Deckers Outdoor Corporation Reports Record Fourth Quarter Financial Results
-- Company Reports Fourth Quarter Sales Increased 36.7% to a Record of $124.4 Million -- -- Fourth Quarter Preliminary Diluted EPS Increased 93.6% to a Record of $1.82, Excluding Expected Non-Cash Charge Related to Write-Down of Intangible Asset --
GOLETA, Calif.--(BUSINESS WIRE)--
Deckers Outdoor Corporation (NASDAQGS: DECK) today announced preliminary financial results for the fourth quarter and fiscal year ended December 31, 2006.
The following results and accompanying condensed consolidated balance sheets and statements of income (unaudited) are presented on a GAAP basis excluding an expected non-cash impairment charge discussed below and its related tax benefit.
Fourth Quarter Highlights
-- Net sales increased 36.7% to $124.4 million versus $91.0
million last year; ahead of previous guidance range of $107.0
million to $110.0 million.
-- Gross margin increased 790 basis points to 48.5% compared to
40.6% a year ago.
-- Preliminary diluted EPS increased 93.6% to $1.82 versus $0.94
last year; ahead of previous guidance range of $1.27 to $1.30.
Fiscal 2006 Highlights
-- Net sales increased 15.0% to $304.4 million versus $264.8
million in 2005; ahead of previous guidance range of $287.0
million to $290.0 million.
-- Gross margin increased 430 basis points to 46.4% compared to
42.1% last year.
-- Preliminary diluted EPS increased 33.1% to $3.30 versus $2.48
in 2005; ahead of previous guidance range of $2.75 to $2.78.
-- Cash and short-term investments increased to $98.9 million
compared to $53.2 million a year ago.
-- Inventories decreased to $32.4 million versus $33.4 million
last year.
Deckers also announced that it recently conducted its annual impairment evaluation of the intangible assets on its balance sheet. Based on preliminary results, the Company expects to record a non-cash, pre-tax charge in the fourth quarter in the range of $14 million to $16 million, reflecting the write-down of the intangible asset related to Teva's trademarks. The exact amount of the charge will be recorded when the Company completes its analysis and files its Form 10-K with the Securities & Exchange Commission on or prior to March 16, 2007.
Angel Martinez, President and Chief Executive Officer, stated, "Our fourth quarter was highlighted by strong full price selling of our entire UGG(R) Brand fall collection throughout the holiday season and across the country which, combined with a meaningful reorder business, allowed us to once again exceed expectations. We are very pleased with our recent performance, particularly our top and bottom line growth. We achieved some key milestones in 2006 including surpassing the $300 million mark in sales, generating more than $3.00 in diluted earnings per share on an operational basis, and finishing the year with nearly $100 million in cash and short term investments on our balance sheet. Throughout the past twelve months we took a number of important steps to better position our Company for the future. And as we enter the new year, we are committed to further investing in all three of our brands, evolving our growth strategy, and fully maximizing the many opportunities that still exist going forward."
Segment Summary
Teva(R)
Teva Brand net sales for the fourth quarter increased 15.5% to $13.0 million compared to $11.3 million for the same period last year. Sales of Teva products were driven by solid sell-through of fall product and pull-forwards on several spring 2007 models. For the full year, Teva product sales decreased 5.6% to $80.5 million compared to $85.2 million in the prior year.
UGG(R)
UGG Brand net sales for the fourth quarter increased 40.1% to $109.9 million versus $78.5 million for the same period a year ago. Consumer demand for the entire women's, men's, and kids' fall collection, including boots, slippers, casuals, fashion and surf contributed to the UGG Brand's better than expected performance. For the full year, UGG Brand sales increased 23.2% to a record $211.5 million versus $171.6 million in 2005.
Simple(R)
Simple Brand net sales increased 18.8% to $1.5 million for the fourth quarter compared to $1.2 million for the same period last year. Simple product sales were on-plan for the quarter, with Green Toe(R) product sales continuing to gain traction and further solidifying the brand's leadership position in sustainable footwear. For the full year, the Simple Brand's sales increased 58.01% to $12.5 million compared to $7.9 million a year ago.
Consumer Direct
Sales for the Consumer Direct business, which are included in the brand sales numbers above, increased 28.4% to $19.5 million compared to $15.2 million for the same period a year ago. Results for the fourth quarter of 2006 include sales from the Company's new UGG Brand flagship store in New York City and two new retail outlet stores in Wrentham, MA and Riverhead, NY, which were not in operation in the fourth quarter of 2005.
Full-Year 2007 Outlook
-- The Company reiterated its full year revenue growth target of
approximately 15%.
-- The Company also introduced its full year diluted earnings per
share target of approximately 5% growth over 2006 before the
impairment charge. It is important to note, that the fiscal
2006 gross margin of 46.4% was above normal due primarily to
labor and material cost containment. The Company expects gross
margin to return to a more normalized level of approximately
44% in fiscal 2007.
-- Fiscal 2007 guidance includes approximately $4.3 million of
stock compensation expense.
First Quarter Outlook
The Company currently expects first quarter 2007 revenue to increase approximately 15% and diluted earnings per share to increase approximately 15% over 2006.
The Company's conference call to review fourth quarter and fiscal 2006 results will be broadcast live over the Internet today, Tuesday, February 27, 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), UGG(R), and Green Toe(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: 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; 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 for the fiscal year ended December 31, 2005 which we filed with the Securities and Exchange Commission on March 9, 2006. 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.
(Tables to follow)
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
December 31, December 31,
Assets 2006 2005
------------ ------------
Current assets:
Cash and cash equivalents $ 34,255 50,749
Short-term investments 64,637 2,500
Trade accounts receivable, net 49,571 39,683
Inventories 32,375 33,374
Prepaid expenses and other current assets 2,199 1,364
Deferred tax assets 4,714 5,949
------------ ------------
Total current assets 187,751 133,619
Property and equipment, at cost, net 7,770 4,711
Intangible assets, less applicable
amortization 69,699 70,009
Other assets 54 52
------------ ------------
$ 265,274 208,391
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 21,053 14,506
Accrued expenses 7,204 4,860
Income taxes payable 7,586 7,133
------------ ------------
Total current liabilities 35,843 26,499
------------ ------------
Deferred tax liabilities-noncurrent 4,241 4,337
Stockholders' equity:
Common stock 126 124
Additional paid-in capital 81,761 76,788
Retained earnings 142,910 100,436
Accumulated other comprehensive income 393 207
------------ ------------
Total stockholders' equity 225,190 177,555
------------ ------------
$ 265,274 208,391
============ ============
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period ended Year ended
December 31, December 31,
-------------------------------------------
2006 2005 2006 2005
----------- ----------- -------- ---------
Net sales $ 124,376 90,963 304,423 264,760
Cost of sales 64,091 54,047 163,224 153,238
----------- ----------- -------- ---------
Gross profit 60,285 36,916 141,199 111,522
Selling, general and
administrative expenses 23,305 17,742 73,989 59,254
----------- ----------- -------- ---------
Income from operations 36,980 19,174 67,210 52,268
Other (income) expense
Interest, net (432) (75) (2,372) 29
Other (12) (1) 1 (4)
----------- ----------- -------- ---------
Income before income taxes 37,424 19,250 69,581 52,243
Income taxes 13,929 7,174 27,107 20,398
----------- ----------- -------- ---------
Net income $ 23,495 12,076 42,474 31,845
=========== =========== ======== =========
Net income per share:
Basic $ 1.87 0.97 3.39 2.58
Diluted 1.82 0.94 3.30 2.48
=========== =========== ======== =========
Weighted-average shares:
Basic 12,565 12,406 12,519 12,349
Diluted 12,922 12,900 12,882 12,866
=========== =========== ======== =========
Source: Deckers Outdoor Corporation
Released February 27, 2007