Deckers Outdoor Corporation Reports Record Third Quarter Financial Results
Company Reports Third Quarter Sales Increased 57.2% to $129.4 Million Third Quarter Diluted Earnings Per Share Increased 81.5% to $1.47 Company Increases Fiscal 2007 Guidance Growth Targets
GOLETA, Calif.--(BUSINESS WIRE)--
Deckers Outdoor Corporation (NASDAQ: DECK) today announced financial results for the third quarter ended September 30, 2007.
Third Quarter Highlights
-- Net sales increased 57.2% to $129.4 million compared to $82.3
million last year.
-- Diluted EPS increased 81.5% to $1.47 from $0.81, as restated,
and ahead of previous guidance of approximately $1.20
-- UGG(R) Brand sales increased 67.5% to $113.7 million compared
to $67.9 million a year ago.
-- Total international sales increased 58.0% to $14.2 million
compared to $9.0 million last year.
Angel Martinez, President and Chief Executive Officer, stated, "Our record third quarter performance was driven by strong full price selling of UGG brand product throughout the United States coupled with growing demand for the brand overseas. Consumer reaction to the UGG brand's fall line has been extremely favorable which we believe underscores the progress we have made evolving the product offering, increasing the breadth and depth of each collection and enhancing the brand's image as the leader in luxury comfort. In addition, our success at penetrating new geographic regions, increasing shelf space and broadening our target market also contributed to our better than expected results. We move forward with positive momentum in our business, a solid infrastructure to support our growth objectives both domestically and overseas, and a long-term strategic development plan designed to maximize the opportunities for each of our leading brands."
Segment Summary
UGG(R)
UGG Brand net sales for the third quarter increased 67.5% to $113.7 million compared to $67.9 million in the third quarter of 2006. Domestic sales were fueled by robust consumer demand for the entire product line, including boots, slippers, casuals, men's, kids', and the new high-end fashion collection, coupled with strong international growth.
Teva(R)
Teva Brand net sales for the third quarter increased 12.1% to $11.2 million compared to $10.0 million for the same period last year. Teva's results were driven by increased sell-through for sandals as well as the positive reaction to the brand's expanded closed-toe product offering.
Simple(R)
Simple Brand net sales were $4.4 million for both the third quarter of 2007 and the third quarter of 2006. Simple's performance was negatively impacted by shipping delays for ecoSNEAKS(TM) as a result of production issues, which have been resolved. Despite this, ecoSNEAKS(TM) had a very solid debut across multiple channels of distribution while Green Toe(R) was successful in opening more mainstream accounts this fall.
Consumer Direct
Sales for the Consumer Direct business, which are included in the brand sales numbers above, increased 82.3% to $10.6 million compared to $5.8 million for the same period a year ago, mostly due to an increase in UGG Brand internet sales. In addition, results for the third quarter of 2007 included sales from the Company's UGG Brand flagship store in New York City and two retail outlet stores in Riverhead and Woodbury Common, New York, which were not in operation in the third quarter of 2006.
Full-Year 2007 Outlook
-- The Company is increasing its 2007 full year revenue growth
target to approximately 39% over 2006, up from previous
guidance of approximately 35%.
-- The Company is increasing its 2007 full year diluted earnings
per share growth target to approximately 35% over 2006 before
the restatement adjustments as disclosed in the Company's Form
10-K/A for the year ended December 31, 2006 and the $15.3
million pre-tax impairment loss attributable to our Teva
trademark that was recorded in the fourth quarter of 2006, up
from previous guidance of approximately 25%.
-- Fiscal 2007 guidance includes approximately $5.3 million of
stock compensation expense, an increase of $3.2 million over
2006, and approximately $2.4 million of expenses related to
the investigation and restatement of the Company's
consolidated financial statements.
Fourth Quarter Outlook
-- The Company is also increasing its fourth quarter 2007 revenue
target to approximately 35% and its diluted earnings per share
target to approximately 15% compared to the fourth quarter of
2006, before the restatement adjustment and impairment charge.
This is up from its previous revenue and diluted earnings per
share growth targets of 30% and 10%, respectively.
The Company's conference call to review third quarter fiscal 2007 results will be broadcast live over the internet today, Thursday, October 25, 2007 at 4:30 pm Eastern Time. The broadcast will be hosted at www.deckers.com and www.earnings.com.
Deckers Outdoor Corporation builds niche products into global lifestyle brands 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) and UGG(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" as defined in the Private Securities Litigation Reform Act of 1995. 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, actual operating results in the future may differ significantly from the future financial performance expected at the current time. Those risks and uncertainties include, among others: the results of the Company's settlement of the underpayment of certain tax obligations to authorities in China for one of the Company's foreign subsidiaries, Holbrook Limited, a Hong Kong company; 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; shortages or price fluctuations of raw materials that could interrupt product manufacturing and increase product costs; our ability to implement our growth strategy; the success of our customers 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; the risk of losing key personnel; 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/A for the fiscal year ended December 31, 2006 which we filed with the Securities and Exchange Commission on October 11, 2007. 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 of the Company.
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
September 30, December 31,
2007 2006
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 39,308 34,255
Restricted cash 250 ----
Short-term investments 35,405 64,637
Trade accounts receivable, net 74,354 49,571
Inventories 88,050 32,375
Prepaid expenses and other current
assets 2,935 2,199
Deferred tax assets 4,386 4,386
------------- -------------
Total current assets 244,688 187,423
Restricted cash 1,000 ----
Property and equipment, at cost, net 8,711 7,770
Intangible assets, less applicable
amortization 54,166 54,399
Deferred tax assets 327 327
Other assets 73 54
------------- -------------
$ 308,965 249,973
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 31,146 21,053
Accrued expenses 13,754 10,949
Income taxes payable 5,096 7,561
------------- -------------
Total current liabilities 49,996 39,563
------------- -------------
Stockholders' equity:
Common stock 130 126
Additional paid-in capital 99,439 81,761
Retained earnings 159,178 128,130
Accumulated other comprehensive income 222 393
------------- -------------
Total stockholders' equity 258,969 210,410
------------- -------------
$ 308,965 249,973
============= =============
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period Nine-month period
ended ended
September 30, September 30,
--------------------- ----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
As As
Restated Restated
Net sales $ 129,381 82,322 $ 254,686 180,047
Cost of sales 70,666 45,266 140,865 99,436
---------- ---------- ---------- ----------
Gross profit 58,715 37,056 113,821 80,611
Selling, general and
administrative expenses 28,055 19,865 65,225 50,684
---------- ---------- ---------- ----------
Income from operations 30,660 17,191 48,596 29,927
Other (income) expense,
net:
Interest income (851) (688) (3,504) (1,985)
Interest and other
expense, net 207 163 781 356
---------- ---------- ---------- ----------
Income before income
taxes 31,304 17,716 51,319 31,556
Income taxes 11,974 7,336 20,271 13,178
---------- ---------- ---------- ----------
Net income $ 19,330 10,380 $ 31,048 18,378
========== ========== ========== ==========
Net income per share:
Basic $ 1.49 0.83 $ 2.43 1.47
Diluted 1.47 0.81 2.37 1.44
========== ========== ========== ==========
Weighted-average shares:
Basic 12,973 12,531 12,784 12,503
Diluted 13,117 12,831 13,095 12,805
========== ========== ========== ==========
Source: Deckers Outdoor Corporation
Released October 25, 2007