Exhibit 99.1
Deckers Outdoor Corporation Reports Record Fourth Quarter and Fiscal
Year 2003 Financial Results
GOLETA, Calif.--(BUSINESS WIRE)--Feb. 26, 2004--Deckers Outdoor
Corporation (NASDAQ: DECK):
-- Fourth Quarter Revenue Increases 39% to a Record $35.7 Million --
-- Reports Record Fourth Quarter Diluted EPS of $0.19 --
-- Raises Fiscal 2004 EPS Guidance to a Range of $1.25 to $1.35 --
Deckers Outdoor Corporation (NASDAQ: DECK) today announced record financial
results for the fourth quarter and fiscal year ended December 31, 2003.
For the quarter ended December 31, 2003, net sales increased 39% to a record
of $35.7 million for the fourth quarter versus $25.8 million in the same period
last year. Net earnings for the quarter rose 81% to $2,464,000, compared to net
earnings of $1,363,000 last year, and diluted earnings per share increased 46%
to $0.19, versus diluted earnings per share of $0.13 in the fourth quarter of
2002. Earnings per diluted share for the fourth quarter of 2003 were negatively
impacted by $0.02 related to the repurchase of preferred stock and the repayment
of subordinated debt during the quarter. The fourth quarter 2002 results
included an after-tax gain of $168,000, or $0.02 per diluted share, as a result
of a final litigation settlement in 2002.
For the year ended December 31, 2003, net sales increased 22% to a record
$121.1 million versus $99.1 million last year. Net earnings increased 465% to
$9.2 million, or $0.77 per diluted share, compared to net earnings before
cumulative effect of accounting change of $1.6 million, or $0.17 per diluted
share last year. Net earnings before cumulative effect of accounting change in
2002 includes litigation charges of $3.2 million ($1.8 million after tax, or
$0.18 per diluted share).
As previously reported, on January 1, 2002, the Company 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 2002 (or $0.92
per diluted share), which was recorded as a cumulative effect of change in
accounting principle, presented net of its tax impact.
Chief Executive Officer, Doug Otto, stated, "We are very pleased with our
fourth quarter performance, driven primarily by strong demand for Ugg(R) and
Teva(R) coupled with further improvements in gross margin and continued leverage
of our operating expenses. These results contributed to record annual operating
income in 2003 and highlight a strong ending to a great year."
"Fiscal 2003 was an important year for Deckers strategically, operationally
and financially," Mr. Otto continued. "From a brand perspective we were able to
leverage the acquisition of Teva to further build our leadership position in the
market and create new opportunities for growth. In addition, Ugg continued to
experience a significant increase in demand and exposure across the country and
we successfully repositioned Simple for the future. During the year we
significantly improved our balance sheet and further enhanced our operating
platform. Our efforts did not go unnoticed as UGG was named 2003 Brand of the
Year by Footwear News."
Teva sales for the year increased 17.5% to $76.5 million compared to $65.1
million last year. Ugg sales for the year increased 54.9% to a record level of
$36.9 million from $23.8 million, and Simple sales were $7.7 million compared to
$10.2 million for the same period last year. These sales are inclusive of sales
generated by our catalog and internet segment, which we acquired in November
2002.
Mr. Otto further stated, "Our traditional sandal business performed very
well during the spring and summer months and the strong momentum continued into
the fall. Late last year, we signed a number of licensing agreements for Teva
and look forward to further leveraging our strong brand name into outdoor
apparel, headwear, eyewear and watches. Ugg recorded its sixth consecutive year
of double-digit growth and enjoyed unprecedented press coverage throughout the
year, especially during the holiday season. We also recently announced a
licensing partnership for Ugg handbags and small leather goods and we will
selectively pursue similar deals as we look to drive the brand's lifestyle
message to a broader audience. Finally, we worked hard throughout the year to
get Simple(R) back on track and focused on expanding the core product offering.
Included in the new Simple line is a moderately priced shearling boot line,
which has received very good response. As we look ahead into 2004 and beyond we
remain enthusiastic about the potential of our strong portfolio of niche brands
and our unique position in the marketplace."
During the fourth quarter of 2003, the Company repurchased all of the $5.5
million of preferred stock and repaid $2 million of its 16.75% subordinated
notes. In connection with the repurchase and pursuant to the terms of the
preferred stock, the Company paid Mr. Thatcher a premium of approximately $0.4
million, which was treated as a capital transaction and accordingly had no
impact on net earnings for 2003. In addition, in connection with the repayment
of the subordinated debt in December, we incurred approximately $0.2 million of
expenses related to the write-off of financing costs.
After year-end, the Company continued to reduce the outstanding 16.75%
subordinated notes, repaying an additional $3 million in January 2004. With this
most recent repayment, the Company has now repaid $7 million of the original $14
million of 16.75% subordinated notes and repurchased all of the $5.5 million of
preferred stock, both of which were incurred in order to finance the Teva
acquisition in November 2002.
The Company also restructured its international operations, which resulted
in a reduced income tax rate to 34.0% in the fourth quarter of 2003, compared to
40.0% for the first nine months of 2003 and 38.5% for all of 2003. The Company
believes this restructuring should yield an annual effective tax rate of
approximately 36.5% in 2004.
Deckers also increased its guidance for 2004. The Company now expects sales
to range from $153 million to $162 million and diluted earnings per share to
range from $1.25 to $1.35, up from the previous guidance of $1.02 to $1.06 per
diluted share. The Company currently expects annual sales in 2004 to be
approximately $84 to $86 million for Teva, $9 - $11 million for Simple and $60 -
$65 million for Ugg. For the first quarter ending March 31, 2004, the Company
currently expects sales to range from $40 million to $42 million and diluted
earnings per share to range from $0.44 to $0.45.
Mr. Otto concluded, "While we have achieved much over the last year, our
sights are firmly set on the future and we believe the prospects for Deckers
have never been brighter, as evidenced by our heightened outlook for fiscal
2004. We move forward with a compelling platform for growth and remain committed
to fully capitalizing on the many opportunities that still lie ahead."
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(R),
Simple(R) and Ugg(R) brand names, which are also its registered trademarks.
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 first quarter of 2004 and for the year
ending December 31, 2004 and its expectations regarding the effective income tax
rate for 2004, among others. These forward-looking statements are based on the
Company's expectations as of today, February 26, 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 projections 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 which could affect our financial condition and results
of operations are the following: our ability to anticipate fashion trends;
whether the UGG brand will continue to grow at the rate it has experienced in
the recent past; the sensitivity of the footwear industry to changes in general
economic conditions; whether we are successful in implementing our growth
strategy; our ability to protect our intellectual property; our ability to
develop and patent new technologies as our existing patents expire; the
difficulty of matching inventory to future customer demand; the risk that
counterfeiting can harm our sales or our brand image; our dependence on
independent manufacturers to supply our products; risks of international
commerce resulting from our reliance on manufacturers outside the U.S.; the risk
that our manufacturers, suppliers or licensees might fail to conform to labor
laws or to our ethical standards; the need to secure sufficient and affordable
sources of raw materials; our reliance on licensing partners to expand our
business; the challenge of managing our brands for growth; expected fluctuations
in quarterly results; dependence on key employees; currency risk; delays and
unexpected costs that can result from customs regulations; our dependence on
computer and communications systems; the sensitivity of our sales, particularly
of the Teva(R) and UGG(R) brands, to seasonal and weather factors; our reliance
on independent distributors in international markets; legal compliance
challenges and political and economic risk in our international markets; the
effect of consolidations and restructurings on our customers in the footwear
industry; intense competition within the footwear industry; and the threat that
terrorism could disrupt commerce in the U.S. and abroad. In addition, our stock
price may be affected by the degree of control of our company exercised by
management through its stock holdings; immediate dilution of book value per
share experienced by purchasers of the stock we issue in the offering;
management's discretion over the use of proceeds from the offering; historical
volatility in our stock price; the potential for future sales of stock to
adversely affect our stock price; and the tendency of anti-takeover provisions
of our charter documents, our stockholder rights plan and Delaware law to
dissuade potential purchasers of the Company. Expectations regarding the
effective income tax rate are dependent upon the mix of earnings between the
domestic and international operations, the Company's ability to continue to use
the foreign generated cash outside the United States and, as with all tax
matters, is subject to review by the taxing authorities in the various tax
jurisdictions. 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 for 2003
or this news release.
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
December 31 December 31,
Assets 2003 2002
------------ ------------
Current assets:
Cash and cash equivalents $ 6,662,000 3,941,000
Trade accounts receivable, net 18,745,000 20,851,000
Inventories 18,004,000 17,067,000
Prepaid expenses and other current assets 694,000 783,000
Deferred tax assets 2,137,000 1,919,000
------------ ------------
Total current assets 46,242,000 44,561,000
Property and equipment, at cost, net 2,969,000 3,864,000
Intangible assets, less applicable
amortization 70,572,000 70,773,000
Deferred tax assets ----- 1,428,000
Other assets 1,243,000 1,786,000
------------ ------------
$121,026,000 122,412,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and current installments of
long-term debt $ 3,792,000 3,951,000
Trade accounts payable 11,220,000 12,916,000
Accrued expenses 4,959,000 4,509,000
Income taxes payable 3,468,000 732,000
------------ ------------
Total current liabilities 23,439,000 22,108,000
------------ ------------
Long-term debt, less current installments 26,495,000 35,077,000
Deferred tax liabilities-noncurrent 568,000 -----
Stockholders' equity:
Preferred stock ----- 5,500,000
Common stock 97,000 95,000
Additional paid-in capital 27,115,000 26,210,000
Retained earnings 43,052,000 33,898,000
Accumulated other comprehensive income
(loss) 260,000 (476,000)
------------ ------------
Total stockholders' equity 70,524,000 65,227,000
------------ ------------
$121,026,000 122,412,000
============ ============
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three-month period ended Year Ended
December 31, December 31,
------------------------ ------------------------
2003 2002 2003 2002
----------- ----------- ------------ -----------
Net sales $35,717,000 25,752,000 121,055,000 99,107,000
Cost of sales 21,946,000 16,105,000 69,710,000 57,577,000
----------- ----------- ------------ -----------
Gross profit 13,771,000 9,647,000 51,345,000 41,530,000
Selling, general and
administrative
expenses 8,880,000 7,098,000 31,907,000 34,954,000
Litigation charge --- (290,000) --- 3,228,000
----------- ----------- ------------ -----------
Earnings from
operations 4,891,000 2,839,000 19,438,000 3,348,000
Other expense
(income):
Interest, net 1,145,000 464,000 4,557,000 406,000
Other 12,000 25,000 (3,000) 98,000
----------- ----------- ------------ -----------
Income before income
taxes and
cumulative
effect of
accounting change 3,734,000 2,350,000 14,884,000 2,844,000
Income taxes 1,270,000 987,000 5,730,000 1,224,000
----------- ----------- ------------ -----------
Income before
cumulative effect
of accounting
change 2,464,000 1,363,000 9,154,000 1,620,000
Cumulative effect of
accounting change,
net of
$843,000 income tax
benefit --- --- --- (8,973,000)
----------- ----------- ------------ -----------
Net income (loss) 2,464,000 1,363,000 9,154,000 (7,353,000)
Preferred stock
redemption (438,000) --- (438,000) ---
----------- ----------- ------------ -----------
Net income (loss)
available for
common
stockholders $ 2,026,000 1,363,000 8,716,000 (7,353,000)
=========== =========== ============ ===========
Basic income per
common share before
cumulative effect
of accounting
change $ 0.21 0.15 0.91 0.17
Cumulative effect of
accounting change --- --- --- (0.96)
----------- ----------- ------------ -----------
Basic net income
(loss) per common
share $ 0.21 0.15 0.91 (0.79)
=========== =========== ============ ===========
Average basic common
shares 9,693,000 9,389,000 9,610,000 9,328,000
=========== =========== ============ ===========
Diluted income per
common share before
cumulative effect
of accounting
change $ 0.19 0.13 0.77 0.17
Cumulative effect of
accounting change --- --- --- (0.92)
----------- ----------- ------------ -----------
Diluted net income
(loss) per common
share $ 0.19 0.13 0.77 (0.75)
=========== =========== ============ ===========
Average diluted
common shares 10,889,000 10,174,000 11,880,000 9,806,000
=========== =========== ============ ===========
CONTACT: DECKERS OUTDOOR CORPORATION
Scott Ash, 805-967-7611
or
Integrated Corporate Relations, Inc.
Investor Relations:
Chad A. Jacobs / Brendon Frey, 203-222-9013