# Deckers Outdoor Corp: Form 10-Q for the period ended Mar 31, 2011

- Company: [Deckers Outdoor Corp](/companies/deck.md) (CIK 910521)
- Form: 10-Q
- Filed: 2011-05-10
- Accepted by EDGAR: May 10, 2011, 17:26 ET
- Period: 2011-03-31
- Accession: 0001104659-11-027709
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/910521/000110465911027709/a11-8744_110q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/910521/000110465911027709/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2011-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2011-01-01 to 2011-03-31 | $204.9m | us-gaap:SalesRevenueGoodsNet |
| Cost of revenue | 3 months, 2011-01-01 to 2011-03-31 | $102.4m | us-gaap:CostOfGoodsSold |
| Gross profit | 3 months, 2011-01-01 to 2011-03-31 | $102.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2011-01-01 to 2011-03-31 | $74.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2011-01-01 to 2011-03-31 | $28.2m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2011-01-01 to 2011-03-31 | $8.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2011-01-01 to 2011-03-31 | $19.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2011-01-01 to 2011-03-31 | $0.49 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2011-01-01 to 2011-03-31 | $0.50 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2011-01-01 to 2011-03-31 | 39,397,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2011-01-01 to 2011-03-31 | $3.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2011-01-01 to 2011-03-31 | $5.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2011-03-31 | $437.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2011-03-31 | $654.7m | us-gaap:AssetsCurrent |
| Total assets | at 2011-03-31 | $753.9m | us-gaap:Assets |
| Current liabilities | at 2011-03-31 | $68.8m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2011-03-31 | $671.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 54,333 characters.

### SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This report and the information incorporated by reference in this report contain “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. We sometimes use words such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “project,” “will” and similar expressions, as they relate to us, our management and our industry, to identify forward-looking statements. Forward-looking statements relate to our expectations, beliefs, plans, strategies, prospects, future performance, anticipated trends and other future events. Specifically, this report and the information incorporated by reference in this report contain forward-looking statements relating to, among other things:

- our global business, growth, operating and financing strategies;
- our product and geographic mix;
- the success of new products, new brands, and other growth initiatives;
- the impact of seasonality on our operations;
- expectations regarding our net sales and earnings growth and other financial metrics;
- our development of worldwide distribution channels;
- trends affecting our financial condition or results of operations;
- overall global economic trends; and
- reliability of overseas factory production and storage and availability of raw materials.

We have based our forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. Actual results may differ materially. Some of the risks, uncertainties and assumptions that may cause actual results to differ from these forward-looking statements are described in Part II, Item 1A, and “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report and the information incorporated by reference in this report might not happen. You should read this report in its entirety, together with the documents that we file as exhibits to this report and the documents that we incorporate by reference in this report with the understanding that our future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements and we assume no obligation to update such forward-looking statements publicly for any reason.

References to “Deckers,” “we,” “us,” “our,” or similar terms refer to Deckers Outdoor Corporation together with its consolidated subsidiaries. Unless otherwise specifically indicated, all amounts herein are expressed in thousands, except for share quantity, per share data, and selling prices. All share and related information presented herein reflects the increased number of shares resulting from the three-for-one stock split paid on July 2, 2010. The following discussion of our financial condition and results of operations should be read together with our condensed consolidated financial statements and the accompanying notes to those statements included elsewhere in this document.

### Overview

We are a leading designer, producer, marketer, and brand manager of innovative, high-quality footwear and accessories. We market our products primarily under two proprietary brands:

- UGG®: Premier brand in luxury and comfort footwear and accessories; and
- Teva®: High performance multi-sport shoes, rugged outdoor footwear, and sport sandals.

In addition to our primary brands, our other brands include Simple®, a line of casual and sustainable-lifestyle sneakers and accessories; TSUBO®, a line of high-end casual footwear that incorporates style, function and maximum comfort; Ahnu®, a line of outdoor performance and lifestyle footwear; and MOZO®, a line of footwear that combines running shoe technology with work shoe toughness for individuals that spend long hours working on their feet.

We sell our brands through our quality domestic retailers and international distributors and retailers, as well as directly to our end-user consumers through our eCommerce business and our retail stores. Independent third parties manufacture all of our products. In 2010, we converted our Teva business in Belgium, the Netherlands, and Luxemburg (Benelux), and France from a distributor model to a wholesale model. In January 2011, we converted from a distributor model to a wholesale model for the UGG, Teva, and Simple brands in the UK and Ireland and the UGG and Simple brands in Benelux and France.

Our business has been impacted by several important trends affecting our end markets:

- The prolonged US and global economic conditions have adversely impacted businesses worldwide in general. Some of our customers have been, and more may be, adversely affected, which in turn has, and may continue to, adversely impact our financial results.
- The top grade sheepskin used in UGG products is in high demand and limited supply and there have been significant increases in the prices of top grade sheepskin as the demand from competitors for this material has increased.
- The markets for casual, outdoor and athletic footwear have grown significantly during the last decade. We believe this growth is a result of the trend toward casual dress in the workplace, increasingly active outdoor lifestyles and a growing emphasis on comfort.
- Consumers are more often seeking footwear designed to address a broader array of activities with the same quality, comfort and high performance attributes they have come to expect from traditional athletic footwear.
- Our customers have narrowed their footwear product breadth, focusing on brands with a rich heritage and authenticity as market category creators and leaders.
- Consumers have become increasingly focused on luxury and comfort, seeking out products and brands that are fashionable while still comfortable.
- There is an emerging sustainable lifestyle movement happening all around the world. Consumers are demanding that brands and companies become more environmentally responsible.

By emphasizing our brands’ images and our focus on comfort, performance and authenticity, we believe we can maintain a loyal consumer following that is less susceptible to fluctuations caused by changing fashions and changes in consumer preferences.

Below is an overview of the various components of our business, including some key factors that affect each business and some of our strategies for growing each business.

### UGG Brand Overview

The UGG brand has become well-known throughout the US as well as internationally. In January 2011, we converted our international UGG brand business from a distributor model to a wholesale model in the UK, Ireland, Benelux, and France. These conversions in key international markets provide us with higher wholesale, versus distributor, revenues and gross margins. Over the past several years, our UGG brand has received increased global media exposure including increased print media in ads and cooperative advertising with our customers, which has contributed to broader public awareness of the brand and significantly increased demand for the collection. We believe that the increased global media focus and demand for UGG products were driven by the following:

- consumer brand loyalty, due to the luxury and comfort of UGG footwear;
- continued innovation of new product categories and styles;
- increased marketing in high-end magazines;
- successful targeting of high-end distribution;
- adoption by high-profile celebrities as a favored footwear brand;
- increased media attention that has enabled us to introduce the brand to consumers much faster than we would have otherwise been able to;
- increased exposure to the brand driven by our concept stores which showcase all of our product offerings;
- retail expansion to 27 stores worldwide as of the end of the first quarter of 2011; and
- continued geographic expansion across the US and internationally.

We believe the luxury and comfort features of UGG products will continue to drive long-term consumer demand. Recognizing that there is a significant fashion element to UGG footwear and that footwear fashions fluctuate, our strategy seeks to prolong the longevity of the brand by offering a broader product line suitable for wear in a variety of climates and occasions and by limiting distribution to select higher-end retailers. As part of this strategy we have increased our product offerings each year, including an extensive spring line, an expanded men’s line, and a fall line that consists of a range of luxurious collections, including boots, casuals, sneakers, slippers, and cold weather footwear for both genders, as well as an expanded kids’ line. In addition, we offer handbags, cold weather accessories, outerwear, and sweaters. We believe that the evolution of the UGG brand and our strategy of product diversification also will help decrease our reliance on prime twinface sheepskin, which is in high demand and subject to price volatility.

### Teva Brand Overview

Our Teva brand is positioned to be the leading innovative, global, action-outdoor brand, with over 25 years worth of contributions to the outdoor adventure experience. The Teva brand pioneered the water sport sandal category in 1984, and to this day, our brand mission is to inspire spontaneity, camaraderie and adventure on, around, or in water. Leveraging our core performance competencies of traction, hydro and comfort, we are focused on driving growth through innovation in the emerging action-outdoor space through multi-sport, light hiking, freestyle mountain bike riding, action water sports, and other action-outdoor lifestyle products.

Our efforts to expand the Teva brand beyond sandals, while embracing our core water-based competencies, contributed to significant revenue growth in 2010. Throughout 2010 and the first quarter of 2011, our broader range of products demonstrated strong retail sell-through across all channels, and we believe that our retail partners have viewed both our product and marketing innovations as relevant and compelling.

We see an opportunity to grow the Teva brand significantly outside of the US. In January 2010, we converted from a distributor model to a wholesale model in the Benelux region and France, enhancing our marketing and distribution capabilities in the outdoor active Benelux market. In January 2011, we converted our Teva brand international business from an independent distributor to a wholesale model in the UK, including Scotland and Ireland, which now affords us the opportunity to better drive our brand building and growth initiatives in this important influential market. Within the US, we see strong growth opportunities within our current core channels of distribution, outdoor specialty and sporting goods, as our product assortment evolves and expands. Also, through effective product and distribution segmentation, we see significant expansion opportunities within the family value, department store, better footwear, and action sports channels. However, we cannot assure investors that these efforts will be successful.

### Other Brands Overview

Our other brands consist of the Simple, TSUBO, Ahnu, and MOZO brands. Our other brands are all sold through most of our distribution channels, with the majority through wholesale channels. The Simple brand is our casual sneaker brand recognized by its name. We believe that we have expertise and a reputation of leadership in sustainable footwear. Since 2005, sustainability has been the primary marketing focus. Beginning in 2011, we are expanding the brand’s positioning to deliver on a broader brand promise of “less is more.” Sustainability will remain a very important brand attribute, but equal emphasis will be placed on style, comfort, quality, and the price to value relationship. We intend to introduce new Simple styles each season, with a design emphasis on timelessness and versatility. We also plan to selectively increase our distribution.

TSUBO, meaning pressure point in Japanese, is marketed as high-end casual footwear for men and women. The brand is the synthesis of ergonomics and style, with a full line of sport and dress casuals, boots, sandals and heels constructed to provide consumers with contemporary footwear that incorporates style, function, and maximum comfort. We are positioning the TSUBO brand as the premium footwear solution for people in the city. We are continuing to create products to address consumers’ unique needs of all-day comfort, innovative style, and superior quality.

The Ahnu brand is an outdoor performance and lifestyle footwear brand for men and women. The name Ahnu is derived from the Celtic goddess representing the balance of well-being and prosperity. The brand focuses primarily on women consumers offering style and comfort for active women on both trails and pavement. The product goal is to achieve uncompromising footwear performance by developing footwear that will provide the appropriate balance of traction, grip, flexibility, cushioning, and durability for a variety of outdoor activities — whether on trails, beaches, or sidewalks.

The MOZO brand was designed for individuals that spend long hours working on their feet. It combines running shoe technology with work shoe toughness. The brand is currently focused on providing footwear for culinary professionals. We have recently expanded our distribution to include large on-line retailers and intend to expand further in 2011 into the health care worker market.

We expect to leverage our design, marketing and distribution capabilities to grow these brands over the next several years, consistent with our mission to build niche brands into global market leaders. Nevertheless, we cannot assure investors that our efforts will be successful.

### eCommerce Overview

Our eCommerce business, which sells all of our brands, allows us to reinforce our relationship with the consumer. eCommerce enables us to meet the growing demand for our products, sell the products at retail prices and provide significant incremental operating income. The eCommerce business provides us an opportunity to communicate to the consumer with a consistent brand message that is in line with our brands’ promises, drives awareness of key brand initiatives, and offers targeted information to specific consumer segments. In recent years, our eCommerce business has had significant revenue growth, much of which occurred as the UGG brand gained popularity and as consumers continued to increase internet usage for footwear and other purchases.

Managing our eCommerce business requires us to focus on the latest trends and techniques for web design and marketing, to generate internet traffic to our websites, to effectively convert website visits into orders, and to maximize average order sizes. We plan to continue to grow our eCommerce business through improved website features and performance, increased marketing, more international websites, and utilization of mobile and tablet technology. Nevertheless, we cannot assure investors that revenue from our eCommerce business will continue to grow.

### Retail Stores Overview

Our retail stores are predominantly UGG Australia concept stores and UGG Australia outlet stores. Our retail stores enable us to directly impact our customers’ experience, meet the growing demand for these products, sell the products at retail prices and provide us with incremental operating income. In addition, our UGG Australia concept stores allow us to showcase our entire line; whereas, a retailer may not carry the whole line. Through our outlet stores, we sell some of our discontinued styles from prior seasons, plus products made specifically for the outlet stores. We sell Teva products as well as some of our other brands through our UGG Australia outlet stores.

As of March 31, 2011, we had a total of 27 retail stores worldwide. These stores are company-owned and operated and include our China stores, which are owned and operated with our joint venture partner. For 2011, we plan to open additional retail stores in the US and significantly expand our retail presence internationally, primarily in Asia.

### Seasonality

Our business is seasonal, with the highest percentage of UGG brand net sales occurring in the third and fourth quarters and the highest percentage of Teva brand net sales occurring in the first and second quarters of each year. Our other brands do not have a significant seasonal impact.

|  | 2011 First Quarter Second Quarter Third Quarter Fourth Quarter |
| --- | ---: |
| Net sales | $204,851 |
| Income from operations | $28,195 |

|  | 2010 First Quarter | Second Quarter | Third Quarter | Fourth Quarter |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $155,927 | $137,059 | $277,879 | $430,124 |
| Income from operations | $28,821 | $13,216 | $66,314 | $140,737 |

With the large growth in the UGG brand over the past several years, net sales in the last half of the year have exceeded that for the first half of the year. Given our expectations for our brands, we currently expect this trend to continue. Nonetheless, actual results could differ materially depending upon consumer preferences, availability of product, competition and our customers continuing to carry and promote our various product lines, among other risks and uncertainties. See Part II, Item 1A, “Risk Factors.”

### Results of Operations

### Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010

The following table summarizes the Company’s results of operations:

|  | Three Months Ended March 31, 2011 Amount% |  | 2010 Amount% |  | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $204,851 | 100.0% | $155,927 | 100.0% | $48,924 | 31.4% |
| Cost of sales | 102,373 | 50.0 | 78,020 | 50.0 | 24,353 | 31.2 |
| Gross profit | 102,478 | 50.0 | 77,907 | 50.0 | 24,571 | 31.5 |
| Selling, general and administrative expenses | 74,283 | 36.3 | 49,086 | 31.5 | 25,197 | 51.3 |
| Income from operations | 28,195 | 13.8 | 28,821 | 18.5 | (626) | (2.2) |
| Other income, net | (138) | (0.1) | (65) | — | (73) | (112.3) |
| Income before income taxes | 28,333 | 13.8 | 28,886 | 18.5 | (553) | (1.9) |
| Income taxes | 8,500 | 4.1 | 10,746 | 6.9 | (2,246) | (20.9) |
| Net income | 19,833 | 9.7 | 18,140 | 11.6 | 1,693 | 9.3 |
| Net income attributable to the noncontrolling interest | 655 | 0.3 | 245 | 0.2 | 410 | 167.3 |
| Net income attributable to Deckers Outdoor Corporation | $19,178 | 9.4% | $17,895 | 11.5% | $1,283 | 7.2% |

***Overview.*** The increase in net sales was primarily due to an increase in UGG product sales. The decrease in income from operations resulted primarily from the higher selling, general and administrative expenses, or SG&A, and higher cost of sales, partially offset by higher net sales.

***Net Sales.*** The following tables summarize net sales by location, brand, and distribution channel:

| Net sales by location: | Three Months Ended March 31, 2011 | 2010 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| US | $148,122 | $117,006 | $31,116 | 26.6% |
| International | 56,729 | 38,921 | 17,808 | 45.8 |
| Total | $204,851 | $155,927 | $48,924 | 31.4% |
| **Net sales by brand and distribution channel:** |  |  |  |  |
| UGG: |  |  |  |  |
| Wholesale | $91,084 | $64,500 | $26,584 | 41.2% |
| eCommerce | 22,088 | 16,938 | 5,150 | 30.4 |
| Retail stores | 35,255 | 22,935 | 12,320 | 53.7 |
| Total | 148,427 | 104,373 | 44,054 | 42.2 |
| Teva: |  |  |  |  |
| Wholesale | 49,486 | 42,237 | 7,249 | 17.2 |
| eCommerce | 852 | 892 | (40) | (4.5) |
| Retail stores | 71 | 40 | 31 | 77.5 |
| Total | 50,409 | 43,169 | 7,240 | 16.8 |
| Other: |  |  |  |  |
| Wholesale | 5,452 | 7,624 | (2,172) | (28.5) |
| eCommerce | 520 | 592 | (72) | (12.2) |
| Retail stores | 43 | 169 | (126) | (74.6) |
| Total | 6,015 | 8,385 | (2,370) | (28.3) |
| Total | $204,851 | $155,927 | $48,924 | 31.4% |
| Total eCommerce | $23,460 | $18,422 | $5,038 | 27.3% |
| Total Retail stores | $35,369 | $23,144 | $12,225 | 52.8% |

The increase in net sales was primarily driven by strong sales for the UGG brand. We experienced an increase in the number of pairs sold primarily through our UGG and Teva wholesale channels, partially offset by a decrease in pairs sold in our other wholesale brands segment. This resulted in an 17.5% overall increase in the volume of footwear sold for all brands to approximately 4.7 million pairs for the three months ended March 31, 2011 compared to approximately 4.0 million pairs for the three months ended March 31, 2010. In addition, we increased prices for certain UGG and Teva styles. Our weighted-average wholesale selling price per pair for all brands increased to $34.24 for the three months ended March 31, 2011 from $30.71 for the three months ended March 31, 2010.

Wholesale net sales of our UGG brand increased primarily due to the increase in pairs sold, as well as an increase in the average selling price, including price increases on several UGG styles. We cannot assure investors that UGG brand sales will continue to grow at their past pace.

Wholesale net sales of our Teva brand increased primarily due to an increase in the volume of pairs sold, as well as a slight increase in the average selling price, including price increases on certain Teva styles.

Wholesale net sales of our other brands decreased due to a decrease in pairs sold, partially offset by an increase in the average selling price.

Net sales of our eCommerce business increased due to both an increase in the number of pairs sold and in the average selling price, including price increases on several UGG styles and certain Teva styles.

Net sales of our retail store business, which are primarily UGG brand sales, increased largely due to the addition of nine new stores opened since March 31, 2010 as well as price increases on several UGG styles and certain Teva styles. New stores that were not open during the full three months ended March 31, 2010 contributed approximately $12,000 of retail sales for three months ended March 31, 2011. We do not expect this growth rate to continue because as we increase the number of our stores, each new store will have less proportional impact on our growth rate. For those stores that were open during the full first quarter of 2011 and 2010, same store sales grew by 2.6%. Our UK stores experienced some operational issues, as well as reduced consumer spending in the UK retail economy in general. We believe the UK stores’ performance significantly impacted our same store sales growth for the three months ended March 31, 2011. Nevertheless, we cannot assure investors that retail store sales will continue to grow at their past pace or that revenue from our retail store business will not at some point decline.

International sales, which are included in the segment sales above, for all of our products combined, represented 27.7% and 25.0% of worldwide net sales for the three months ended March 31, 2011 and 2010, respectively. The international sales growth was led by the UGG brand in the European region, which included our increased sales from our distributor conversions to wholesale sales in certain key European markets.

***Gross Profit.*** As a percentage of net sales, gross margin for the three months ended March 31, 2011 remained flat, compared to the three months ended March 31, 2010.

***Selling, General and Administrative Expenses (SG&A).*** As a percentage of net sales, SG&A increased to 36.3% for the three months ended March 31, 2011, compared to 31.5% for the three months ended March 31, 2010. The increase in SG&A resulted primarily from:

- retail expenses, primarily fixed costs related to nine new retail stores that were not open as of March 31, 2010, of approximately $5,000;
- increased international divisional costs in support of our continued growth including wholesale conversions of approximately $4,000;
- increased legal costs, primarily related to the protection of our intellectual property, of approximately $3,000;
- increased commission expenses due to increased sales of approximately $3,000; and
- increased marketing expenses of approximately $2,000.

***Income from Operations.*** The gross profit derived from the sales to third parties of the eCommerce and retail store segments is separated into two components: (i) the wholesale profit is included in the related operating income or loss of each wholesale segment, and (ii) the remaining profit is included in the eCommerce and retail stores segments. The following table summarizes operating income (loss) by segment:

|  | Three Months Ended March 31, 2011 | 2010 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| UGG wholesale | $38,663 | $33,034 | $5,629 | 17.0% |
| Teva wholesale | 14,285 | 11,185 | 3,100 | 27.7 |
| Other wholesale | (1,926) | (814) | (1,112) | (136.6) |
| eCommerce | 5,674 | 4,702 | 972 | 20.7 |
| Retail stores | 5,575 | 3,907 | 1,668 | 42.7 |
| Unallocated overhead costs | (34,076) | (23,193) | (10,883) | (46.9) |
| Total | $28,195 | $28,821 | $(626) | (2.2)% |

Income from operations decreased slightly due to the increase in SG&A expenses and cost of sales, partially offset by the increase in net sales.

The increase in income from operations of UGG brand wholesale was primarily the result of higher sales, partially offset by a 1.9 percentage point decrease in gross margin, partially related to higher duty refunds of approximately $2,000 in the three months ended March 31, 2010. The increase was also partially offset by higher amortization, commissions, and marketing expenses totaling approximately $6,000.

The increase in income from operations of Teva brand wholesale was largely due to higher sales as well as a decrease of approximately $1,000 of amortization expenses.

The loss from operations of our other brands wholesale increased primarily due to decreased sales and a 10.1 percentage point decrease in gross margin, largely due to increased inventory write-downs and closeout sales.

Income from operations of our eCommerce business increased primarily due to an increase in sales, partially offset by an increase in operating expenses of approximately $1,000.

The increase in income from operations of our retail store business was primarily due to increased sales and a 0.8 percentage point increase in gross margin, partially offset by approximately $5,000 of higher operating expenses primarily related to our new store openings.

The increase in unallocated overhead costs resulted most significantly from an increase of approximately $5,000 related to international infrastructure costs to support our continued growth, including costs of our conversions to wholesale business, as well as an increase of approximately $3,000 in legal expenses.

***Other Income, Net.*** Other income, net increased primarily due to negative interest expense resulting from a reversal of a prior year income tax related accrual.

***Income Taxes.*** Income taxes for the interim periods are computed using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management and can vary from quarter to quarter. Income tax expense and effective income tax rates were as follows:

|  | Three Months Ended March 31, 2011 | 2010 |
| --- | ---: | ---: |
| Income tax expense | $8,500 | $10,746 |
| Effective income tax rate | 30.0% | 37.2% |

The decrease in the effective tax rate was primarily due to the increase in our projected annual international pre-tax income as a percentage of worldwide pre-tax income, as income generated in most of our foreign jurisdictions is taxed at significantly lower rates than the US. The effective tax rate is subject to ongoing review and evaluation by management and can vary from quarter to quarter. We anticipate our effective tax rate for the full year 2011 to be significantly lower than the full year rate of 37.2% in 2010.

***Net Income Attributable to the Noncontrolling Interest.*** Net income attributable to the noncontrolling interest in our joint venture with Stella International was $655 and $245 for the three months ended March 31, 2011 and 2010, respectively.

***Net Income Attributable to Deckers Outdoor Corporation.*** Our net income increased as a result of the items discussed above. Our diluted earnings per share increased by 6.5% to $0.49 for the three months ended March 31, 2011 compared to $0.46 in the same period of 2010, primarily as a result of the increase in net income.

### Off-Balance Sheet Arrangements

We have off-balance sheet arrangements consisting of operating lease obligations and purchase obligations. See “Contractual Obligations” below.

### Liquidity and Capital Resources

We finance our working capital and operating needs using a combination of our cash and cash equivalents balances, cash generated from operations and, as needed, the credit available under our credit agreement. In an economic recession or under other adverse economic conditions, we may be unable to realize a return on our cash and cash equivalents, secure additional credit on favorable terms, renew our existing credit or access our existing line of credit. Such failures may impact our working capital reserves and have a material adverse effect on our business.

Our cash flow cycle includes the purchase of inventories, the subsequent sale of the inventories, and the eventual collection of the resulting accounts receivables. As a result, our working capital requirements begin when we purchase the inventories and continue until we ultimately collect the resulting receivables. The seasonality of our UGG brand business requires us to build fall and winter inventories in the second and third quarters to support sales for the UGG brand’s major selling seasons, which historically occur during the third and fourth quarters; whereas, the Teva brand generally begins to build its inventory levels beginning in the fourth and first quarters in anticipation of the spring selling season that occurs in the first and second quarters. Given the seasonality of our UGG and our Teva brands, our working capital requirements fluctuate significantly throughout the year. The cash required to fund these working capital fluctuations has been provided using our internal cash flows. If necessary, we may borrow funds under our credit agreement. During 2010 and the three months ended March 31, 2011, we did not borrow funds under our credit agreement.

The following table summarizes the Company’s cash flows and working capital:

|  | Three Months Ended March 31, 2011 | 2010 | Change Amount% |  |
| --- | ---: | ---: | ---: | --- |
| Net cash provided by operating activities | $3,583 | $21,617 | $(18,034) | (83.4)% |
| Net cash (used in) provided by investing activities | $(9,208) | $19,651 | $(28,859) | \* |
| Net cash (used in) provided by financing activities | $(1,893) | $205 | $(2,098) | \* |

|  | March 31, 2011 | December 31, 2010 | Change Amount% |  |
| --- | ---: | ---: | ---: | ---: |
| Cash and cash equivalents | $437,900 | $445,226 | $(7,326) | (1.6)% |
| Trade accounts receivable | 78,227 | 116,663 | (38,436) | (32.9) |
| Inventories | 107,118 | 124,995 | (17,877) | (14.3) |
| Other current assets | 31,477 | 28,848 | 2,629 | 9.1 |
| Total current assets | 654,722 | 715,732 | (61,010) | (8.5) |
| Trade accounts payable | 43,010 | 67,073 | (24,063) | (35.9) |
| Other current liabilities | 25,807 | 77,790 | (51,983) | (66.8) |
| Total current liabilities | 68,817 | 144,863 | (76,046) | (52.5) |
| Net working capital | $585,905 | $570,869 | $15,036 | 2.6% |

\* Calculation of percentage change is not meaningful.

***Cash from Operating Activities.*** Net cash provided by operating activities decreased primarily due to accrued expenses and income taxes payable decreasing more in the first three months of 2011 compared to 2010. The larger decrease in accrued expenses was primarily due to a higher accrued payroll payment related to our increased company performance in 2010. The larger decrease in income taxes payable was primarily due to higher tax payments related to higher taxable income. These changes were partially offset by trade accounts receivable decreasing more in the three months ended March 31, 2011 versus 2010. The larger decrease in trade accounts receivable was primarily due to timing of purchases and subsequent cash receipts from certain large customers. Net working capital increased from December 31, 2010 to March 31, 2011, primarily as a result of lower current liabilities, partially offset by lower accounts receivable and inventories. Changes in working capital are due to the items discussed above, as well as our normal seasonality and timing of cash receipts and cash payments.

Wholesale accounts receivable turnover decreased to 8.6 times in the twelve months ended March 31, 2011 from 9.1 times for the twelve months ended March 31, 2010, primarily due to higher average accounts receivable balances, partially offset by increased cash collections for the twelve months ended March 31, 2011 compared to the twelve months ended March 31, 2010.

Inventory turnover increased slightly to 4.2 times for the twelve months ended March 31, 2011 compared to 4.0 times for the twelve months ended March 31, 2010, mainly due to increased sales, partially offset by higher average inventory balances, during the twelve months ended March 31, 2011 compared to the twelve months ended March 31, 2010.

***Cash from Investing Activities.*** Net cash used in investing activities for the three months ended March 31, 2011 resulted from purchases of property and equipment and purchases of intangible assets. Our larger capital expenditures were miscellaneous computer hardware and software and the build out of new retail stores. The purchased intangible assets included order books from our international distributor conversions. For the three months ended March 31, 2010, net cash provided by investing activities resulted primarily from sales of short-term investments, partially offset by acquisitions of businesses and purchases of property and equipment. In addition, we did not purchase short-term investments in the three months ended March 31, 2010 or subsequently, as we shifted our investments to highly liquid cash equivalents.

As of March 31, 2011, we had no material commitments for future capital expenditures but estimate that the remaining capital expenditures for 2011 will range from approximately $55,000 to $60,000. We anticipate these expenditures will primarily include the build-out of our corporate and regional offices and new retail stores. The actual amount of capital expenditures for the remainder of the year may differ from this estimate, largely depending on the timing of new store openings or any unforeseen needs to replace existing assets and the timing of other expenditures.

***Cash from Financing Activities.*** For the three months ended March 31, 2011, net cash used in financing activities was comprised primarily of cash used for shares withheld for taxes from employee stock unit vestings, partially offset by excess tax benefits from stock compensation. These changes were larger than the prior period primarily due to the issuance of stock in relation to our long-term incentive program. For the three months ended March 31, 2010, net cash provided by financing activities was comprised primarily of excess tax benefits from stock compensation, partially offset by cash used for shares withheld for taxes from employee stock unit vestings.

In June 2009, we announced that our Board of Directors approved a stock repurchase program to repurchase up to $50,000 of our common stock in the open market or in privately negotiated transactions, subject to market conditions, applicable legal requirements and other factors. The program does not obligate us to acquire any particular amount of common stock and the program may be suspended at any time at our discretion. During the three months ended March 31, 2011 and 2010, we did not repurchase any shares of our common stock under this program. As of March 31, 2011, the remaining amount approved to repurchase shares was approximately $20,000.

In May 2010, we entered into the Second Amended and Restated Credit Agreement with Comerica Bank, or the Credit Agreement. The Credit Agreement provides for a maximum availability of $20,000. Up to $12,500 of borrowings may be in the form of letters of credit. The Credit Agreement bears interest at the lender’s prime rate (3.25% at March 31, 2011) or, at our option, at the London Interbank Offered Rate, or LIBOR, (0.24% at March 31, 2011) plus 1.0%, and is secured by substantially all of our assets. The Credit Agreement includes annual commitment fees of $60 per year which can be waived if we deposit $10,000 in non-interest bearing new deposits with Comerica Bank, provided that such deposits may be removed by us at any time, subject to paying a pro-rated annual commitment fee. The Credit Agreement expires on June 1, 2012. At March 31, 2011, we had no outstanding borrowings under the Credit Agreement and outstanding letters of credit of $724. As a result, $19,276 was available under the Credit Agreement at March 31, 2011.

The Credit Agreement contains certain financial covenants. The covenants currently include a maximum additional debt of $20,000, maximum asset sales of $5,000, maximum loans to employees of $200, and maximum loans to subsidiaries who are not parties to the Credit Agreement of $25,000. As of March 31, 2011, we were in compliance with all covenants and remain so as of the date of this report. The agreements underlying the Credit Agreement also contain certain financial covenants, if outstanding obligations exceed $2,000, including a minimum tangible net worth requirement of $294,891 plus 75% of the consolidated net profit on a cumulative basis, commencing with the fiscal year ended December 31, 2010, no consolidated net loss for two or more consecutive fiscal quarters and maximum acquisitions of $25,000 per calendar year. At March 31, 2011, these covenants were not in effect because our balance did not exceed $2,000.

**Contractual Obligations.** The following table summarizes our contractual obligations at March 31, 2011, and the effects such obligations are expected to have on liquidity and cash flow in future periods.

|  | Payments Due by Period Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years |
| --- | ---: | ---: | ---: | ---: | ---: |
| Operating lease obligations(1) | $119,147 | $23,024 | $33,612 | $25,999 | $36,512 |
| Purchase obligations(2) | 450,442 | 446,345 | 3,197 | 900 | — |
| Unrecognized tax benefits(3) | 3,721 | — | 3,721 | — | — |
| Total | $573,310 | $469,369 | $40,530 | $26,899 | $36,512 |

(1) Our operating lease obligations consist primarily of building leases for our retail locations, distribution centers, and corporate and regional offices. Other long-term liabilities on our condensed consolidated balance sheets include primarily deferred rents, of which the cash lease payments are included in operating lease obligations in this table.

(2) Our purchase obligations consist largely of open purchase orders. They also include promotional expenses and service contracts. Outstanding purchase orders are primarily with our third party manufacturers and are expected to be paid within one year. These are outstanding open orders and not minimum purchase obligations. Our promotional expenditures and service contracts are due periodically through 2014. In March 2011, we entered into contracts requiring minimum purchase commitments of sheepskin with a remaining commitment of approximately $48,000 as of March 31, 2011 that Deckers’ affiliates, manufacturers, factories and other agents (each or collectively, a “Buyer”) must make on or before July 31, 2011. These contracts may result in unconditional purchase obligations if a Buyer does not meet the minimum purchase requirements. In the event that a Buyer does not purchase such minimum commitments on or before July 31, 2011, Deckers is required to make a deposit for the remaining amounts on or before July 31, 2011. Such deposit shall be refundable upon receipt of payment by Buyers for such amounts. We expect our sheepskin purchases by third party factories supplying UGG product to us will eventually exceed these levels; however, we believe a deposit may be required under this contractual arrangement. In the event a deposit is made, we believe any deposit will become fully refundable. However, we are not able to reasonably estimate when or if cash payments will occur and have included the remaining amount in this table. We believe this will not materially affect our liquidity or results of operations, as it is in the normal course of our business.

(3) The unrecognized tax benefits are related to uncertain tax positions taken in our income tax return that would impact the effective tax rate or additional paid-in capital, if recognized. See note 9 to our accompanying condensed consolidated financial statements.

In addition to the amounts in the table above, we have entered into other off-balance sheet arrangements. We agreed to make loans to our joint venture with Stella International, should the need arise. As of March 31, 2011, the estimated remaining loans by Deckers were expected to be approximately $1,000. We also have potential future earn-out payments relating to our acquisitions of TSUBO, LLC and Ahnu, Inc. through 2013. These amounts were excluded from the table above as all conditions for the earn-out payments have not been met. Additionally, we entered into agreements with certain of our international distributors to assist with the transition related to regaining our distribution rights in those regions. Under these agreements, we expect to make total payments to these distributors of approximately $4,000 from April 1 through the end of 2011. The payments include consideration for the purchase of certain assets and services.

We believe that internally generated funds, the available borrowings under our existing Credit Agreement or a new credit agreement, and our cash and cash equivalents will provide sufficient liquidity to enable us to meet our current and foreseeable working capital requirements. However, risks and uncertainties that could impact our ability to maintain our cash position include our growth rate, the continued strength of our brands, our ability to respond to changes in consumer preferences, our ability to collect our receivables in a timely manner, our ability to effectively manage our inventories, the availability of short-term credit, and market volatility, among others. See Part II, Item 1A, and “Risk Factors” for a discussion of additional factors that may affect our working capital position. Furthermore, we may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If these sources are insufficient to satisfy our cash requirements, we may seek to sell debt securities or additional equity securities or to obtain a new credit agreement or draw on our existing Credit Agreement. The sale of convertible debt securities or additional equity securities could result in additional dilution to our stockholders. The incurrence of indebtedness would result in incurring debt service obligations and could result in operating and financial covenants that would restrict our operations. In addition, there can be no assurance that any additional financing will be available on acceptable terms, if at all. Although there are no other material present understandings, commitments or agreements with respect to the acquisition of any other businesses, we may evaluate acquisitions of other businesses or brands.

### Impact of Inflation

We believe that the rates of inflation during the three most recent fiscal years have not had a material impact on our net sales or income from operations.

### Critical Accounting Policies and Estimates

**Revenue Recognition.** We recognize revenue when products are shipped and the customer takes title and assumes risk of loss, collection of relevant receivable is reasonably assured, persuasive evidence of an arrangement exists, and the sales price is fixed or determinable. Allowances for estimated returns, discounts, chargebacks, and bad debts are provided for when related revenue is recorded. Amounts billed for shipping and handling costs are recorded as a component of net sales, while the related costs paid to third-party shipping companies are recorded as a cost of sales. We present revenue net of taxes collected from customers and remitted to governmental authorities.

**Use of Estimates.** The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures about contingent liabilities and the reported amounts of net sales and expenses during the reporting period. 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. Management reasonably could use different estimates and assumptions, and changes in estimates and assumptions could occur from period to period, with the result in each case being a potential material change in the financial statement presentation of our financial condition or results of operations. We have historically been materially accurate in our estimates used for the reserves and allowances below. We believe that the estimates and assumptions below are among those most important to an understanding of our condensed consolidated financial statements contained in this report.

The following table summarizes data related to the critical accounting estimates for accounts receivable allowances and reserves, which are discussed below:

|  | March 31, 2011 Amount | % of Gross Trade Accounts Receivable | December 31, 2010 Amount | % of Gross Trade Accounts Receivable |
| --- | ---: | ---: | ---: | ---: |
| Gross trade accounts receivable | $85,737 |  | $130,435 |  |
| Allowance for doubtful accounts | $1,103 | 1.3% | $1,379 | 1.1% |
| Reserve for sales discounts | $1,747 | 2.0% | $5,819 | 4.5% |
| Allowance for estimated chargebacks | $1,888 | 2.2% | $2,535 | 1.9% |

|  | Amount | % of Net Sales | Amount | % of Net Sales |
| --- | ---: | ---: | ---: | ---: |
| Net sales for the three months ended | $204,851 |  | $430,124 |  |
| Allowance for estimated returns | $2,772 | 1.4% | $4,039 | 0.9% |
| Estimated returns liability | $548 | 0.3% | $4,838 | 1.1% |

***Allowance for Doubtful Accounts.*** We provide a reserve against trade accounts receivable for estimated losses that may result from customers’ inability to pay. We determine the amount of the reserve by analyzing known uncollectible accounts, aged trade accounts receivables, economic conditions and forecasts, historical experience and the customers’ credit-worthiness. Trade accounts receivable that are subsequently determined to be uncollectible are charged or written off against this reserve. The reserve includes specific reserves for accounts, which all or a portion of are identified as potentially uncollectible, plus a non-specific reserve for the balance of accounts based on our historical loss experience. Reserves have been established for all projected losses of this nature. Our use of different estimates and assumptions could produce different financial results. For example, a 1.0% change in the rate used to estimate the reserve for the accounts we consider to have credit risk and are not specifically identified as uncollectible would change the allowance for doubtful accounts at March 31, 2011 by approximately $390.

***Reserve for Sales Discounts.*** A significant portion of our domestic net sales, as well as our international wholesale sales, and resulting trade accounts receivable reflects a discount that our customers may take, generally based upon meeting certain order, shipment and payment timelines. We estimate the amount of the discounts that are available to be taken against the period-end trade accounts receivable, and we record a corresponding reserve for sales discounts. The decrease in the reserve was primarily due to a lower overall accounts receivable balance for one of our largest customers that qualifies for discounts at March 31, 2011 compared to December 31, 2010. Our use of different estimates and assumptions could produce different financial results. For example a 10.0% change in the estimate of the percentage of accounts that are entitled to discounts would change the reserve for sales discounts at March 31, 2011 by approximately $150.

***Allowance for Estimated Chargebacks.*** When our wholesale customers pay their invoices, they often take deductions for chargebacks against their invoices, which are often valid. Therefore, we record an allowance for the balance of chargebacks that are outstanding in our accounts receivable balance as of the end of each quarter, along with an estimated reserve for chargebacks that have not yet been taken against outstanding accounts receivable balances. This estimate is based on historical trends of the timing and amount of chargebacks taken against invoices.

***Allowance for Estimated Returns and Estimated Returns Liability.*** We record an allowance for anticipated future returns of goods shipped prior to period-end and a liability for anticipated returns of goods sold direct to consumers. In general, we accept returns for damaged or defective products but discourage returns for other reasons. We also accept returns from our retail and eCommerce customers for a thirty day period. We base the amounts of the allowance and liability on any approved customer requests for returns, historical returns experience and any recent events that could result in a change from historical returns rates, among other factors. The estimated returns liability as of March 31, 2011 decreased relative to the liability at December 31, 2010 due to the December reserve amount including increased reserves to account for increased expected holiday returns during the first quarter of 2011. Our use of different estimates and assumptions could produce different financial results. For example, a 1.0% change in the rate used to estimate the percentage of sales expected to ultimately be returned would change the allowance and liability reserves for returns in total at March 31, 2011 by approximately $1,300.

***Inventory Write-Downs.*** Inventories are stated at lower of cost or market. We review the various items in inventory on a regular basis for excess, obsolete, and impaired inventory. In doing so, we write the inventory down to the lower of cost or estimated future net selling prices. At March 31, 2011, inventories were stated at $107,118, net of inventory write-downs of $2,255. At December 31, 2010, inventories were stated at $124,995 net of inventory write-downs of $1,684. The increase in inventory write-downs at March

31, 2011 compared to December 31, 2010 was primarily due to additional write-downs primarily in our Teva brand segment inventories. Our use of different estimates and assumptions could produce different financial results. For example, a 10.0% change in the estimated selling prices of our potentially obsolete inventory would change the inventory write-down reserve at March 31, 2011 by approximately $570.

***Valuation of Goodwill, Intangible and Other Long-Lived Assets.*** Annually, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, we assess the impairment of goodwill, intangible and other long-lived assets on a separate asset basis based on assumptions and judgments regarding the carrying amount of these assets individually. We test goodwill and nonamortizable intangible assets for impairment on an annual basis as of December 31, except for our Teva trademarks which are tested as of October 31, based on the fair value of the reporting unit for goodwill and the fair value of the assets for nonamortizable intangibles compared to their respective carrying value. We consider other long-lived assets to be impaired if we determine that the carrying value may not be recoverable. Among other considerations, we consider the following factors:

- the assets’ ability to continue to generate income from operations and positive cash flow in future periods;
- changes in consumer demand or acceptance of the related brand names, products or features associated with the assets;
- increased competition; and
- deterioration of general economic conditions or the retail environment, and customers reducing orders in response to such conditions.

If we determine the assets to be impaired, we recognize an impairment loss equal to the amount by which the carrying value of the assets exceeds the estimated fair value of the assets. In addition, as it relates to long-lived assets, we base the useful lives and related amortization or depreciation expense on the estimate of the period that the assets will generate sales or otherwise be used by us.

***Stock Compensation Expense.*** Stock compensation transactions with employees are accounted for using the fair value method and expensed ratably over the vesting period of the award. Stock compensation expense is based on the fair values of all share-based awards as of the grant date. Determining the expense of share-based awards at the grant date requires judgment, including estimating the percentage of awards that will be forfeited, probabilities of meeting criteria for performance-based awards, stock volatility, the expected life of the award, and other inputs. If actual forfeitures differ significantly from the estimates, stock compensation expense and our results of operations could be materially impacted.

## Market risk

As filed, 4,693 characters.

***Interest Rate Risk.*** Our market risk exposure with respect to financial instruments is tied to changes in the prime rate in the US and changes in LIBOR. Our credit agreement provides for interest on outstanding borrowings at rates tied to the prime rate or, at our election, tied to LIBOR. At March 31, 2011, we had no outstanding borrowings under the credit agreement. A 1.0% increase in interest rates on our current borrowings would have no impact on income before income taxes.

***Foreign Currency Exchange Rate Risk.*** We face market risk to the extent that changes in foreign currency exchange rates affect our foreign assets, liabilities, revenues and expenses. We hedge certain foreign currency forecasted transactions and exposures from existing assets and liabilities, compared to the three months ended March 31, 2010 when we did not hedge foreign currency exchange rate risk. Other than an increasing amount of sales, expenses, and financial positions denominated in foreign currencies, as discussed above, we do not believe that there has been a material change in the nature of our primary market risk exposures, including the categories of market risk to which we are exposed and the particular markets that present the primary risk of loss. As of the date of this Quarterly Report on Form 10-Q, we do not know of or expect there to be any material change in the general nature of our primary market risk exposure in the near term.

We currently utilize forward contracts and other derivative instruments to mitigate exposure to fluctuations in the foreign currency exchange rate, for a portion of the amounts we expect to purchase and sell in foreign currencies. As our international operations grow and we increase purchases and sales in foreign currencies, we will evaluate and utilize additional derivative instruments, as needed, to hedge our foreign currency exposures. We do not use foreign currency contracts for trading purposes.

Although the majority of our sales and inventory purchases are denominated in US currency, our sales and inventory purchases may be impacted by fluctuations in the exchange rates between the US dollar and the local currencies in the international markets where our products are sold and manufactured. Our foreign currency exposure is generated primarily from our Asian and European operations. Approximately $37,000, or 18.0%, of our total net sales during the three months ended March 31, 2011 were denominated in foreign currencies. As we begin to hold more cash and other monetary assets and liabilities in foreign currencies, we are exposed to financial statement translation gains and losses as a result of translating the operating results and financial positions held in foreign currencies into US dollars. We translate monetary assets and liabilities denominated in foreign currencies into US dollars using the exchange rate as of the end of the reporting period. In addition, certain of our foreign subsidiaries’ local currency is their designated functional currency. Accordingly, we translate those monetary assets and liabilities denominated in US dollars into their local currencies using the exchange rate as of the end of the reporting period, which also results in financial statement translation gains and losses. Changes in foreign exchange rates affect our reported profits and can distort comparisons from year to year. In addition, if the US dollar strengthens, it may result in increased pricing pressure on our foreign distributors, which may have a negative impact on our net sales and gross margins. As of March 31, 2011, our hedging contracts had notional amounts totaling approximately $58,000. Based upon sensitivity analysis as of March 31, 2011, a 10.0% change in foreign exchange rates would cause the fair value of our financial instruments to increase or decrease by approximately $4,700.

***Commodity Price Risk.*** We purchase certain materials that are affected by commodity prices and are, therefore, subject to price volatility caused by weather, global economic conditions, and other factors which are not considered predictable or within our control. Although these materials are subject to changes in commodity prices, we use purchasing contracts or pricing arrangements to reduce the impact of price volatility as an alternative to hedging commodity prices. The purchasing contracts and pricing arrangements we use may result in unconditional purchase obligations, which are not reflected in our condensed consolidated balance sheets. In the event of significant commodity cost increases, we may not be able to adjust our selling prices sufficiently to mitigate the impact on our margins.

## Controls and procedures

As filed, 1,812 characters.

### Disclosure Controls and Procedures

The Company maintains a system of disclosure controls and procedures which are designed to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. These disclosure controls and procedures include, among other processes, controls and procedures designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company carried out an evaluation, under the supervision and with the participation of management, including the principal executive officer and the principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2011 pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the principal executive officer and the principal financial officer concluded that the Company’s disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e) and 15d-15(e), were effective as of the end of the period covered by this report.

### Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Filed May 10, 2011.
Source: SEC EDGAR, the filing index for accession 0001104659-11-027709. Last ingested by Listed: Oct 29, 2026, 13:00 ET. No prices; not investment advice.