Commitments and Contingencies

9 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

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 between 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, was as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Non-cash operating activities
Operating lease assets obtained in exchange for lease liabilities*	$	12,849	$	8,859	$	26,058	$	35,153
Reductions to operating lease assets for reductions to lease liabilities*	(1,241)		(4,669)		(1,649)		(5,293)

*Amounts disclosed include non-cash additions or reductions resulting from lease remeasurements.

Operating lease liabilities recorded in the condensed consolidated balance sheets exclude an aggregate of $52,443 of undiscounted minimum lease payments due pursuant to leases signed but not yet commenced. These leases are primarily for the following:

•additional space for the Company's US warehouse and DC in Mooresville, Indiana with an initial lease term of ten years, which the Company expects to be operational in the second quarter of its next fiscal year ending March 31, 2024 (next fiscal year);

•a new international UGG brand flagship retail store in Munich, Germany with an initial term of five years, which the Company expects to be opened in the first quarter of its next fiscal year; and,

•a new HOKA brand retail store in Nagoya, Japan with an initial lease term of six years, which the Company expects to be opened in the second quarter of its next fiscal year.

Purchase Obligations. The Company has been subject to the following adjustments to its purchase obligations:

3PL Agreements. Since March 31, 2022, the Company has entered into 3PL agreements relating to international logistics operations that require additional minimum commitments of approximately $86,000, which is expected to be paid over a period of three to five years.

Commodities. During December 2022, the Company received refunds of deposits of $10,000 reflecting the return of funds previously advanced to sheepskin suppliers under certain expired supply agreements. Deposits are initially recorded in other assets in the condensed consolidated balance sheets and are returned from sheepskin suppliers as the Company, its affiliates, third-party manufacturers, factories, and other agents (each or collectively, a Buyer) purchase the remaining minimum commitments corresponding to unused sheepskins on previously expired contracts. As of December 31, 2022, an additional deposit refund due but not yet paid of $6,877 was reclassified from other assets to other current assets in the condensed consolidated balance sheets. As of December 31, 2022, remaining deposits recorded in other assets in the condensed consolidated balance sheets is $16,266.

Except as described above, there were no other material changes outside the ordinary course of business during the nine months ended December 31, 2022, to the contractual obligations and other commitments last disclosed in the Company's 2022 Annual Report and as of March 31, 2022.

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 currently believes that the outcome of these ordinary course matters will not, individually or in the aggregate, have a material adverse effect on its business, results of operations, financial condition, or cash flows. However, regardless of the outcome, these ordinary course matters can have an adverse impact on the Company because of legal costs, diversion of management time and resources, and other factors.

Commitments and Contingencies

Commitments and Contingencies

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 between 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, was as follows:

	Three Months Ended December 31,				Nine Months Ended December 31,
	2022		2021		2022		2021
Non-cash operating activities
Operating lease assets obtained in exchange for lease liabilities*	$	12,849	$	8,859	$	26,058	$	35,153
Reductions to operating lease assets for reductions to lease liabilities*	(1,241)		(4,669)		(1,649)		(5,293)

*Amounts disclosed include non-cash additions or reductions resulting from lease remeasurements.

Operating lease liabilities recorded in the condensed consolidated balance sheets exclude an aggregate of $52,443 of undiscounted minimum lease payments due pursuant to leases signed but not yet commenced. These leases are primarily for the following:

•additional space for the Company's US warehouse and DC in Mooresville, Indiana with an initial lease term of ten years, which the Company expects to be operational in the second quarter of its next fiscal year ending March 31, 2024 (next fiscal year);

•a new international UGG brand flagship retail store in Munich, Germany with an initial term of five years, which the Company expects to be opened in the first quarter of its next fiscal year; and,

•a new HOKA brand retail store in Nagoya, Japan with an initial lease term of six years, which the Company expects to be opened in the second quarter of its next fiscal year.

Purchase Obligations. The Company has been subject to the following adjustments to its purchase obligations:

3PL Agreements. Since March 31, 2022, the Company has entered into 3PL agreements relating to international logistics operations that require additional minimum commitments of approximately $86,000, which is expected to be paid over a period of three to five years.

Commodities. During December 2022, the Company received refunds of deposits of $10,000 reflecting the return of funds previously advanced to sheepskin suppliers under certain expired supply agreements. Deposits are initially recorded in other assets in the condensed consolidated balance sheets and are returned from sheepskin suppliers as the Company, its affiliates, third-party manufacturers, factories, and other agents (each or collectively, a Buyer) purchase the remaining minimum commitments corresponding to unused sheepskins on previously expired contracts. As of December 31, 2022, an additional deposit refund due but not yet paid of $6,877 was reclassified from other assets to other current assets in the condensed consolidated balance sheets. As of December 31, 2022, remaining deposits recorded in other assets in the condensed consolidated balance sheets is $16,266.

Except as described above, there were no other material changes outside the ordinary course of business during the nine months ended December 31, 2022, to the contractual obligations and other commitments last disclosed in the Company's 2022 Annual Report and as of March 31, 2022.

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 currently believes that the outcome of these ordinary course matters will not, individually or in the aggregate, have a material adverse effect on its business, results of operations, financial condition, or cash flows. However, regardless of the outcome, these ordinary course matters can have an adverse impact on the Company because of legal costs, diversion of management time and resources, and other factors.