Deckers Outdoor Corporation Reports Record Third Quarter Financial Results
Company Reports Third Quarter Sales Increased 21.7% to a Record of $277.9 Million
Third Quarter Diluted EPS Increased 24.4% to a Record $1.07 on a Post-Split Basis, Compared to Diluted EPS of $0.86 a Year Ago on a Post-Split Basis
Company Raises 2010 Sales and Earnings Outlook
GOLETA, Calif.--(BUSINESS WIRE)-- Deckers Outdoor Corporation (NASDAQGS: DECK) today announced financial results for the third quarter ended September 30, 2010.
Third Quarter Highlights
-- Net sales increased 21.7% to $277.9 million versus $228.4 million last
year.
-- Gross margin improved 420 basis points to 47.1% versus 42.9% a year ago.
-- Diluted EPS increased 24.4% to $1.07 compared to $0.86 a year ago. The
Company completed a three-for-one stock split, in the form of a stock
dividend paid on July 2, 2010. All share and per share data in this
release and accompanying tables have been adjusted to reflect the impact
of such split for all periods presented.
-- UGG(R) brand sales increased 20.2 % to $255.8 million versus $212.8
million last year.
-- Teva(R) brand sales increased 51.7% to $13.7 million compared to $9.0
million a year ago.
-- International sales increased 48.2% to $73.2 million versus $49.4
million last year.
-- Retail sales increased 63.3% to $20.2 million compared to $12.3 million
last year; same store sales rose 17.9%.
Angel Martinez, President, Chief Executive Officer and Chairman of the Board of Directors, stated: "The strong performance of our new fall lines helped fuel sales gains across each of our distribution channels and geographic regions compared to the third quarter of last year. We continue to successfully expand the UGG brand's market share by developing more compelling products including boots, casuals and sneakers that target a wider consumer audience. The global response to our fall collection has been very encouraging, with sell-through rates accelerating as we've moved into the fourth quarter. At the same time, the strong momentum the Teva brand experienced during the first half of the year is carrying over into the second half. This was driven by increased shipments of our fall collection, led by an expanded offering of closed toe products coupled with strong in-season demand for our sandal assortment. We are encouraged by the current trends in our business and believe we are well positioned for a very good holiday selling season."
Division Summary
UGG(R) Brand
UGG brand net sales for the third quarter increased 20.2% to $255.8 million compared to $212.8 million for the same period last year. The sales gain was primarily attributable to an increase in global shipments of fall product versus the same period a year ago, coupled with strong sales of the fall line at company owned retail stores.
Teva(R) Brand
Teva brand net sales increased 51.7% to $13.7 million for the third quarter compared to $9.0 million for the same period last year. The increase in sales was driven by higher reorders of the expanded spring line of open and closed toe footwear in the third quarter compared with the year ago period, an increase in domestic shipments of the fall line, as well as from the Company assuming control of direct distribution in the Benelux region.
Other Brands
Combined net sales of the Company's other brands increased 26.5% to $8.4 million for the third quarter compared to $6.6 million for the same period last year. The increase in sales was driven by an increase in domestic shipments of fall product.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 3.8% to $8.7 million for the third quarter compared to $8.4 million for the same period last year.
Retail Stores
Sales for the retail store business, which are included in the brand sales numbers above, increased 63.3% to $20.2 million for the third quarter compared to $12.3 million for the same period last year, driven by eight new stores that opened since September 30, 2009 and a same store sales increase of 17.9% for those stores that were open for the full three month periods ended September 30, 2009 and 2010.
Share Repurchases
During the third quarter, the Company repurchased approximately 170,000 shares of its common stock under its stock repurchase program for a total of approximately $7.4 million. As of September 30, 2010, the Company had approximately $20 million authorized repurchase funds remaining under its $50 million stock repurchase program announced in June 2009. Depending on market conditions and other factors, such purchases may be commenced or suspended at any time without prior notice.
Full-Year 2010 Outlook
-- Based on better than expected third quarter results combined with higher
projected sales for the UGG and Teva brands, the Company is raising its
full-year outlook.
-- The Company now expects its full-year revenue to increase approximately
16% over 2009 levels, compared to previous guidance of approximately
14%.
-- The Company now expects its full-year diluted earnings per share to
increase approximately 22% over the non-GAAP diluted EPS of $2.98 in
2009, compared to previous guidance of approximately 16%. This guidance
assumes a gross profit margin of approximately 49% and SG&A as a
percentage of sales of approximately 25%. The non-GAAP diluted EPS of
$2.98 in 2009 has been adjusted to reflect the three-for-one stock
split, in the form of a stock dividend, that was distributed in July
2010, and excluded pre-tax non-cash impairment charges of $1.0 million,
or $0.02 per diluted share, as discussed in the related earnings
release.
-- Fiscal 2010 guidance includes a reduction of net income of approximately
$8.0 million pre-tax, with a diluted EPS impact of approximately $0.13,
resulting from estimates of incremental expenses associated with the
continuing transition to wholesale sales for the Teva brand in the
Benelux region and France, and incremental expenses and a shift in sales
from 2010 to 2011 associated with the expected transitions in January
2011 to wholesale sales for the UGG, Teva and Simple brands in the
United Kingdom as well as the UGG and Simple brands in the Benelux
region and France. Fiscal 2010 guidance also assumes an effective tax
rate of 36.8% compared to 36.2% in 2009 due to the impact on
international income from the aforementioned incremental expenses and
shift in profit.
Fourth Quarter Outlook
-- The Company reiterated its outlook for both the fourth quarter 2010
revenue and diluted EPS to increase approximately 8% over 2009 levels.
This guidance includes incremental expenses and a shift in sales from
2010 to 2011 associated with the upcoming transitions described above
and assumes a gross profit margin of approximately 52% and SG&A as a
percentage of sales of approximately 21%.
The Company's conference call to review third quarter fiscal 2010 results will be broadcast live over the internet today, Thursday, October 28, 2010 at 4:30 pm Eastern Time. The broadcast will be hosted at www.deckers.com and www.earnings.com.
Deckers Outdoor Corporation strives to be a premier lifestyle marketer that builds niche brands into global market leaders by designing and marketing innovative, functional and fashion-oriented footwear developed for both high performance outdoor activities and everyday casual lifestyle use. Teva(R), Simple(R) Shoes, UGG(R) Australia, TSUBO(R), and Ahnu(R) are registered trademarks of Deckers Outdoor Corporation.
This news release contains statements regarding our expectations, beliefs and views about our future financial performance which are "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. Forward-looking statements can be identified by the use of words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," or future or conditional verbs such as "will," "would," "should," "could," or "may" or by the fact that such statements relate to future, and not just historical, events or circumstances, including statements related to anticipated revenues, expenses, earnings, operating cash flows, the outlook for the Company's markets and the demand for its products. The forward-looking statements in this news release regarding our future financial performance are based on currently available information as of the date of this release, and because our business is subject to a number of risks and uncertainties, some of which may be beyond our control, actual operating results in the future may differ materially from the future financial performance expected at the current time. In addition, the results reported in this release may differ from actual results filed with the Securities and Exchange Commission (SEC) for the quarter ended September 30, 2010 if material events or circumstances occur between now and our SEC filing. Those risks and uncertainties include, among others: the continued decline of the global economy; the ability to realize returns on our new and existing retail stores; our ability to anticipate fashion trends; a decline in wholesaler, distributer, or direct consumer demand or inventory needs; impairment charges related to a decline in the value of our brands' intangible assets below their carrying values; shortages or price fluctuations of raw materials that could interrupt product manufacturing and increase product costs; increased costs of manufacturing in China and actions by the Chinese government; currency fluctuations; our ability to implement our growth strategy; the success of our customers, their ability to perform and obtain credit in an adverse economic environment and the risk of losing one or more of our key customers; our ability to develop and adequately protect our brands and intellectual property; the risk that counterfeiting can harm our sales or our brand image; our dependence on independent manufacturers to supply and store our products; the risk that retailers could postpone or cancel existing orders; unpredictable events and circumstances and currency risks related to our international operations; volatile credit and equity markets; liquidity and market risks for our cash equivalents and short-term investments; the risk of losing key personnel or the interruption of key information technology systems; a delay, increase in cost, or interruption in the delivery of merchandise to our customers; the sensitivity of our sales to seasonal and weather conditions; and we could be subject to additional income tax liabilities. Certain of these risks and uncertainties, as well as others, are more fully described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which the Company filed with the SEC on March 1, 2010, and under "Risk Factors" in any subsequent filings with the SEC. Readers are cautioned not to place undue reliance on forward-looking statements contained in this news release, which speak only as of the date of this release. The Company undertakes no obligation to publicly release or update the results of any revisions to forward-looking statements, which may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The risks and uncertainties highlighted herein should not be assumed to be the only items that could affect the future performance or valuation of the Company.
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
September 30, December 31,
Assets 2010 2009
Current assets:
Cash and cash equivalents $ 250,536 315,862
Restricted cash 200 300
Short-term investments - 26,120
Trade accounts receivable, net 142,232 76,427
Inventories 197,313 85,356
Prepaid expenses and other current assets 7,921 7,210
Deferred tax assets 9,712 9,712
Total current assets 607,914 520,987
Restricted cash 200 400
Property and equipment, at cost, net 42,907 35,442
Intangible assets, net 25,239 23,940
Deferred tax assets 16,704 16,704
Other assets 4,214 1,570
Total assets $ 697,178 599,043
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 73,202 47,331
Accrued payroll 20,575 20,869
Other accrued expenses 9,879 12,985
Income taxes payable 23,109 19,685
Total current liabilities 126,765 100,870
Long-term liabilities 8,091 6,269
Stockholders' equity:
Deckers Outdoor Corporation stockholders'
equity:
Common stock 385 129
Additional paid-in capital 136,971 125,431
Retained earnings 424,228 365,304
Accumulated other comprehensive income 174 494
Total Deckers Outdoor Corporation 561,758 491,358
stockholders' equity
Noncontrolling interest 564 546
Total equity 562,322 491,904
Total liabilities and equity $ 697,178 599,043
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period ended Nine-month period ended
September 30, September 30,
2010 2009 2010 2009
Net sales $ 277,879 228,414 570,865 465,188
Cost of sales 146,926 130,463 301,262 267,539
Gross profit 130,953 97,951 269,603 197,649
Selling, general and 64,639 44,871 161,252 121,018
administrative expenses
Impairment loss - - - 1,000
Income from operations 66,314 53,080 108,351 75,631
Other income, net 213 105 775 1,942
Income before income taxes 66,527 53,185 109,126 77,573
Income tax expense 24,555 19,434 40,104 28,702
Net income 41,972 33,751 69,022 48,871
Net loss (income)
attributable to the
noncontrolling interest 171 74 (18 ) 173
Net income attributable to
Deckers Outdoor
Corporation $ 42,143 33,825 69,004 49,044
Net income per share
attributable to Deckers
Outdoor Corporation common
stockholders:
Basic $ 1.09 0.87 1.79 1.25
Diluted $ 1.07 0.86 1.76 1.24
Weighted-average common
shares:
Basic 38,615 38,928 38,638 39,183
Diluted 39,228 39,210 39,258 39,480
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
(Unaudited)
(Amounts in thousands, except for per share data)
Twelve-month
period ended
December 31, 2009
GAAP Presentation
Net income attributable to Deckers Outdoor Corporation $ 116,786
Net income per share attributable to Deckers Outdoor
Corporation common stockholders:
Basic $ 2.99
Diluted $ 2.96
Weighted-average shares:
Basic 39,024
Diluted 39,393
Reconciliation to Non-GAAP Measures
Income before income taxes $ 183,223
Add back impairment charges 1,000
Income before income taxes, excluding impairment charges 184,223
Income tax expense (1) 66,666
Net income excluding impairment charges 117,557
Net income attributable to the noncontrolling interest (133)
Net income excluding impairment charges attributable to
Deckers Outdoor Corporation $ 117,424
Net income per share excluding impairment charges
attributable
to Deckers Outdoor Corporation common stockholders:
Basic $ 3.01
Diluted $ 2.98
(1) The non-GAAP income tax expense assumes the same effective tax rate as the GAAP income tax expense for the period presented. Use of Non-GAAP Financial Measures To supplement the actual and forecast results in accordance with U.S. generally accepted accounting principles (GAAP), for the applicable period, the Company also used non-GAAP measures of net income and earnings per share, which are adjusted from the GAAP-based results to exclude non-cash impairment charges. This adjustment is not in accordance with or an alternative for GAAP. This adjustment is provided to enhance an overall understanding of the Company's financial performance for the applicable period and is an indicator management uses for planning and forecasting future periods. The excluded item represents non-cash impairment charges associated with the write-down of the Company's TSUBO trademarks because management does not believe these expenses are indicative of the Company's core business. Even though such items have occurred in the past and may recur in future periods, it is driven by events that are not directly related to the Company's ongoing core business operations. These financial measures are not to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP.
Source: Deckers Outdoor Corporation
Released October 28, 2010