Exhibit 99.1
Deckers Outdoor Corporation Reports Third Quarter Financial Results
GOLETA, Calif.--(BUSINESS WIRE)--Oct. 22, 2003--Deckers Outdoor
Corporation (NASDAQ: DECK)
-- Exceeds First Call Earnings Per Share Consensus Estimate
-- Sales Increase 40% to a Record $24.9 million
-- Raises Guidance for Fiscal 2003; Introduces Guidance for 2004
-- Company Announces Intention to Repurchase $5.5 Million of
Preferred Stock
Deckers Outdoor Corporation (NASDAQ: DECK) today announced
financial results for the third quarter and nine months ended
September 30, 2003.
For the third quarter, net sales increased 40.4% to a record $24.9
million compared to $17.7 million in the same period last year. Net
earnings for the quarter were $481,000, or $0.04 per diluted share,
compared to a net loss of $2,547,000, or ($0.27) per diluted share for
the third quarter of last year. The prior year third quarter included
a special litigation charge of $2,117,000 (after tax), or ($0.22) per
diluted share. The pre-tax litigation charge was $3,518,000.
For the nine months ended September 30, 2003, net sales increased
16.3% to $85.3 million compared to $73.4 million in the same period
last year. Net earnings for the first nine months of fiscal 2003
increased to $6,690,000, or $0.57 per diluted share, compared to net
earnings before cumulative effect of change in accounting principle
described below of $257,000, or $0.03 per diluted share last year. The
prior year nine- month period included the aforementioned special
litigation charge of $2,117,000 (after tax), or ($0.22) per diluted
share.
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 nine months ended September 30,
2002, which was recorded as a cumulative effect of a change in
accounting principle, presented net of its tax impact.
Mr. Douglas Otto, Chairman and CEO stated, "Our record top line
performance for the third quarter was driven by the continued robust
growth of Ugg and higher than anticipated sell-throughs at Teva. With
the introduction of new Ugg product and fueled by substantial
editorial and celebrity exposure, we continue to experience a
heightened demand for the Ugg brand beyond its historical Holiday
selling period, which has allowed us to add new accounts and further
expand our geographic presence. In addition, the strong response to
our Teva sandal offering that we experienced this summer carried over
into fall and several of our closed-toe product offerings continued to
retail well."
For the third quarter, net sales of Teva products increased 59% to
$9.0 million versus $5.7 million in the same period last year. Net
sales of Ugg also increased 44% to $14.1 million compared to $9.8
million last year. Net sales of the Simple brand were $1.8 million
versus $2.2 million in the same period last year.
Gross margin for the third quarter increased to 38.2% from 37.8%
for the third quarter last year largely due to the addition of the
higher gross margin Internet and catalog sales and lower overhead
costs per pair, partially offset by an increased impact of closeout
sales and inventory write-downs. Selling, general and administrative
expenses decreased to 31.0% of sales for the current quarter compared
to 42.2% for the third quarter last year as a result of several
factors including a decrease in bad debt expense and the continuing
favorable impact of the Teva acquisition, which eliminated
approximately $246,000 of royalties and $234,000 of Teva license cost
amortization, combined with the Company's ability to control operating
costs during a period of increasing sales.
The Company also announced that its Board of Directors has
authorized the repurchase of the entire $5.5 million of preferred
stock previously issued to Mark Thatcher in connection with the
acquisition of the Teva worldwide assets. The Company stated that the
transaction is expected to occur during the fourth quarter of 2003. In
connection with the repurchase, the Company will pay Mr. Thatcher a
premium of approximately $425,000, which is treated as a capital
transaction and accordingly will have no impact on the Company's net
earnings for 2003. However, in accordance with Generally Accepted
Accounting Principles (GAAP) the premium will reduce earnings
available for common shareholders and, therefore, is expected to
negatively impact the fourth quarter earnings per share by
approximately $0.04 per share. However, going forward, the transaction
is expected to eliminate approximately 1.5 million shares from the
Company's average diluted shares outstanding calculation beginning in
2004, effectively eliminating approximately 13% of the dilution from
the EPS calculation.
In addition, during the fourth quarter, the Company expects to
make a $2 million early repayment of a portion of its outstanding
subordinated debt, which is otherwise not due until 2008. In
connection with the repayment, Deckers will not incur a pre-payment
fee but will record a $100,000 charge to write off a pro rata share of
the related loan costs in the fourth quarter. Going forward, by
replacing the higher interest-bearing subordinated debt with lower
interest-bearing senior debt, the Company expects to save
approximately $200,000 to $250,000 of interest costs over each of the
next five years beginning in 2004.
The Company intends to complete the subordinated debt repayment
and preferred stock repurchase transactions using a combination of the
Company's cash flows, borrowing availability under its line of credit
and a $3.5 million increase in its senior term debt. In total, the
transactions are expected to reduce earnings per diluted share in the
fourth quarter of 2003 by approximately $0.04, but should provide an
improvement of approximately $0.12 per diluted share in 2004 and each
year thereafter. All per share estimates are based upon the estimated
weighted average outstanding shares. Changes in stock prices and other
stock transactions would impact those estimates.
Mr. Otto stated, "The decision by our Board to make an early
repayment of subordinated debt and to redeem the preferred stock
reflects our ongoing commitment to maximizing shareholder value and
our dedication to further reducing our interest expense going forward.
Our ability to do these transactions ahead of schedule underscores the
health of our business and the continued strength of our cash flows."
Deckers updated its guidance for the fourth quarter ending
December 31, 2003. The Company currently expects fourth quarter sales
to range between $28 million and $30 million and diluted earnings per
share to range from $0.06 to $0.08, inclusive of the estimated $0.04
per share negative impact of the preferred stock repurchase and
subordinated debt pre-payment. In comparison, during the fourth
quarter of 2002 the Company reported sales of $25.8 million and
earnings per share of $0.13. It is important to note that last year's
fourth quarter results included a one-time after tax gain of $168,000,
or $0.02 per diluted share, related to the final settlement of the
Yeti litigation. In addition, due to the timing of the Teva
acquisition, which closed on November 25, 2002, the Company paid
slightly more than one month of interest on the borrowings associated
with the purchase. In the fourth quarter of fiscal 2003 the Company
expects to pay three full months of interest on the aforementioned
borrowing, aggregating approximately an additional $650,000, or $0.03
per diluted share. Also, given the timing of the Teva acquisition,
there are no substantial incremental royalty savings between the
fourth quarters of 2003 and 2002 as the vast majority of fourth
quarter royalty savings were already realized last year. Accounting
for these various items, the fourth quarter 2002 diluted earnings per
share excluding the $0.02 gain on litigation settlement and including
an additional two months of interest of $0.03 would have yielded a pro
forma diluted earnings per share of $0.08; whereas, the expected
fourth quarter 2003 diluted earnings per share excluding the $0.04 for
debt repayment and preferred stock repurchase would yield a pro forma
estimate of approximately $0.10 to $0.12, a 25% to 50% improvement
compared to the $0.08 pro forma 2002 amount. See the accompanying
table entitled "Pro Forma Diluted Earnings Per Share Comparison" for a
presentation of this reconciliation in tabular format.
The Company also raised its guidance for the fiscal year ending
December 31, 2003. The Company now expects 2003 sales to range between
$113 million and $115 million and diluted earnings per share to range
from $0.62 to $0.64. The Company expects its Teva sales to be $74
million to $75 million, Simple to be approximately $8 million and Ugg
to be $31 million to $32 million.
The Company is introducing guidance for fiscal 2004. Deckers
currently anticipates its fiscal 2004 sales to be in the range of $126
million to $132 million, including $82 to $84 million for Teva, $9 to
$11 million for Simple and $35 to $37 million for Ugg. Deckers
currently expects its diluted earnings per share for fiscal 2004 to
range from $0.92 to $0.96.
Mr. Otto concluded, "We are very pleased with our positive
momentum as we head into the holiday and look forward to a strong
ending to the fiscal year. Over the past several months we have made
some significant progress from both a financial and operational
standpoint. Ugg brand awareness continues to strengthen and, as we
approach our one-year anniversary for the acquisition of Teva, we
continue to further our leadership position in the marketplace. We
remain dedicated to capitalizing on the opportunities that we have
created."
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.
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 fourth quarter
of 2003 and for the years ending December 31, 2003 and 2004 and its
expectations regarding the repurchase of the preferred stock and
repayment of the subordinated debt including expectations regarding
the timing of the transactions as well as the estimated impact on
current and future earnings. These forward-looking statements are
based on the Company's expectations as of today, October 22, 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. The Company's ability to repurchase the preferred stock
and repay its subordinated debt is also subject to available cash
flows and borrowing availability, which are dependent on factors
including the Company's growth rate, the continued strength of the
Company's brands, its ability to respond timely to changes in consumer
preferences, its ability to collect its receivables in a timely
manner, its ability to effectively manage its inventory, and the
volume of letters of credit used to purchase product, among other risk
factors. 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.
(Tables to follow)
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
Assets 2003 2002
------------- -------------
Current assets:
Cash and cash equivalents $ 1,941,000 3,941,000
Trade accounts receivable, net 18,014,000 20,851,000
Inventories 22,432,000 17,067,000
Prepaid expenses and other current
assets 566,000 783,000
Deferred tax assets 1,919,000 1,919,000
------------- -------------
Total current assets 44,872,000 44,561,000
Property and equipment, at cost, net 3,222,000 3,864,000
Intangible assets, less applicable
amortization 70,641,000 70,773,000
Deferred tax assets 1,428,000 1,428,000
Other assets 1,407,000 1,786,000
------------- -------------
$ 121,570,000 122,412,000
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current installments
of long-term debt $ 3,541,000 3,951,000
Trade accounts payable 5,818,000 12,916,000
Accrued expenses 3,761,000 4,509,000
Income taxes payable 4,215,000 732,000
------------- -------------
Total current liabilities 17,335,000 22,108,000
------------- -------------
Long-term debt, less current installments 31,015,000 35,077,000
Stockholders' equity:
Preferred stock 5,500,000 5,500,000
Common stock 96,000 95,000
Additional paid-in capital 26,836,000 26,210,000
Retained earnings 40,588,000 33,898,000
Accumulated other comprehensive income
(loss) 200,000 (476,000)
------------- -------------
Total stockholders' equity 73,220,000 65,227,000
------------- -------------
$ 121,570,000 122,412,000
============= =============
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three-month period ended Nine-month period ended
September 30, September 30,
------------------------- -----------------------
2003 2002 2003 2002
------------ ----------- ----------- -----------
Net sales $24,894,000 17,727,000 85,338,000 73,355,000
Cost of sales 15,392,000 11,029,000 47,764,000 41,472,000
------------ ----------- ----------- -----------
Gross profit 9,502,000 6,698,000 37,574,000 31,883,000
Selling, general and
administrative
expenses 7,720,000 7,489,000 23,027,000 27,856,000
Litigation costs 0 3,518,000 0 3,518,000
------------ ----------- ----------- -----------
Earnings (loss)
from operations 1,782,000 (4,309,000) 14,547,000 509,000
Other expense
(income):
Interest, net 981,000 (31,000) 3,412,000 (58,000)
Other (1,000) 45,000 (15,000) 73,000
------------ ----------- ----------- -----------
Income (loss) before
income taxes and
cumulative effect
of accounting change 802,000 (4,323,000) 11,150,000 494,000
Income taxes
(benefit) 321,000 (1,776,000) 4,460,000 237,000
------------ ----------- ----------- -----------
Income (loss) before
cumulative effect of
accounting change 481,000 (2,547,000) 6,690,000 257,000
Cumulative effect of
accounting change,
net of $843,000
income tax benefit --- --- --- (8,973,000)
------------ ----------- ----------- -----------
Net income (loss) $ 481,000 (2,547,000) 6,690,000 (8,716,000)
============ =========== =========== ===========
Basic income (loss)
per common share
before cumulative
effect of
accounting change $ 0.05 (0.27) 0.70 0.03
Cumulative effect of
accounting change --- --- --- (0.97)
----------- ----------- ----------- -----------
Basic net income
(loss) per common
share $ 0.05 (0.27) 0.70 (0.94)
=========== =========== =========== ===========
Average basic common
shares 9,657,000 9,339,000 9,582,000 9,307,000
=========== =========== =========== ===========
Diluted income (loss)
per common share
before cumulative
effect of accounting
change $ 0.04 (0.27) 0.57 0.03
Cumulative effect of
accounting change --- --- --- (0.93)
----------- ----------- ----------- -----------
Diluted net income
(loss) per common
share $ 0.04 (0.27) 0.57 (0.90)
=========== =========== =========== ===========
Average diluted
common shares 12,037,000 9,339,000 11,716,000 9,642,000
=========== =========== =========== ===========
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Pro Forma Diluted Earnings Per Share Comparison
(Unaudited)
Pro Forma
------------------------------
Three-month period ended
December 31,
------------------------------
2003 2002
--------------- --------------
Diluted earnings per share $ 0.06 - $0.08 $ 0.13
Gain on litigation settlement ---- $ (0.02)
Additional two months of interest ---- $ (0.03)
Preferred stock repurchase premium and
subordinated debt loan cost write-off $ 0.04 ----
--------------- --------------
Pro forma diluted earnings per share $ 0.10 - $0.12 $ 0.08
=============== ==============
The pro forma diluted earnings per share reconciliation above is used
to demonstrate the pro forma expected diluted earnings per share for
the three months ended December 31, 2003 compared to the three months
ended December 31, 2002.
The pro forma diluted earnings per share are the result of an
adjustment to the Company's earnings (as reported under generally
accepted accounting principles) by excluding non-recurring items of
gain and loss. The Company believes that a comparison of the resulting
adjusted numbers can be a useful measure of the Company's intrinsic
performance.
This table should be read in conjunction with the discussion within
the text of the accompanying press release and is subject to the
discussion regarding forward- looking statements in the last paragraph
of the press release.
CONTACT: Deckers Outdoor Corporation
Scott Ash, 805/967-7611
or
Investor Relations:
Integrated Corporate Relations, Inc.
Chad A. Jacobs/Brendon E. Frey, 203/222-9013