DECKERS OUTDOOR CORP - Annual Report: 2024 (Form 10-K)

Foreign currency translation loss()()()Total other comprehensive loss, net of tax()()()Comprehensive income$ $ $ Net income per shareBasic$ $ $ Diluted$ $ $

Weighted-average common shares outstanding (Note 11)

Basic Diluted

See accompanying notes to the consolidated financial statements.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(amounts in thousands)

Common Stock

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Total Stockholders’
Equity

Amount

Balance, March 31, 2021

()

Stock-based compensation

—

Shares issued upon vesting

—

Exercise of stock options

—

Shares withheld for taxes

—

()

—

()

Repurchases of common stock (Note 10)

()

—

()

—

()

Net income

—

Total other comprehensive loss

—

()

Balance, March 31, 2022

()

Stock-based compensation

—

Shares issued upon vesting

—

Exercise of stock options

—

Shares withheld for taxes

—

()

—

()

Repurchases of common stock (Note 10)

()

—

()

—

()

Excise taxes related to repurchases of common stock

—

()

—

()

Net income

—

Total other comprehensive loss

—

()

Balance, March 31, 2023

()

Stock-based compensation

—

Shares issued upon vesting

—

Exercise of stock options

—

Shares withheld for taxes

—

()

—

()

Repurchases of common stock (Note 10)

()

—

()

—

()

Excise taxes related to repurchases of common stock

—

()

—

()

Net income

—

Total other comprehensive loss

—

()

Balance, March 31, 2024

()

See accompanying notes to the consolidated financial statements.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)


	Years Ended March 31,
	2024	2023	2022
OPERATING ACTIVITIES
Net income	$	$	$
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation, amortization, and accretion
Amortization on cloud computing arrangements
Loss on extinguishment of debt
Bad debt expense (benefit)			()
Deferred tax benefit	()	()	()
Stock-based compensation
Loss on disposal of long-lived assets
Impairment of intangible assets
Impairment of operating lease and other long-lived assets
Changes in operating assets and liabilities:
Trade accounts receivable, net		()	()
Inventories		()	()
Prepaid expenses and other current assets	()	()	()
Income tax receivable	()		()
Net operating lease assets and lease liabilities	()	()
Other assets	()		()
Trade accounts payable		()
Other accrued expenses			()
Income tax payable			()
Other long-term liabilities	()
Net cash provided by operating activities
INVESTING ACTIVITIES
Purchases of property and equipment	()	()	()
Proceeds from sales of property and equipment
Net cash used in investing activities	()	()	()
FINANCING ACTIVITIES
Loan origination costs on revolving credit facilities		()
Proceeds from issuance of stock
Proceeds from exercise of stock options
Repurchases of common stock	()	()	()
Cash paid for shares withheld for taxes	()	()	()
Net cash 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	$	$	$

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(continued)

Years Ended March 31,

2024

2023

2022

SUPPLEMENTAL CASH FLOW DISCLOSURE

Cash paid during the period

Income taxes

Interest

Operating leases

Non-cash investing activities

Changes in accounts payable and other accrued expenses for purchases of property and equipment

()

Accrued for asset retirement obligation assets related to leasehold improvements

Leasehold improvements acquired through tenant allowances

Non-cash financing activities

Accrued for shares withheld for taxes

Accrued excise taxes related to repurchases of common stock

See accompanying notes to the consolidated financial statements.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

NOTE 1.

proprietary brands include the UGG® (UGG), HOKA® (HOKA), Teva® (Teva), Sanuk® (Sanuk), Koolaburra by UGG® brand (Koolaburra), and AHNU® (AHNU) brands.

The Company sells its products through quality domestic and international retailers, international distributors, and directly to its global consumers through its Direct-to-Consumer (DTC) business, which is comprised of its-e‑commerce business and retail stores. Independent third-party contractors manufacture all of the Company’s products.

A significant part of the UGG brand’s business has historically been seasonal, requiring the Company to build inventory levels during certain quarters in its fiscal year to support higher selling seasons, which has contributed to variation in its results from quarter to quarter. However, as the Company continues to take steps to diversify and expand its product offerings by creating more year-round styles, and as net sales of the HOKA brand, which generally occur more evenly throughout the year, continue to increase as a percentage of the Company’s aggregate net sales, the Company expects to continue to see the impact from seasonality decrease over time.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

reportable operating segments include the worldwide wholesale operations of the UGG brand, HOKA brand, Teva brand, Sanuk brand, and Other brands (primarily consisting of the Koolaburra brand, as well as the recently launched AHNU brand in March 2024), as well as DTC (collectively, the Company’s reportable operating segments). Refer to Note 12, “Reportable Operating Segments,” for further information on the Company’s reportable operating segments.

During October 2023, the Company announced that it intends to divest the Sanuk brand as it focuses on allocating resources that best align with its long-term objectives. Refer to Note 3, “Goodwill and Other Intangible Assets,” for discussion on the Sanuk brand definite-lived intangible asset impairment charge recorded during the year ended March 31, 2024.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

Summary of Significant Accounting Policies. The following is a summary of the Company’s significant accounting policies applied to its consolidated financial statements:

Refer to Note 4, “Fair Value Measurements,” for further information on the fair value of money-market funds. Refer to Note 13, “Concentration of Business,” for further information on credit risks in cash.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

As of March 31, 2024, net capitalized costs for CCAs are $, with $ recorded in prepaid expenses and $ recorded in other assets in the consolidated balance sheets. As of March 31, 2023, net capitalized costs for CCAs are $, with $ recorded in prepaid expenses and $ recorded in other assets in the consolidated balance sheets.

. Property and equipment include tangible, non-consumable items owned by the Company. Software implementation costs are capitalized if they are incurred during the application development stage and relate to costs to obtain computer software from third parties, including related consulting expenses, or costs incurred to modify existing software that results in additional upgrades or enhancements that provide additional functionality.

$ Building Machinery and equipment

Furniture and fixtures

Computer software

Leasehold improvements

Construction in progress Gross property and equipment Less accumulated depreciation and amortization()()Total$ $

Depreciation was $, $, and $ during the years ended March 31, 2024, 2023, and 2022, respectively.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

$ Additions and changes in estimate Liabilities settled during the period()()Accretion expenses Foreign currency translation gains()()

Ending balance

$ $

Refer to Note 3, “Goodwill and Other Intangible Assets,” for further information on the Company’s goodwill and indefinite-lived intangible assets and annual impairment assessment results.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

Refer to Note 3, “Goodwill and Other Intangible Assets,” for discussion on the Sanuk brand impairment charge recorded during the year ended March 31, 2024, and for further information on remaining amortization expense for definite-lived intangible assets.

During the years ended March 31, 2024, 2023, and 2022, the Company recorded impairment charges of $, $, and $, respectively, within its DTC reportable operating segment in SG&A expenses in the consolidated statements of comprehensive income for retail store-related operating lease and other long-lived assets. These impairment charges were due to the underperformance of certain retail stores that resulted in the carrying value exceeding the estimated fair value, which is determined based on an estimate of the future discounted cash flows. Refer to Note 7, “Commitments and Contingencies,” for further information on the Company’s operating lease assets and liabilities.

months or less to manage foreign currency risk and 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 Company does not use derivative contracts for trading purposes.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

Refer to Note 9, “Derivative Instruments,” for further information on the impact of derivative instruments and hedging activities.

Refer to Note 10, “Stockholders’ Equity,” for further information on the Company’s stock repurchase program.

or less and have payment terms that are generally to days.

Refer to Note 2, “Revenue Recognition,” for further information regarding the Company’s components of variable consideration.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

Such costs amounted to $, $, and $ for the years ended March 31, 2024, 2023, and 2022, respectively, and are recorded in SG&A expenses in the consolidated statements of comprehensive income.

, $, and $ for the years ended March 31, 2024, 2023 and 2022, respectively, which are recorded in SG&A expenses in the consolidated statements of comprehensive income. Advertising costs are expensed the first time the advertisement is run or communicated. All other costs of advertising, marketing, and promotion are expensed as incurred. Included in prepaid expenses as of March 31, 2024, and 2023 are $ and $, respectively, related to prepaid advertising, marketing, and promotion expenses for programs expected to take place after such dates.

Refer to Note 8, “Stock-Based Compensation,” for further information on grant activity, types of awards, and additional disclosure related to stock-based compensation.

% of each eligible participant’s deferrals on up to % of eligible compensation. Internationally, the Company has various defined contribution plans. Certain international locations require mandatory contributions under social programs, and the Company contributes at least the statutory minimums. US 401(k) matching contributions totaled $, $, and $ during the years ended March 31, 2024, 2023, and 2022, respectively, and were recorded in SG&A expenses in the consolidated statements of comprehensive income. In addition, the Company may also make discretionary profit-sharing contributions to the plan. However, there were Company profit-sharing contributions for the years ended March 31, 2024, 2023, and 2022.

% of their annual base salary and up to % of any cash incentive bonus under the NQDC Plan. The Company holds all its non-qualified deferred compensation plan investments in mutual funds. In March 2015, the Board of Directors approved a Company contribution feature to allow the option, but not the obligation, for the Company to make discretionary or matching cash contributions to NQDC Plan participants.

Refer to Note 4, “Fair Value Measurements,” for further information on the fair value of deferred compensation assets and liabilities.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

Refer to Note 5, “Income Taxes,” for further information on tax impacts and components of tax balances in the consolidated financial statements.

Refer to Note 10, “Stockholders’ Equity,” for further information on components of OCI.

Refer to Note 11, “Basic and Diluted Shares,” for a reconciliation of basic to diluted weighted-average common shares outstanding.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

NOTE 2.

$()

Net additions to sales return liability (1)

()Actual returns() Balance, March 31, 2023 ()

Net additions to sales return liability (1)

()Actual returns() Balance, March 31, 2024$ $()

(1) Net additions to the sales return liability include a provision for anticipated sales returns, which consists of both contractual return rights and discretionary authorized returns.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

)$()Redemptions and expirations for loyalty certificates and points recognized in net sales Deferred revenue for loyalty points and certificates issued()()

Ending balance

$()$()

)$()Additions of customer cash payments()()Revenue recognized Ending balance$()$()

NOTE 3.

$ HOKA brand Total goodwill Other intangible assetsIndefinite-lived intangible assetsTrademarks

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

Other Total gross carrying amount

Accumulated amortization and impairments

()()Net definite-lived intangible assets Total other intangible assets, net Total $ $

The weighted-average amortization period for definite-lived intangible assets was years for the years ended March 31, 2024, and 2023. Intangible assets consist primarily of indefinite-lived and definite-lived trademarks, customer relationships, patents, lease rights, and non-compete agreements arising from the application of purchase accounting. Goodwill is allocated to the wholesale reportable operating segments of the brands described above.

Annual Impairment Assessment. During the years ended March 31, 2024, 2023, and 2022, the Company evaluated goodwill for impairment at the reporting unit level for the UGG and HOKA brands wholesale reportable operating segments as of December 31st and evaluated the Teva indefinite-lived trademarks as of October 31st. Based on the evaluation of qualitative and quantitative factors, including the asset carrying amounts recorded in the consolidated balance sheets against each of the brands’ actual results of operations and long-term forecasts of net sales and operating income, impairment loss was recorded for goodwill and indefinite-lived intangible assets. As of March 31, 2024, and 2023, the gross carrying amount of goodwill is $ and the accumulated impairment losses are $.

During the fourth fiscal quarter for the year ended March 31, 2024, the Company recorded an impairment loss of $ in SG&A expenses in the consolidated statements of comprehensive income for the Sanuk brand definite-lived trademark, driven by lower-than-expected results of operations for the wholesale channel that resulted in the carrying value exceeding the estimated fair value, which was determined based on an estimate of the future discounted cash flows. The Company did not identify any definite-lived intangible asset triggering events during the years ended March 31, 2023, and 2022.

Other Intangible Assets, net.

$ $ Impairment charges() Amortization expense()()()Foreign currency translation net loss()()()

Ending balance

$ $ $

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

2026 2027 2028 2029 Thereafter Total$

NOTE 4.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

$ $ $ Other assets:Non-qualified deferred compensation asset Total assets measured at fair value$ $ $ $ Liabilities:Other accrued expenses:Non-qualified deferred compensation liability$()$()$ $ Other long-term liabilities:Non-qualified deferred compensation liability()() Total liabilities measured at fair value$()$()$ $

As of

Measured Using

March 31, 2023

Level 1

Level 2

Level 3

Assets:

Cash equivalents:

Money-market funds

Other assets:

Non-qualified deferred compensation asset

Total assets measured at fair value

Liabilities:

Other accrued expenses:

Non-qualified deferred compensation liability

()

Other long-term liabilities:

Non-qualified deferred compensation liability

()

Total liabilities measured at fair value

()

The Company’s non-financial assets, such as other long-lived assets and definite-lived intangible assets, which include operating lease assets, machinery and equipment, leasehold improvements, definite-lived trademarks; as well as indefinite-lived intangible assets and goodwill, are not required to be carried at fair value on a recurring basis and are reported at carrying value. Instead, these assets are tested for impairment annually, or when an event occurs or changes in circumstances indicate the carrying value may not be recoverable. When determining fair value, Level 3 measurements are used for the estimates and assumptions, including undiscounted future cash flows expected to be generated by the asset groups based upon historical experience, expected market conditions, as well and management’s plans.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

NOTE 5.

$ $ Foreign Total$ $ $

(1) Domestic income before income taxes for the years ended March 31, 2024, 2023, and 2022 is presented net of intercompany dividends (or repatriated cash) of $, $, and $, respectively.

Income Tax Expense.

$ $ State Foreign Total DeferredFederal() ()State() ()Foreign ()()Total()()()Total$ $ $

Income Tax Expense Reconciliation.

$ $

State income taxes, net of federal income tax benefit

Foreign rate differential()()()Gross unrecognized tax benefits ()

Intercompany transfers of assets

()()()US tax on foreign earnings Total()()Deferred tax assets, net$ $

The deferred tax assets are currently expected to be realized between fiscal years 2025 and 2031. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets. The Company’s deferred tax valuation allowances are primarily the result of foreign losses in jurisdictions with limited future profitability.

US Taxation of Foreign Earnings. The Company is subject to US taxation of its foreign subsidiary earnings, which is considered global intangible low-taxed income (commonly known as GILTI), as well as limitations on the deductions of executive compensation, which are included in income tax expense in the consolidated statements of comprehensive income for the periods presented above.

The Company currently anticipates repatriating current and future unremitted earnings of non-US subsidiaries, to the extent they have been and will be subject to US income tax, as long as such cash is not required to fund ongoing foreign operations. Due to the complexities in the laws of foreign jurisdictions, it is not practicable to estimate the amount of foreign withholding taxes associated with such unremitted earnings. During the year ended March 31, 2024, the Company declared an intercompany dividend of $ from a foreign subsidiary, for which no foreign withholding taxes were required.

As of March 31, 2024, the Company has $ of undistributed earnings from its non-US subsidiaries, of which $ is held as cash and cash equivalents, a portion of which may be subject to additional foreign withholding taxes if it were to be repatriated. As of March 31, 2024, the Company has $ of accumulated earnings from its non-US subsidiaries for which no US federal or state income taxes have been paid.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

$ $ Gross increase related to current year tax positions Gross increase related to prior year tax positions Gross decrease related to prior year tax positions()()()Settlements() ()Lapse of statute of limitations()()()Ending balance$ $ $

Total gross unrecognized tax benefits recorded in the consolidated balance sheets are as follows:


	As of March 31,
	2024	2023
Long-term asset
Deferred tax assets, net	$	$
Current liability
Income tax payable
Long-term liability
Income tax liability
Total	$	$

Net unrecognized tax benefits are defined as gross unrecognized tax benefits, less federal benefit for state income taxes, related to uncertain tax positions taken in the Company’s income tax return that would impact the Company’s effective tax rate, if recognized. Management believes it is reasonably possible that the amount of net unrecognized tax benefits, as well as associated interest and penalties, may decrease during the next 12 months by $, which includes amounts relating to expirations of statute of limitations and settlements of various tax matters. Of this amount, $ would result in an income tax benefit for the Company and $ would result in a decrease to interest expense in the consolidated statements of comprehensive income.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

and $ for the payment of interest and penalties, respectively, in income tax liability in the consolidated balance sheets. During the years ended March 31, 2024, 2023, and 2022, the Company recorded $, $, and $(), respectively, of interest and penalties as an increase or (decrease) to interest expense in the consolidated statements of comprehensive income.

The Company has on-going income tax examinations in various state and foreign tax jurisdictions and regularly assesses tax positions taken in years open to examination. The Company files income tax returns in the US federal jurisdiction and various state, local, and foreign jurisdictions. With few exceptions, the Company is no longer subject to US federal, state, local, or foreign income tax examinations by tax authorities before fiscal year 2020.

Although the Company believes its tax estimates are reasonable and prepares its tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company’s estimates or from its historical income tax provisions and accruals. The results of an audit or litigation could have a material impact on results of operations or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, or interest assessments. However, management does not currently expect these audits and inquiries to have a material impact on the Company’s consolidated financial statements.

NOTE 6.

, $ unsecured revolving credit facility (Primary Credit Facility), contains a $ sublimit for the issuance of letters of credit, and matures on December 19, 2027, subject to extension on early termination as described in the Credit Agreement.

In addition to allowing borrowings in US dollars, the Primary Credit Facility provides a $ sublimit for borrowings in Euros, Sterling, Canadian dollars, and any other foreign currency that is subsequently approved by Citibank, each lender, and each bank issuing letters of credit. Subject to customary conditions, the Company has the option to increase the maximum principal amount available up to an additional $, resulting in a maximum available principal amount of $. However, none of the lenders have committed at this time to provide any such increase in the commitment.

The obligations of the Company and each other borrower under the Primary Credit Facility are guaranteed by the Company’s existing and future wholly owned domestic subsidiaries that meet certain materiality thresholds, subject to limited exceptions. All obligations under the Primary Credit Facility and the foregoing guaranty are unsecured, and amounts borrowed may be prepaid at any time without a premium or penalty, subject to limited exceptions.

Certain of the Company’s foreign subsidiaries may also borrow under the Primary Credit Facility, which permits the Company, subject to customary conditions, to designate one or more additional subsidiaries organized in foreign jurisdictions to borrow. The Company is liable for the obligations of each foreign borrower, but the obligations of the foreign borrowers are several (not joint) in nature.

Interest Rate Terms. At the Company’s election, revolving loans issued under the Primary Credit Facility will bear interest at the adjusted term SOFR, the adjusted Euro InterBank Offered Rate (EURIBOR), the Sterling Overnight Index Average (SONIA), the Canadian Dollar Offered Rate (CDOR), or the adjusted Alternate Base Rate (ABR), in each case plus the applicable interest rate margin.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

% and % based on the Company’s total net leverage ratio, and ABR, plus % per annum. The applicable interest rate margin is based on a pricing grid based on the Company’s total net leverage ratio and ranges from % to % per annum in the case of loans based on the SOFR, EURIBOR, SONIA, or CDOR, and from % to % per annum in the case of loans based on ABR. As of March 31, 2024, the effective interest rates for SOFR and ABR are % and %, respectively.

Commitment Fees. The Company is required to pay a fee rate that fluctuates between % and % per annum on the daily unused amount of the Primary Credit Facility, with the exact commitment fee based on the Company’s total net leverage ratio.

Borrowing Activity. During the year ended March 31, 2024, the Company made borrowings or repayments under the Primary Credit Facility. As of March 31, 2024, the Company has outstanding balance, $ of outstanding letters of credit, and available borrowings of $ under the Primary Credit Facility.

Deferred Financing Costs. During the year ended March 31, 2023, the Company paid $ for various commitment, arrangement, other fees, and expense reimbursements to certain parties to the Credit Agreement. These costs are being amortized on a straight-line basis over the term of the Credit Agreement and are primarily included in other assets in the consolidated balance sheets. Deferred financing costs associated with the Prior Credit Agreement had a remaining unamortized balance previously recorded in other current assets in the consolidated balance sheets of $, which was written off to interest expense during the year ended March 31, 2023.

China Credit Facility. In October 2021, Deckers (Beijing) Trading Co., LTD (DBTC), 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, or $, with an overdraft facility sublimit of CNY, or $. The China Credit Facility is payable on demand and subject to annual review with a defined aggregate period of borrowing of up to months, which was amended to increase from months in November 2023. The obligations under the China Credit Facility are guaranteed by the Company for % 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 March 31, 2024, the effective interest rate is %. During the year ended March 31, 2024, the Company made borrowings or repayments under the China Credit Facility. As of March 31, 2024, the Company has outstanding balance, outstanding bank guarantees of $, and available borrowings of $ under the China Credit Facility.

Debt Covenants. Under the Credit Agreement, the Company is subject to usual and customary representations and warranties, and contains usual and customary affirmative and negative covenants, which include limitations on liens, additional indebtedness, investments, restricted payments, indemnification provisions in favor of the lenders and transactions with affiliates. The financial covenant requires the total net leverage ratio to be no greater than to .

Under the Credit Agreement, the Company is also subject to other customary limitations, as well as usual and customary events of default, which include non-payment of principal, interest, fees and other amounts; breach of a representation or warranty; non-performance of covenants and obligations; default on other material debt; bankruptcy or insolvency; material judgments; incurrence of certain material Employee Retirement Income Security Act of 1974 (ERISA) liabilities; and a change of control of the Company.

Under the China Credit Facility, DBTC is subject to usual and customary representations and warranties, and usual and customary affirmative and negative covenants, which include limitations on liens and additional indebtedness.

As of March 31, 2024, the Company is in compliance with all financial covenants under the Primary Credit Facility and China Credit Facility.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

NOTE 7.

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.

Variable Lease Payments. Certain leases require additional payments based on (1) actual or forecasted sales volume (either monthly or annually), (2) reimbursement for real estate taxes (tax), (3) common area maintenance (CAM), and (4) insurance (collectively, variable lease payments). Variable lease payments are generally excluded from operating lease assets and lease liabilities and are recorded in rent expense as a component of SG&A expenses in the consolidated statements of comprehensive income. Some leases are dependent upon forecasted annual sales volume, and lease payments are recognized on a straight-line basis as rent expense over each annual period when the achievement of the related sales target is reasonably likely to occur. Other variable lease payments, such as tax, CAM, and insurance, are recognized in rent expense as incurred. Some leases contain one fixed lease payment that include variable lease payments, which are considered non-lease components. The Company has elected to account for these instances as a single lease component and the total of these fixed payments is used to measure the operating lease assets and lease liabilities.

Discount Rate. The Company discounts its unpaid lease payments using the interest rate implicit in the lease or, if the rate cannot be readily determined, its IBR. Generally, the Company cannot determine the interest rate implicit in the lease because it does not have access to the lessor’s estimated residual value or the amount of the lessor's deferred initial direct costs. The Company has a centralized treasury function, which enables the Company to use a portfolio approach to discount lease obligations. Therefore, the Company generally derives a discount rate at the lease commencement date by utilizing its IBR, which is based on what the Company would have to pay on a collateralized basis to borrow an amount equal to its lease payments under similar terms. Because the Company does not currently borrow on a collateralized basis under its revolving credit facilities, it uses the interest rate it pays on its non-collateralized borrowings under its Primary Credit Facility as an input for deriving an appropriate IBR, adjusted for the amount of the lease payments, the lease term, and the effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease.

$ $ Variable Short-term Total$ $ $

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

2026 2027 2028 2029 Thereafter Total undiscounted future lease payments Less: Imputed interest()Total$

Operating lease liabilities recorded in the consolidated balance sheets exclude an aggregate of $ of undiscounted minimum lease payments due pursuant to leases signed but not yet commenced, primarily for the expansion of an existing office with an initial term of , which the Company expects to open in the fourth quarter of its fiscal year ending March 31, 2025 (next fiscal year).

Weighted-average discount rate % %

Supplemental information for amounts presented in the consolidated statements of cash flows related to operating leases, were as follows:


	Years Ended March 31,
	2024	2023	2022
Non-cash operating activities (1)
Operating lease assets obtained in exchange for lease liabilities	$	$	$
Reductions to operating lease assets for reductions to lease liabilities	()	()	()

(1) Amounts disclosed include non-cash additions or reductions resulting from lease remeasurements.

Purchase Obligations. The Company has various types of purchase obligations, as follows:

Product. As of March 31, 2024, the Company has $ of outstanding purchase orders or other obligations with independent third-party contractors that manufacturer all of its products. These obligations consist mostly of open purchase orders that are expected to be fulfilled in the ordinary course of business and to be paid in less than one year. A significant portion of the purchase commitments can be cancelled by the Company under certain circumstances; however, the occurrence of such circumstances is generally limited. As a result, the amount does not necessarily reflect the dollar amount of the Company’s binding commitments or minimum purchase obligations for products, and instead reflects an estimate of its future payment commitments based on information currently available.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

(collectively, commodity contracts). The Company’s fixed pricing agreements are non-cancellable and may be subject to fees, including certain sheepskin purchasing contracts requiring deposits when minimum volumes are not fully consumed. Sugarcane-derived EVA is used to manufacture certain UGG brand products. Sugarcane-derived EVA purchasing contracts do not require deposits, but they contain minimum purchase commitments.

Based on information available as of March 31, 2024, the Company’s aggregated estimated future payment obligations are $ for commitments under these commodity contracts, of which $ is due in less than one year and the remainder $ is due in one to three years. Included in the aggregate commodity purchase commitment amount above are deposits the Company made for certain sheepskin supply agreements that are expected to be consumed in the ordinary course of business. These deposits will be returned as the designated suppliers purchase the remaining minimum commitments as these sheepskin supply agreements do not permit net settlement. As of March 31, 2024 and 2023, there are $ of certain sheepskin supply agreement deposits that have not been fully consumed and are recorded in other assets in the consolidated balance sheets. During the year ended March 31, 2024, the Company did receive refunds of deposits reflecting the return of funds previously advanced to sheepskin suppliers under certain expired supply agreements. During the year ended March 31, 2023, the Company received refunds of deposits of $ reflecting the return of funds previously advanced to sheepskin suppliers under certain expired supply agreements. During the years ended March 31, 2024 and 2023, no additional deposits were made.

Other. Other purchase commitments include third-party logistics provider (3PL) arrangements, sales management services, supply chain services, information technology (IT) services, promotional expenses, and other commitments under service contracts. As of March 31, 2024, the Company has an aggregate of $ of other purchase commitments, of which $ is due in less than one year, $ is due in one to three years, and the remainder of $ is due in three to five years.

Litigation. From time to time, the Company is involved in various legal proceedings, disputes, and other claims arising in the ordinary course of business, including employment, intellectual property, and product liability claims. Although the results of these matters cannot be predicted with certainty, the Company believes it is not currently a party to any legal proceedings, disputes, or other claims for which a material loss is considered probable and for which the amount (or range) of loss is reasonably estimable. However, regardless of the merit of the claims raised or the outcome, these matters can have an adverse impact on the Company as a result of legal costs, diversion of management’s time and resources, and other factors.

Indemnification. The Company has agreed to indemnify certain of its licensees, distributors, and promotional partners in connection with claims related to the use of the Company’s intellectual property. The terms of such agreements generally do not provide for a limitation on the maximum potential future payments. From time to time, the Company also agrees to indemnify its licensees, distributors, and promotional partners in connection with claims that the Company’s products infringe on the intellectual property rights of third parties. These agreements may or may not be made pursuant to a written contract. In addition, from time to time, the Company also agrees to standard indemnification provisions in commercial agreements in the ordinary course of business. Management believes the likelihood of any payments under any of these arrangements is remote and would be immaterial. This determination is made based on a prior history of insignificant claims and related payments. There are currently no pending claims relating to indemnification matters involving the Company’s intellectual property.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

NOTE 8.

shares of the Company’s common stock for issuance to employees, directors, consultants, independent contractors, and advisors. The maximum aggregate number of shares that may be issued to employees under the 2015 SIP through the exercise of incentive stock options is . As of March 31, 2024, shares of common stock remained available for future issuance under the 2015 SIP, subject to adjustment for future stock splits, stock dividends, and similar changes in capitalization.

Annual Stock Awards. During the years ended March 31, 2024, 2023, and 2022, the Company granted RSU and LTIP PSU awards under the 2015 SIP to certain members of the Company’s management team, which entitle the recipients to receive shares of the Company’s common stock upon vesting. dividends are paid or accumulated on any RSU or LTIP PSU awards.

$ $

Granted (1)

Vested (2)

()()()()Forfeited()()()()Nonvested, March 31, 2022

Granted (1)

Vested (2)

()()()()Forfeited()()()()Nonvested, March 31, 2023

Granted (1)

Vested (2)

()()()()Forfeited()()()()Nonvested, March 31, 2024 $ $

(1) The amounts granted are the maximum amounts under the terms of the applicable LTIP PSUs.

(2) The amounts vested include shares withheld to cover taxes that are not issued to the recipient.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

following the date of grant. The grant date fair value of RSUs is determined based on the closing market price of the Company’s common stock on the date of grant.

Long-Term Incentive Plan Awards. LTIP PSU awards are subject to market, performance, and time-based vesting conditions. The term of LTIP PSU awards is over a multi-fiscal year performance period with metrics established at the beginning of the performance period, which is generally two or (Measurement Period). The LTIP PSU awards include a market condition tied to the Company’s relative total stockholder return (TSR) in relation to its peer companies (peer market condition), as well as financial performance conditions tied to certain revenue and pre-tax income performance targets (financial performance conditions). Following the determination of the Company’s achievement with respect to the financial performance conditions for the applicable Measurement Period, the vesting of each LTIP PSU award will be subject to adjustment for the peer market condition based on the application of the TSR modifier. The amount of the adjustment is 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 Measurement Period.

The grant date fair value of LTIP PSUs is determined using a Monte-Carlo model that simulates a range of possible future stock prices for the Company and each member of the peer group over the Measurement Period. For each grant of LTIP PSUs, the Monte-Carlo simulation model factors in key assumptions, such as the market price of the underlying common stock at the beginning and end of the Measurement Period, risk free interest rate, expected dividend yield when simulating a TSR, expected dividend yield when simulating the Company’s stock price, stock price volatility, and correlation coefficients. The Company evaluates the probability of achieving the financial performance conditions against its most current long-range forecast at least quarterly and may adjust stock-based compensation expense for its LTIP PSUs up or down based on its estimated probability outcome over the Measurement Period. The peer market condition is measured as part of the grant date fair value.

The actual number of LTIP PSU awards that vest may increase up to a maximum of % of the targeted amount for the award based on achievement of the financial performance conditions and the peer market condition. No vesting of any portion of the LTIP PSU awards will occur if the Company fails to achieve the financial performance conditions for each reporting period within the Measurement Period. The Company determined that the achievement of at least the minimum threshold target performance criteria for the LTIP PSU awards granted during the fiscal year 2024, was probable as of March 31, 2024, based on the Company’s current long-range forecast. As of March 31, 2024, the Company expects to exceed the targeted amount for the fiscal year 2023 and 2022 awards based on its current estimates for the financial performance conditions for the grants.

During the years ended March 31, 2024, 2023, and 2022, LTIP NQSOs were granted.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

Exercised

()()Exercisable, March 31, 2024 $ $

for annual service on the Board of Directors during the year ended March 31, 2024. The shares are issued in equal quarterly installments with the number of shares being determined using the rolling average of the closing price of the Company’s common stock during the last ten trading days leading up to, and including, the grant date, which is in alignment with the Company’s equity grant guidelines. Each of these shares is fully vested and recorded as compensation expense in the consolidated statements of comprehensive income on the date of issuance.

shares of the Company’s common stock for sale to eligible employees using their after-tax payroll deductions, which are refundable until purchases are made, and are liability-classified. ESPP shares are excluded from basic earnings per share until purchases are made but are included in diluted earnings per share as after-tax payroll deductions are made. Each consecutive purchase period is (purchase period) in duration and shares are purchased on the last trading day of the purchase period (no look-back provision) at a % discount to the closing price on that date. Purchase windows take place in February and August of each fiscal year. The net difference between the timing of compensation expense incurred and remeasured during the purchase period and purchase windows are recorded in other accrued expenses in the consolidated balance sheets.

Stock-Based Compensation.

$ $ LTIP PSUs LTIP PSUs Total$

NOTE 9.

outstanding derivative contracts. The Company settled derivative contracts with notional values as follows:


	Years Ended March 31,
	2024	2023	2022
Designated Derivative Contracts	$	$	$
Non-Designated Derivative Contracts
Total	$	$	$

$ $ Reclassifications from AOCL into net sales()()()

NOTE 11.

Dilutive effect of equity awards Diluted ExcludedRSUs LTIP PSUs Deferred Non-Employee Director Equity Awards

Refer to Note 8, “Stock-Based Compensation,” for further information on the Company’s equity incentive plans.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

NOTE 12.

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.

Segment Net Sales and Income from Operations. The Company evaluates reportable operating segment performance primarily based on net sales and income (loss) from operations. The wholesale operations of each brand are 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 the Company’s warehouses and DCs, certain executive and stock-based compensation, accounting, finance, legal, IT, 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 as these transactions are eliminated in consolidation.

$ $ HOKA brand wholesale Teva brand wholesale Sanuk brand wholesale Other brands wholesale Direct-to-Consumer Total$ $ $ Income (loss) from operationsUGG brand wholesale$ $ $ HOKA brand wholesale Teva brand wholesale Sanuk brand wholesale() Other brands wholesale () Direct-to-Consumer Unallocated overhead costs()()()Total$ $ $

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

$ $ HOKA brand wholesale Sanuk brand wholesale Other brands wholesale Direct-to-Consumer Unallocated overhead costs Total$ $ $ Capital expendituresUGG brand wholesale$ $ $ HOKA brand wholesale Direct-to-Consumer Unallocated overhead costs Total$ $ $

$ 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$ $

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

NOTE 13.

$ $ % of net sales % % %Net sales in foreign currencies$ $ $ % of net sales % % %

Ten largest global customers as % of net sales

% % %

For the years ended March 31, 2024, 2023, and 2022, no single foreign country comprised 10.0% or more of the Company’s total net sales. No single global customer accounted for 10.0% or more of the Company’s total net sales during the years ended March 31, 2024, 2023, and 2022.

As of March 31, 2024, the Company has two customers that represent % of trade accounts receivable, net, compared to no customers that represent 10.0% of trade accounts receivable, net, as of March 31, 2023. 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.

Designated Suppliers. The Company outsources the production of its products to independent manufacturers, which are primarily located in Asia. Sheepskin is the principal raw material for certain UGG brand products and most of the Company’s sheepskin is purchased from tanneries in China, which is sourced primarily from Australia, and is also the source of the repurposed wool in UGGplush. Sugarcane-derived EVA is also utilized within certain UGG brand products and is predominately purchased by our designated suppliers from company in Brazil for the production of soles. Excluding sheepskin, UGGplush, sugarcane-derived EVA, and certain branded materials for materials like outsoles, the Company believes substantially all raw materials and components used to manufacture its products, including virgin wool, rubber, leather, and nylon webbing, are generally available from multiple sources at competitive prices.

Long-Lived Assets.

Foreign (1)

Total$ $

(1) No single foreign country’s property and equipment, net, represents 10.0% or more of the Company’s total property and equipment, net, as of March 31, 2024, and 2023.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

NOTE 14.

As of March 31, 2024, and 2023, the Company had $ and $, respectively, of balances outstanding related to the SFP recorded in trade accounts payable in the consolidated balance sheets. Payments made in connection with the SFP are reported as cash used in operating activities in the trade accounts payable line item of the consolidated statements of cash flows.

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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Fiscal Years Ended March 31, 2024, 2023, and 2022

(dollar amounts in thousands, except per share or share data)

NOTE 15.

$ $ $ Gross profit Income from operations Net income Net income per shareBasic$ $ $ $ Diluted$ $ $ $

Fiscal Year 2023

Quarter Ended

6/30/2022

9/30/2022

12/31/2022

3/31/2023

Net sales

Gross profit

Income from operations

Net income

Net income per share

Basic

Diluted

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Schedule II

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

TOTAL VALUATION AND QUALIFYING ACCOUNTS

(dollar amounts in thousands)

)$()$()Additions()() Deductions Ending balance$()$()$()

Allowance for sales discounts (2)

Beginning balance$()$()$()Additions()()()Deductions Ending balance$()$()$()

Allowance for chargebacks (3)

Beginning balance$()$()$()Additions()()()Deductions Ending balance$()$()$()Total$()$()$()

(1) The additions to the allowance for doubtful accounts represent estimates of the Company’s bad debt expense or recovery based on the factors on which the Company evaluates the collectability of its accounts receivable, with actual recoveries netted into additions. Deductions are for the actual amounts written off against outstanding trade accounts receivables.

(2) The additions to the allowance for sales discounts represent estimates of discounts to be taken by the Company’s customers based on the amount of outstanding discounts for meeting certain order, shipment, and prompt payments terms. Deductions are for the actual discounts taken by the Company’s customers against outstanding trade accounts receivables.

(3) The additions to the allowance for chargebacks represent chargebacks and markdowns taken in the respective year, as well as an estimate of amounts that will be taken in the future related to sales in the current reporting period. Deductions are for the actual amounts written off against outstanding trade accounts receivables.

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DECKERS OUTDOOR CORP - Annual Report: 2024 (Form 10-K)

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