Deckers Outdoor Corporation Reports Record Fourth Quarter and Fiscal 2008 Financial Results
Company Reports Fourth Quarter Sales Increased 56.3% to a Record of $303.5 Million and Diluted EPS Increased 50.6% to a Record of $4.05, Excluding Non-Cash Write-Down of Intangible Assets
Company Reports Fiscal 2008 Sales Increased 53.6% to a Record of $689.4 Million and Diluted EPS Increased to a Record $7.27, Excluding Non-Cash Write-Down of Intangible Assets
GOLETA, Calif.--(BUSINESS WIRE)-- Deckers Outdoor Corporation (NASDAQGS: DECK) today announced financial results for the fourth quarter and fiscal year ended December 31, 2008.
Fourth Quarter Highlights
-- Net sales increased 56.3% to $303.5 million versus $194.2 million last
year.
-- Diluted EPS of $3.07 on a GAAP basis, or $4.05 excluding the pre-tax
non-cash write down of $20.9 million described below. The non-GAAP *
diluted EPS of $4.05 represents an increase of 50.6% over diluted EPS of
$2.69 a year ago.
-- Domestic sales increased 59.5% to $283.4 million compared to $177.7
million last year.
-- International sales increased 21.3% to $20.1 million versus $16.5
million a year ago.
-- UGG(R) brand sales increased 62.0% to $288.0 million compared to $177.7
million last year.
Fiscal 2008 Highlights
-- Net sales increased 53.6% to $689.4 million versus $448.9 million last
year.
-- Diluted EPS of $5.60 on a GAAP basis, or $7.27 excluding the pre-tax
non-cash write down of $14.9 million incurred in the second quarter of
fiscal 2008 and the $20.9 million incurred in the fourth quarter of
fiscal 2008. The non-GAAP * diluted EPS of $7.27 represents an increase
of 43.7% over diluted EPS of $5.06 a year ago.
-- Domestic sales increased 50.4% to $581.5 million compared to $386.6
million last year.
-- International sales increased 73.1% to $107.9 million versus $62.3
million a year ago.
-- UGG brand sales increased 67.5% to $582.0 million compared to $347.6
million last year.
-- Simple sales increased 27.4% to $17.2 million versus $13.5 million in
the prior year.
-- Cash, cash equivalents and short-term investments increased to $194.8
million compared to $168.1 million a year ago, or on a non-GAAP * basis
$14.76 per diluted share compared to $12.80 per diluted share a year
ago.
* See the Reconciliation of Non-GAAP Measures in the tables below.
As part of the Company's annual goodwill and indefinite lived asset impairment testing, the Company recognized an impairment charge for the entire balance of $11.9 million of the Teva(R) brand's goodwill as well as the entire balance of $3.5 million of the TSUBO(R) brand's goodwill in the fourth quarter of fiscal 2008. These impairment charges resulted primarily from a significant decrease in the Company's market capitalization as the stock market as a whole has declined, as well as reduced forecasts for the Teva brand. In addition, the Company recognized an impairment loss of $5.5 million on the Teva brand's trademarks, leaving a balance of $15.3 million as of December 31, 2008. This impairment charge resulted primarily from the reduced forecasts for the Teva brand.
Angel Martinez, President, Chief Executive Officer and Chairman of the Board of Directors, stated: "Our UGG business, both in the U.S. and internationally, performed very well during the fourth quarter. We experienced robust consumer demand for our expanded product assortment across all geographic regions and throughout our wholesale accounts, company-owned stores, and on our eCommerce website. This allowed us to exceed expectations and represented a strong finish to another record year. While the macroeconomic conditions did impact Teva and Simple's fourth quarter performance, we are pleased with the progress both brands made during the past twelve months. For Teva, this included targeting a younger audience, improving retail placement, and introducing a fall line of closed-toe footwear. And for Simple, it was expanding the product assortment, increasing distribution, and broadening consumer awareness of the brand and its collections. We begin 2009 fully cognizant of the challenges confronting our industry and this is reflected in our modest growth assumptions for the full year. That said, we remain confident about our long-term prospects and believe that the current retail environment is creating new opportunities for market share gains. Therefore, we plan to take advantage of our positive momentum and strong balance sheet by making strategic investments in our brands and infrastructure to ensure we are best positioned for the future."
Division Summary
UGG(R)
UGG brand net sales for the fourth quarter increased 62.0% to $288.0 million compared to $177.7 million for the same period last year. The significant sales gain was driven by increased orders for fall and holiday product from domestic retailers, international distributors, and higher sell-through rates at company-owned retail locations and on its eCommerce website versus a year ago. For the full year, UGG brand sales increased 67.5% to a record $582.0 million versus $347.6 million in 2007.
Teva(R)
Teva brand net sales were $12.4 million for the fourth quarter compared to $13.9 million for the same period last year, a decrease of 11.1%. The sales decline was primarily attributable to a lower level of pull-forwards on spring product compared with last year, partially offset by demand for new fall closed-toe product. For the full year, Teva brand sales decreased 1.6% to $86.5 million compared to $87.9 million in 2007.
Simple(R)
Simple brand net sales for the fourth quarter were $2.3 million compared to $2.6 million for the same period last year, a decrease of 12.3%, primarily due to lower reorders from retailers. For the full year, Simple brand sales increased 27.4% to $17.2 million versus $13.5 million in the prior year.
TSUBO(R)
TSUBO brand net sales were $0.9 million for the fourth quarter and $3.8 million for the full year. TSUBO was acquired by the Company in the second quarter of 2008.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 51.2% to $36.1 million for the fourth quarter compared to $23.9 million for the same period a year ago. For the full year, sales for the eCommerce business increased 51.2% to a record $68.8 million versus $45.5 million in 2007.
Retail Stores
Sales for the retail store business, which are included in the brand sales numbers above, increased 103.1% to $24.7 million for the fourth quarter compared to $12.1 million for the same period a year ago. For the full year, sales for the retail store business increased 109.2% to $38.5 million versus $18.4 million a year ago. For those stores that were open during the full year of 2007 and 2008, same store sales grew by 32.7%.
Full-Year 2009 Outlook
-- The Company introduced a full year revenue growth target of
approximately 6% to 9% over 2008.
-- The Company also introduced its full year diluted earnings per share
target of approximately the same as to slightly down from the $7.27
non-GAAP diluted EPS in 2008, based on a gross margin being the same as
to slightly up from 2008, SG&A expenses as a percentage of sales of
approximately 25% to 26% and an effective tax rate of approximately 38%.
-- Fiscal 2009 guidance includes additional marketing investments in the
Simple and TSUBO divisions of approximately $10.0 million in an effort
to increase consumer brand awareness and market share, and approximately
$10.5 million of stock compensation expense.
First Quarter Outlook
-- The Company currently expects first quarter 2009 revenue to increase
approximately 22% over 2008, and expects first quarter 2009 diluted
earnings per share to be approximately 28% down from 2008.
-- First quarter guidance includes additional marketing investments in the
Simple and TSUBO divisions of $2 million, lower gross margins compared
to 2008 due to higher levels of wholesale and international distributor
sales as a percentage of total sales expected this year and higher
levels of fixed overhead for new retail stores, warehouse operations,
international infrastructure and general administrative costs.
The Company's conference call to review fourth quarter and fiscal 2008 financial results will be broadcast live over the internet today, Thursday, February 26, 2009 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. UGG(R) Australia, Teva(R), Simple(R) Shoes, TSUBO(R), and Deckers(R) Brand 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 recent past; impairment charges related to our brand's 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 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, 2007, which we filed with the Securities and Exchange Commission on February 29, 2008, and the Company's Quarterly Reports on Form 10-Q for the first, second and third quarters of 2008. 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 2008 2007
Current assets:
Cash and cash equivalents $ 176,804 54,525
Restricted cash 300 250
Short-term investments 17,976 113,567
Trade accounts receivable, net 108,129 72,209
Inventories 92,740 51,776
Prepaid expenses and other current assets 3,691 3,276
Deferred tax assets 13,324 5,964
Total current assets 412,964 301,567
Restricted cash 700 1,000
Property and equipment, at cost, net 28,318 10,579
Intangible assets, less applicable amortization 24,034 54,131
Deferred tax assets 17,447 2,682
Other assets 258 73
$ 483,721 370,032
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 42,960 36,221
Accrued expenses 27,672 17,629
Income taxes payable 24,577 17,544
Total current liabilities 95,209 71,394
Long-term liabilities 3,847 ----
Minority interest 413 ----
Stockholders' equity:
Common stock 131 130
Additional paid-in capital 115,214 103,659
Retained earnings 268,515 194,567
Accumulated other comprehensive income 392 282
Total stockholders' equity 384,252 298,638
$ 483,721 370,032
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,
2008 2007 2008 2007
Net sales $ 303,506 194,243 $ 689,445 448,929
Cost of sales 166,016 100,593 384,127 241,458
Gross profit 137,490 93,650 305,318 207,471
Selling, general and 52,843 36,693 152,574 101,918
administrative expenses
Impairment loss 20,925 ---- 35,825 ---
Income from operations 63,722 56,957 116,919 105,553
Other (income) expense,
net:
Interest income (683 ) (1,351 ) (3,190 ) (4,855 )
Interest expense (227 ) 101 (142 ) 768
Other, net (14 ) (513 ) (251 ) (399 )
Income before income
taxes and minority 64,646 58,720 120,502 110,039
interest
Income tax expense 24,306 23,331 46,631 43,602
Minority interest (120 ) ---- (77 ) ----
Net income $ 40,460 35,389 $ 73,948 66,437
Net income per share:
Basic $ 3.10 2.72 $ 5.67 5.18
Diluted 3.07 2.69 5.60 5.06
Weighted-average shares:
Basic 13,072 12,989 13,042 12,835
Diluted 13,198 13,158 13,195 13,129
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period ended Twelve-month period ended
December 31, December 31,
2008 2007 2008 2007
Income before income
taxes and minority $ 64,646 58,720 $ 120,502 110,039
interest
Add back impairment 20,925 ---- 35,825 ----
charges
Income before income
taxes and minority
interest,
excluding impairment 85,571 58,720 156,327 110,039
charges
Income tax expense (1) 32,214 23,331 60,494 43,602
Minority interest (120 ) ---- (77 ) ----
Net income excluding 53,477 35,389 95,910 66,437
impairment charges
Net income excluding
impairment charges per
share:
Basic $ 4.09 2.72 $ 7.35 5.18
Diluted 4.05 2.69 7.27 5.06
Weighted-average
shares:
Basic 13,072 12,989 13,042 12,835
Diluted 13,198 13,158 13,195 13,129
(1) The non-GAAP income tax expense for the three and twelve months ended
December 31, 2008
assumes the same effective tax rate as the GAAP income tax expense for those
periods.
As of As of
December 31, December 31,
2008 2007
Cash and cash $ 176,804 54,525
equivalents
Short-term investments 17,976 113,567
Cash, cash equivalents
and short-term 194,780 168,092
investments
Cash, cash equivalents
and short-term
investments
per diluted share: $ 14.76 12.80
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 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 26, 2009