Exhibit 99.1
Deckers Outdoor Corporation Reports Second Quarter Results;
Exceeds First Call Earnings Per Share Consensus Estimate
GOLETA, Calif.--(BUSINESS WIRE)--July 24, 2003--Deckers Outdoor
Corporation (Nasdaq:DECK)
Company Announces Favorable Ruling in European Anti-Dumping Case
Raises Guidance for FY 2003
Deckers Outdoor Corporation (Nasdaq:DECK) today announced
financial results for the second quarter ended June 30, 2003.
For the second quarter, net sales increased 9% to $24.3 million
compared to $22.4 million in the same period last year. Net earnings
for the quarter increased 212% to $2,006,000, compared to net earnings
of $642,000 last year, and diluted earnings per share increased 143%
to $0.17 compared to diluted earnings per share of $0.07 in the second
quarter of 2002. The improvement in second quarter earnings partly
resulted from a favorable final ruling in the Company's appeal against
European anti-dumping duties which were levied in 1997. The matter was
ultimately decided in the Company's favor during the second quarter,
resulting in the reversal of the previously established $500,000
accrual ($300,000 after tax, or $0.03 per share).
For the six months ended June 30, 2003, net sales increased 9% to
$60.4 million compared to $55.6 million in the same period last year.
Net earnings for the first half of fiscal 2003 increased 121% to $6.2
million, compared to net earnings before cumulative effect of change
in accounting principle described below of $2.8 million last year.
Diluted earnings per share increased 86% to $0.54 compared to earnings
before cumulative effect of change in accounting principle of $0.29 in
the first half of fiscal 2002.
As previously reported, on January 1, 2002 Deckers implemented
Statement of Financial Accounting Standards No. 142 ("SFAS 142"),
Goodwill and Other Intangible Assets, which requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized
to earnings but instead be reviewed periodically for impairment. The
implementation of SFAS 142 resulted in a goodwill impairment charge of
approximately $9.0 million during the six months ended June 30, 2002,
which was recorded as a cumulative effect of change in accounting
principle. In addition, SFAS 142 provides that goodwill no longer be
amortized.
Douglas Otto, Chairman & CEO, stated, "We exceeded expectations
primarily due to double digit growth in our Teva business during the
second quarter. Teva branded product experienced a strong sell through
and healthy reorder business despite the unseasonably cold weather
experienced throughout much of the country. Additionally, our earnings
continue to be positively impacted by our recent Teva acquisition
which has resulted in the elimination of royalty payments as well as
increased sales from the growing high-margin Internet and catalog
retailing business, which was acquired as part of the Teva
acquisition."
Teva sales for the second quarter increased 15% to $22.4 million
from $19.5 million in the same period a year ago, while Simple sales
were $1.5 million compared to $2.6 million last year. Reflecting the
seasonal nature of Ugg's business, Ugg sales were $0.4 million
compared to $0.3 million.
Otto further commented, "Strong retail response to our core Teva
product helped the brand outpace the competition in the sport sandal
category. As we approach the fall selling season we are encouraged by
our second full line of closed toe product, led by the introduction of
the Oraibi model in our Nomadic series of rugged outdoor footwear.
Ugg's popularity continues to outperform our expectations and, as we
enter the back half of the year, the brand is well positioned to once
again deliver another solid performance in 2003. As for Simple, we
continue to execute a strategy that we believe will result in a
resurgence of the brand in the casual footwear market. To that end, we
will be introducing several new styles and categories at the WSA trade
show in August, highlighted by several new styles of retro inspired
sneakers and the introduction of a Simplegirl line of sandals and
thongs for a younger demographic."
Gross margin for the quarter increased to 48.6% compared to 45.0%
in the second quarter of last year, primarily due to the strength of
the Euro in the European market, the addition of the higher gross
margin Internet and catalog sales and a reduced impact of closeout
sales compared to that of the second quarter last year. Selling,
general and administrative expenses decreased by $1,813,000 to
$7,154,000 for the second quarter compared to $8,967,000 in the year
ago period. The decrease was due to a variety of factors including the
favorable impact of the recent Teva acquisition, which eliminated
$1,287,000 of Teva royalties and $236,000 of Teva license cost
amortization. In addition, selling, general and administrative
expenses decreased as a result of the favorable resolution of the
anti-dumping duties matter and lower bad debt expense, partially
offset by higher sales commissions on the increased sales levels,
increased marketing expenditures and the addition of the operating
costs of the newly acquired Internet and catalog retailing business.
In June 2003, Deckers made a $2 million early repayment of a
portion of its outstanding subordinated debt which was otherwise not
due until 2008. In connection with the repayment, Deckers incurred a
$100,000 pre-payment fee and recorded an additional $100,000 charge to
write off a pro rata share of the related loan costs. These aggregate
costs of $200,000 are included in interest expense for the second
quarter of 2003. By replacing this debt with a lower interest-bearing
advance on its line of credit, the Company estimates it has eliminated
annual interest costs of approximately $200,000 to $250,000 for each
of the next five years.
During the second quarter, Deckers reduced its outstanding debt by
approximately $3.9 million, including the $2 million repayment of
subordinated debt described above. While sales increased 9% compared
to the same period last year, through improved collections Deckers has
reduced its accounts receivable by 9% since June 30, 2002. Inventories
increased $6.2 million compared to those at June 30, 2002, reflecting
an increase for Ugg of $4.7 million, an increase for Teva of $2.3
million and a decrease for Simple of $0.8 million. The increase in
inventory resulted primarily from a continuing change in the
seasonality and nature of the business which includes the increase in
Ugg sales in general, and more particularly, the further expansion of
Ugg business in the third quarter. In addition, Teva's fall closed toe
shoe business is increasing, while retailers are also carrying Teva's
basic sport sandal models year round. As a result of these trends,
Deckers brought in its fall inventories earlier in the season this
year and also increased the depth of inventory for the fall season.
Because this shift is in response to fall seasonality, Deckers expects
the inventory balances to return to amounts comparable to last year's
by December 31, 2003.
Due to the better-than-expected second quarter results, Deckers
increased its guidance for fiscal year 2003. Deckers now anticipates
sales for fiscal year 2003 to range from $104 million to $108 million
and expects diluted earnings per share to range from $0.57 to $0.59,
up from the previous guidance of $0.50 to $0.53 per share. Deckers
currently expects third quarter 2003 sales to range from $19 million
to $20 million and loss per share to range from ($0.04) to ($0.05) per
share.
Deckers expects 2003 Teva sales to be $70 million to $72 million,
Simple sales to be $9 million to $10 million and Ugg sales to be $25
million to $26 million.
Otto concluded, "We believe our strong performance in the first
six months of 2003 bodes well for business throughout the remainder of
the year and beyond. We are extremely pleased with our performance
during the spring 2003 Teva season, and as it comes to a close we are
enthusiastic about the coming transition to the fall season as we
continue to roll out our Teva closed toe footwear offering and as we
enter the Ugg selling season, which we expect will contribute to
another record year for Ugg. Over the past several years we have
successfully diversified our brands, product, and distribution to
become a well balanced company, both operationally and financially. We
move ahead with a powerful platform and a solid management team
dedicated to delivering long-term earnings growth."
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. The Company's products
are offered under the Teva, Simple and Ugg brand names.
Deckers Outdoor Corporation will host a conference call to review
second quarter fiscal 2003 results, which will be broadcast live over
the Internet on Thursday, July 24, 2003 at 10:00 a.m. Eastern Time.
The broadcast will be hosted at http://www.viavid.com and
http://www.deckers.com . A replay of the call will be available until
July 31, 2003 at midnight at 877-519-4471, passcode: 4041391.
All statements in this press release that are not historical facts
are forward-looking statements, including the Company's estimates
regarding sales and earnings per share results for the year ending
December 31, 2003 and for the quarter ending September 30, 2003 as
well as the 2003 sales expectations for each of the Company's three
brands. These forward-looking statements are based on the Company's
expectations as of today, July 24, 2003. No one should assume that any
forward-looking statement made by the Company will remain consistent
with the Company's expectations after the date the forward-looking
statement is made. The Company intends to continue its practice of not
updating forward-looking statements until its next quarterly results
announcement. In addition, such forward-looking statements involve
known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company,
or industry results, to differ materially from any future results,
performance or achievements expressed or implied by such
forward-looking statements. Many of the risks, uncertainties and other
factors are discussed in detail in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2002. Among the factors
that could impact results are the general economic conditions and
strength or weakness in the retail environments in which the Company's
products are sold. In addition, the Company's sales are highly
dependent on consumer preferences, which are difficult to assess and
can shift rapidly. Any shift in consumer preferences away from one or
more of the Company's product lines could result in lower sales as
well as obsolete inventory, both of which could adversely affect the
Company's results of operations, financial condition and cash flows.
The Company also depends on its customers continuing to carry and
promote its various lines. Availability of products can also affect
the Company's ability to meet its customers' orders. Sales of the
Company's products, particularly those under the Teva(R) and Ugg(R)
lines, are very sensitive to weather conditions. Extended periods of
unusually cold weather during the spring and summer could adversely
impact demand for the Company's Teva(R) line. Likewise, unseasonably
warm weather during the fall and winter months could adversely impact
demand for the Company's Ugg(R) product line. Given these
uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the
results of any revisions to any of the forward-looking statements
contained in the 2002 Annual Report on Form 10-K, the Quarterly
Reports on Form 10-Q or this news release.
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
Assets 2003 2002
-------------- --------------
Current assets:
Cash and cash equivalents $ 2,212,000 3,941,000
Trade accounts receivable, net 15,822,000 20,851,000
Inventories 22,957,000 17,067,000
Prepaid expenses and other current
assets 685,000 783,000
Deferred tax assets 1,919,000 1,919,000
-------------- --------------
Total current assets 43,595,000 44,561,000
Property and equipment, at cost, net 3,397,000 3,864,000
Intangible assets, less applicable
amortization 70,710,000 70,773,000
Deferred tax assets 1,428,000 1,428,000
Other assets 1,485,000 1,786,000
-------------- --------------
$ 120,615,000 122,412,000
============== ==============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current
installments of long-term debt $ 3,620,000 3,951,000
Trade accounts payable 8,351,000 12,916,000
Accrued expenses 3,433,000 4,509,000
Income taxes payable 3,782,000 732,000
-------------- --------------
Total current liabilities 19,186,000 22,108,000
-------------- --------------
Long-term debt, less current
installments 28,774,000 35,077,000
Stockholders' equity:
Preferred stock 5,500,000 5,500,000
Common stock 96,000 95,000
Additional paid-in capital 26,761,000 26,210,000
Retained earnings 40,107,000 33,898,000
Accumulated other comprehensive
income (loss) 191,000 (476,000)
-------------- --------------
Total stockholders' equity 72,655,000 65,227,000
-------------- --------------
$ 120,615,000 122,412,000
============== ==============
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three-month period ended Six-month period ended
June 30, June 30,
------------------------ ------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net sales $24,342,000 22,369,000 60,444,000 55,628,000
Cost of sales 12,510,000 12,298,000 32,372,000 30,443,000
----------- ----------- ----------- -----------
Gross profit 11,832,000 10,071,000 28,072,000 25,185,000
Selling, general
and administrative
expenses 7,154,000 8,967,000 15,307,000 20,367,000
----------- ----------- ----------- -----------
Earnings from
operations 4,678,000 1,104,000 12,765,000 4,818,000
Other expense
(income):
Interest, net 1,334,000 (10,000) 2,431,000 (27,000)
Other 1,000 11,000 (14,000) 28,000
----------- ----------- ----------- -----------
Income before
income taxes and
cumulative effect
of accounting
change 3,343,000 1,103,000 10,348,000 4,817,000
Income taxes 1,337,000 461,000 4,139,000 2,013,000
----------- ----------- ----------- -----------
Income before
cumulative effect
of accounting
change 2,006,000 642,000 6,209,000 2,804,000
Cumulative effect
of accounting
change, net of
$843,000 income
tax benefit --- --- --- (8,973,000)
----------- ----------- ----------- -----------
Net income (loss) $ 2,006,000 642,000 6,209,000 (6,169,000)
=========== =========== =========== ===========
Basic income per
common share
before cumulative
effect of
accounting change $ 0.21 0.07 0.65 0.30
Cumulative effect
of accounting
change --- --- --- (0.96)
----------- ----------- ----------- -----------
Basic net income
(loss) per common
share $ 0.21 0.07 0.65 (0.66)
=========== =========== =========== ===========
Average basic
common shares 9,536,000 9,307,000 9,545,000 9,326,000
=========== =========== =========== ===========
Diluted income per
common share
before cumulative
effect of
accounting change $ 0.17 0.07 0.54 0.29
Cumulative effect
of accounting
change --- --- --- (0.93)
----------- ----------- ----------- -----------
Diluted net income
(loss) per common
share $ 0.17 0.07 0.54 (0.64)
=========== =========== =========== ===========
Average diluted
common shares 11,611,000 9,732,000 11,487,000 9,665,000
=========== =========== =========== ===========
CONTACT: Deckers Outdoor Corporation
Scott Ash, 805-967-7611
or
Investor Relations:
Integrated Corporate Relations, Inc.
Chad A. Jacobs or Brendon Frey, 203-222-9013