Deckers Outdoor Corporation Reports Record Fourth Quarter and Fiscal 2009 Financial Results
Company Reports Fourth Quarter Sales Increased 14.7% to a Record $348.0 Million
Fourth Quarter Diluted EPS Increased 28.9% to a Record $5.22, Compared to Non-GAAP Diluted EPS of $4.05 a Year Ago, Which Excluded a Non-Cash Impairment on Intangible Assets
Company Reports Fiscal 2009 Sales Increased 17.9% to a Record $813.2 Million
Fiscal 2009 Non-GAAP Diluted EPS Increased 23.0% to a Record $8.94, Excluding Non-Cash Impairment on Intangible Assets During the Current and Prior Fiscal Years
Company Announces Direct Distribution Strategy for United Kingdom, Benelux and France
GOLETA, Calif.--(BUSINESS WIRE)-- Deckers Outdoor Corporation (NASDAQGS: DECK) today announced record financial results for both the fourth quarter and fiscal year ended December 31, 2009.
Fourth Quarter Highlights
-- Net sales increased 14.7% to $348.0 million versus $303.5 million for
the same period last year
-- Diluted EPS increased 28.9% to $5.22 versus non-GAAP diluted EPS of
$4.05 a year ago, which excluded a pre-tax non-cash impairment of $20.9
million on intangible assets, or $0.98 per diluted share
-- Gross margin increased 450 basis points to a record 49.8% compared to
45.3% for the same period last year
-- UGG(R) brand sales increased 15.7% to $333.3 million compared to $288.0
million for the same period last year
-- International sales increased 96.0% to $39.3 million compared to $20.1
million for the same period last year
-- Retail sales increased 88.7% to $46.6 million versus $24.7 million for
the same period last year
-- eCommerce sales increased 27.0% to $45.9 million compared to $36. 1
million for the same period last year
Fiscal 2009 Highlights
-- Net sales increased 17.9% to $813.2 million versus $689.4 million last
year
-- Diluted EPS was $8.89 on a GAAP basis, or $8.94 excluding a pre-tax
non-cash impairment of $1.0 million on intangible assets in the second
quarter of 2009. The non-GAAP diluted EPS of $8.94 represents an
increase of 23.0% versus non-GAAP diluted EPS of $7.27 a year ago, which
excluded a pre-tax non-cash impairment of $35.8 million on intangible
assets, or $1.67 per diluted share
-- UGG(R) brand sales increased 22.3% to $711.8 million compared to $582.0
million last year
-- Domestic sales increased 11.1% to $646.0 million compared to $581.5
million last year
-- International sales increased 54.9% to $167.2 million compared to $107.9
million last year
-- Retail sales increased 105.3% to $79.0 million versus $38.5 million last
year
-- Cash and cash equivalents and short-term investments increased 75.6% to
$342.0 million versus $194.8 million a year ago
Angel Martinez, President, Chief Executive Officer and Chairman of the Board of Directors, stated: "We are extremely pleased with our fourth quarter results and strong finish for the year. During the holiday season, we experienced robust demand for the entire UGG brand product line, with the performance of several new styles far exceeding expectations. Sell-through was particularly strong at our company-owned retail stores and on our eCommerce websites, which helped us increase earnings substantially during the fourth quarter. Our ability to successfully develop new and compelling footwear, penetrate additional categories, profitably grow our consumer direct division, and expand internationally is driving our current performance, while at the same time creating new growth opportunities for the future. 2009 was not without its challenges. The difficult retail environment negatively impacted our other brands as the majority of our accounts carried much less inventory and bought closer to season compared to prior years. That said, the Teva brand experienced better sell-through on the strength of new product introductions and was able to gain market share in a challenging year. In addition, improved inventory management led to lower closeout sales and increased margins. The Simple brand also performed well at retail, especially with major accounts like Nordstrom and Journeys. We are excited about several new product introductions for 2010 and believe a renewed emphasis on balancing style and sustainability will broaden our consumer base and enhance the brand's market position."
International Direct Distribution
On January 1, 2010, the Company commenced selling directly to wholesale customers for the Teva brand in the Benelux region and France. The Company also has announced that, in January 2011, following the expiration of existing distribution agreements, the Company will assume control of distributing the UGG, Teva and Simple brands in the United Kingdom and the UGG and Simple brands in the Benelux region and France. As part of the transition, the Company plans to incur incremental expenses in 2010 and will experience a shift in sales from 2010 to 2011. The net impact of this transition in 2010 on pre-tax earnings is estimated to be approximately $8.0 million, of which approximately 65% is a one-time impact. Most of the incremental sales and gross margin benefits resulting from this additional spend will not be realized until 2011. By selling directly to the retailers in the United Kingdom, Benelux and France, the Company expects to capture the additional sales and gross margin previously provided to its distributors.
Mr. Martinez commented, "The international markets represent a significant growth opportunity, and we are excited about the incremental sales and earnings potential by selling directly to our wholesale customers. Starting in 2011, we believe that the incremental sales and gross margin benefits from selling directly to our wholesale customers will more than offset the infrastructure investments in 2010 and drive higher earnings in the future. Furthermore, with control over sales and marketing, we look forward to building on the current momentum and expanding market share for each of the brands in their respective categories."
Division Summary
UGG(R) Brand
UGG brand net sales for the fourth quarter increased 15.7% to a record $333.3 million compared to $288.0 million for the same period last year. The sales gain was primarily attributable to an increase in full price selling at company-owned retail stores and on the Company's eCommerce websites coupled with higher shipments to international distributors versus the same period a year ago. For the full year, UGG brand sales increased 22.3% to a record $711.8 million versus $582.0 million in 2008.
Teva(R) Brand
Teva brand net sales decreased 14.8% to $10.5 million for the fourth quarter compared to $12.4 million for the same period last year. The decline in sales was primarily the result of lower closeout sales compared with the same period last year. For the full year, Teva brand sales decreased 10.2% to $77.7 million compared to $86.5 million in 2008.
Simple(R) Brand
Simple brand net sales for the fourth quarter increased 17.9% to $2.7 million compared to $2.3 million for the same period last year, primarily due to an increase in weighted-average selling prices. For the full year, Simple brand sales decreased 17.7% to $14.1 million versus $17.2 million in 2008.
Other Brands
Combined net sales of the Company's other brands were $1.5 million and $9.6 million for the fourth quarter and full year, respectively.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 27.0% to $45.9 million for the fourth quarter compared to $36.1 million for the same period a year ago. The increase in sales resulted from higher demand for the fall line of the UGG brand, increased spend in advertising, and a favorable inventory position compared to the same period last year. For the full year, sales for the eCommerce business increased 10.0% to $75.7 million versus $68.8 million in 2008.
Retail Stores
Sales for the retail store business, which are included in the brand sales numbers above, increased 88.7% to $46.6 million for the fourth quarter compared to $24.7 million for the same period a year ago, driven by 5 new stores and a same store sales increase of 29.7%. For the full year, sales for the retail store business increased 105.3% to $79.0 million versus $38.5 million in 2008. For those stores that were open during the full year of 2008 and 2009, same store sales grew by 27.6%.
Balance Sheet
At December 31, 2009, cash and cash equivalents and short-term investments increased 75.6% to $342.0 million compared to $194.8 million at December 31, 2008. Inventories at December 31, 2009 decreased 8.0% to $85.4 million from $92.7 million at December 31, 2008.
Full-Year 2010 Outlook
-- Based upon current visibility, the Company introduced a full year
revenue growth target of approximately 11% over 2009.
-- The Company expects full year diluted earnings per share to increase
approximately 5% over the non-GAAP diluted EPS of $8.94 in 2009. This
guidance assumes a gross profit margin of approximately 47% and SG&A as
a percentage of sales of approximately 25%.
-- Fiscal 2010 guidance includes estimates of incremental expenses in 2010
associated with the transition to wholesale sales for the Teva brand in
the Benelux region and France and estimates of incremental expenses and
a shift in sales from 2010 to 2011 associated with the upcoming
transitions in January 2011 to wholesale sales in the United Kingdom,
Benelux region and France of approximately $8.0 million, or
approximately $0.38 per diluted share. Fiscal 2010 guidance also assumes
an effective tax rate of approximately 37% compared to 36.2% in 2009 due
to the impact on international income from the aforementioned
incremental expenses and shift in profit.
First Quarter Outlook
-- The Company currently expects first quarter 2010 revenue to increase
approximately 7% over 2009, and expects first quarter 2010 diluted
earnings per share to be down approximately 6% compared to 2009.
-- First quarter guidance includes estimates of $2.0 million for
incremental investments associated with the distribution transitions,
which results in reducing diluted EPS by approximately $0.10. First
quarter guidance also includes improved gross margins compared to 2009
due to a higher retail mix and improved brand margins. In addition,
first quarter guidance includes higher levels of fixed overhead for new
retail stores, international infrastructure and other general and
administrative costs.
The Company's conference call to review fourth quarter and fiscal 2009 results will be broadcast live over the internet today, Thursday, February 25, 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. Those risks and uncertainties include, among others: the continued decline of the global economy; our ability to anticipate fashion trends; consumer demand or inventory needs; whether the UGG brand will continue to grow at the same rate it has experienced in the past; impairment charges related to our brands' intangible assets if our product sales or operating performance decline to a point that the fair value of our brands' intangible assets do not exceed 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 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 our products; the risk that retailers could postpone or cancel existing orders; unpredictable events and circumstances and currency risks related to our international operations; a downturn in key market economies; volatile credit markets; liquidity and market risks for our cash equivalents and short-term investments; the risk of losing key personnel; a delay or interruption in the delivery of merchandise to our customers; and the sensitivity of our sales to seasonal and weather conditions. 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, 2008, which the Company filed with the Securities and Exchange Commission on March 2, 2009, and under "Risk Factors" in any subsequent filings with the Securities and Exchange Commission. 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.
(Tables to follow)
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
December 31, December 31,
Assets 2009 2008
Current assets:
Cash and cash equivalents $ 315,862 176,804
Restricted cash 300 300
Short-term investments 26,120 17,976
Trade accounts receivable, net 76,427 108,129
Inventories 85,356 92,740
Prepaid expenses and other current assets 7,210 3,691
Deferred tax assets 9,712 13,324
Total current assets 520,987 412,964
Restricted cash 400 700
Property and equipment, at cost, net 35,442 28,318
Intangible assets, net 23,940 24,034
Deferred tax assets 16,704 17,447
Other assets 1,570 258
Total assets $ 599,043 483,721
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 47,331 42,960
Accrued expenses 33,854 27,672
Income taxes payable 19,685 24,577
Total current liabilities 100,870 95,209
Long-term liabilities 6,269 3,847
Stockholders' equity:
Deckers Outdoor Corporation stockholders' equity:
Common stock 129 131
Additional paid-in capital 125,431 115,214
Retained earnings 365,304 268,515
Accumulated other comprehensive income 494 392
Total Deckers Outdoor Corporation stockholders' 491,358 384,252
equity
Noncontrolling interest 546 413
Total equity 491,904 384,665
Total liabilities and equity $ 599,043 483,721
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period ended Twelve-month period ended
December 31, December 31,
2009 2008 2009 2008
Net sales $ 347,989 303,506 813,177 689,445
Cost of sales 174,548 166,016 442,087 384,127
Gross profit 173,441 137,490 371,090 305,318
Selling, general and 67,825 52,843 188,843 152,574
administrative expenses
Impairment loss --- 20,925 1,000 35,825
Income from operations 105,616 63,722 181,247 116,919
Other (income) expense,
net:
Interest income (37 ) (683 ) (1,010 ) (3,190 )
Interest expense 40 (227 ) (875 ) (142 )
Other, net (37 ) (14 ) (91 ) (251 )
Income before income 105,650 64,646 183,223 120,502
taxes
Income tax expense 37,602 24,306 66,304 46,631
Net income 68,048 40,340 116,919 73,871
Less: Net (income) loss
attributable to the (306 ) 120 (133 ) 77
noncontrolling interest
Net income attributable
to Deckers Outdoor $ 67,742 40,460 116,786 73,948
Corporation
Net income attributable
to Deckers Outdoor
Corporation common
stockholders per share:
Basic $ 5.27 3.10 8.98 5.67
Diluted $ 5.22 3.07 8.89 5.60
Weighted-average common
shares:
Basic 12,851 13,072 13,008 13,042
Diluted 12,987 13,198 13,131 13,195
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period Twelve-month period
ended December 31, ended December 31,
2009 2008 2009 2008
Income before income taxes $ 105,650 64,646 183,223 120,502
Add back impairment charges ---- 20,925 1,000 35,825
Income before income taxes, excluding 105,650 85,571 184,223 156,327
impairment charges
Income tax expense (1) 37,602 32,214 66,666 60,494
Net income excluding impairment 68,048 53,357 117,557 95,833
charges
Less: Net (income) loss attributable (306 ) 120 (133 ) 77
to the noncontrolling interest
Net income excluding impairment
charges attributable to Deckers $ 67,742 53,477 117,424 95,910
Outdoor Corporation
Net income excluding impairment
charges attributable to Deckers
Outdoor Corporation common
stockholders per share:
Basic $ 5.27 4.09 9.03 7.35
Diluted $ 5.22 4.05 8.94 7.27
Weighted-average shares:
Basic 12,851 13,072 13,008 13,042
Diluted 12,987 13,198 13,131 13,195
(1) The non-GAAP income tax expense assumes the same effective tax rates as the GAAP income tax expense for those periods 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 periods, 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 periods and are indicators management uses for planning and forecasting future periods.
The excluded items represent non-cash impairment charges associated with the write-down of the Company's Teva goodwill and trademarks and TSUBO goodwill and 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 February 25, 2010