,977 of legally binding undiscounted minimum lease commitment throughpayments due pursuant to a lease signed but not yet commenced for a new flagship store location that will replace an existing flagship store during the expiration datefiscal year ending March 31, 2021.

Supplemental information for amounts presented in the condensed consolidated statements of cash flows related to operating leases is approximately $77,200. as follows:

During the ninesix months ended December 31, 2017,September 30, 2019, there were no material changes to operating lease commitments other than that noted above and those that occurred inoutside the ordinary course of business.

In September 2019, the Company approved LTIP awards under the 2015 SIP for the issuance of PSUs (2020 LTIP PSUs), which were awarded to certain members of the warehouseCompany's senior management team, including the Company's named executive officers. The 2020 LTIP PSUs are subject to vesting based on service conditions over three years, as well as the Company meeting certain revenue and distribution center located in Moreno Valley, California. There were no material changespre-tax income performance targets for the fiscal year ending March 31, 2022 (Measurement Period) and incorporates a relative total shareholder return (TSR) modifier for the 36-month performance period commencing on April 1, 2019 and ending March 31, 2022 (Performance Period). To the extent financial performance is achieved above the threshold levels for each of these performance criteria, the number of 2020 LTIP PSUs that will vest will increase up to other purchase obligations, including commitmentsa maximum of 200% of the targeted amount for capital expenditures,that award. No vesting of any portion of the 2020 LTIP PSUs will occur if the Company fails to achieve revenue and pre-tax income amounts equal to at least 90% of the threshold amounts for these criteria. Following the determination of the Company’s achievement with respect to the revenue and pre-tax income criteria for the Measurement Period, the vesting of each 2020 LTIP PSU will be subject to adjustment based on the application of a relative TSR modifier. The amount of the adjustment will be determined based on a comparison of the Company's TSR relative to the TSR of a pre-determined set of peer group companies for the Performance Period. A Monte-Carlo simulation model was used to determine the grant date fair value by simulating a range of possible future stock prices for the Company and each member of the peer group over the Performance Period.

The after-tax unrealized gains or losses from changes in the ordinary coursefair value of business.

As of legal proceedings and claims cannot be predicted with certainty,September 30, 2019, the Company currently believes thathad the final outcome of these ordinary course matters will not, individually orfollowing derivative contracts recorded at fair value in the aggregate,condensed consolidated balance sheets: