Exhibit 99.1
Deckers Outdoor Corporation Reports Second Quarter Results;
Company Confirms High-End of Previous Guidance for Fiscal 2005
GOLETA, Calif.--(BUSINESS WIRE)--July 21, 2005--Deckers Outdoor
Corporation (NASDAQ:DECK) today announced financial results for the
second quarter ended June 30, 2005.
For the second quarter, net sales were $40.3 million compared to
$40.5 million in the same period last year. Net earnings for the
quarter were $2.7 million, compared to net earnings of $5.1 million in
the same period last year, and diluted earnings per share were $0.21
compared to diluted earnings per share of $0.43 in the second quarter
of 2004.
For the six months ended June 30, 2005, net sales increased 23% to
$104.6 million compared to $84.8 million in the same period last year.
Net earnings for the first half of fiscal 2005 increased 11% to $11.6
million, compared to net earnings of $10.5 million in the same period
last year. Diluted earnings per share were $0.90 compared to diluted
earnings per share of $0.91 in the same period of fiscal 2004.
Douglas Otto, Chairman of Deckers Outdoor, stated, "As expected,
Teva's dependency on open toe sandals combined with the lingering cold
weather during the Spring 2005 season negatively impacted our domestic
Teva business during the quarter, while weakness in certain
international markets affected Teva's overseas business. However,
demand for UGG remained strong and as we enter our key selling period
for UGG we are very excited about the opportunities we continue to see
in the marketplace. The UGG orders for our Fall season have come in
strong and we expect another record year for our UGG brand in 2005."
Including sales from both the wholesale divisions and the Internet
and catalog retailing business, Teva sales for the second quarter
decreased to $24.8 million from $27.1 million in the same period a
year ago, while UGG sales increased to $13.3 million compared to $11.7
million for the second quarter last year. Simple sales increased to
$2.2 million compared to $1.8 million for the second quarter last
year. Sales for the Internet and catalog retailing business, which are
included in the brand sales numbers above, aggregated approximately
$3.5 million for the second quarter of 2005, compared to $4.9 million
for the second quarter of 2004.
Mr. Otto continued, "Our UGG business for the first half of 2005
was very positive, with sales more than doubling compared to the first
half of 2004. We feel very good about UGG's performance year to date
and expect this momentum to continue this Fall. For the upcoming Fall
season, we have substantially broadened our product offerings and
increased the number of slipper and casual footwear styles. We also
introduced new collections including the Metropolitan Collection,
which includes the Cargo Boot and the Uptown Mukluk, while continuing
to deliver the popular Classic and Ultra styles that have been the
mainstay of the UGG brand. Based on our strong bookings, current
sell-through rates and positive retailer response, we feel very
encouraged about both the near- and long-term prospects for the brand.
We believe that, over time, we have a tremendous opportunity to
increase our geographic penetration and expand our footwear and
non-footwear categories and we are dedicated to taking full advantage
of the significant growth prospects that lie ahead."
"With regard to Teva, we have put in place a number of strategic
initiatives to further strengthen our position in the market both
domestically and abroad," Mr. Otto stated. "We are re-engineering our
product line with a heightened focus on innovation and a renewed
dedication to capitalizing on proprietary technologies. We are also
developing a more comprehensive line of non-weather dependent
footwear. Finally, for our Spring 2006 season, we plan to
significantly increase our marketing and advertising efforts in order
to reinvigorate and sharpen our worldwide message for the brand."
"At Simple, we experienced solid Spring sell-through at retail
which has translated into healthy bookings for Fall. At the same time,
we have recently begun showing our Spring 2006 product line to our
retailers and are encouraged by their favorable reaction to the line."
Gross margin for the quarter was 39.6% compared to 46.6% in the
second quarter of last year, primarily due to an increased impact of
closeout sales and inventory write-downs during the quarter. In
addition, the decrease in the high margin Internet and catalog retail
sales compared to the second quarter of last year also contributed to
the lower gross margin. Selling, general and administrative expenses
increased to 28.0% of net sales, compared to 23.8% in the second
quarter of 2004, largely due to the addition of a new distribution
center, as well as an increase in marketing spending compared to the
second quarter of last year.
Overall, inventories increased to $66.7 million at June 30, 2005
from $19.6 million at June 30, 2004 primarily related to Fall 2005 UGG
inventory. The Company made a strategic decision to bring in its Fall
UGG inventories much earlier in the year this year than it did last
year in order to ensure more timely deliveries to customers in 2005.
UGG inventories were $55.6 million at June 30, 2005 compared to $10.0
million at June 30, 2004; Teva inventories were $8.6 million at June
30, 2005 compared to $7.3 million at June 30, 2004; and, Simple
inventories were $2.5 million at June 30, 2005 compared to $2.3
million at June 30, 2004. The Company's management stated that it
expects the inventory level to be reduced substantially by the end of
the year.
Deckers reaffirmed the higher end of its previous guidance for net
sales and earnings for fiscal 2005. For the year, Deckers now expects
net sales between $251 million to $258 million and diluted earnings
per share between $2.35 to $2.43. For the third quarter, Deckers
expects net sales of $68 million to $71 million and diluted earnings
per share of $0.58 to $0.61. For the fourth quarter, Deckers currently
forecasts net sales to range from $78 million to $82 million and
diluted earnings per share to range from $0.87 to $0.92.
Deckers now expects 2005 Teva sales to be $88 million to $89
million, Simple sales to be $10 million to $11 million and UGG sales
to be $153 million to $158 million.
Angel Martinez, President and Chief Executive Officer, commented,
"I remain extremely confident about the vitality of our brands and I
am very excited about our future prospects. Our entire team is
committed to taking the necessary steps to improve our business at
Teva, while at the same time, we are focused on fully capitalizing on
the tremendous opportunities that exist with UGG and Simple."
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 statements about the near-
and long-term prospects for the Company and its brands, the Company's
expectations for continued momentum in its brands and the related
expectations for record sales for UGG in 2005, the Company's
expectations regarding UGG's opportunities to increase geographic
penetration and expand its footwear and non-footwear categories, the
Company's plans to increase its Teva marketing and advertising
efforts, the Company's estimates regarding net sales and diluted
earnings per share results for the third and fourth quarters of 2005
and for the full year ending December 31, 2005, and sales expectations
for each of the brands in 2005, among others. These forward-looking
statements are inherently uncertain and are based on the Company's
expectations as of today, July 21, 2005. 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. In addition, such forward-looking statements
involve known and unknown risks, uncertainties and other factors that
may cause the actual results to differ materially from those 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, 2004. 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; possible shortages
in top grade sheepskin or interruption in the supply of other
materials, which could interrupt product manufacturing and increase
product costs; the risk on how our licensees will perform under their
licenses; the risk that we are unable to accurately forecast consumer
demand; the risk that retailers could postpone or cancel existing
orders; the sensitivity of the footwear industry to changes in general
economic conditions; whether we are successful in continuing to
implement our growth strategy; the success of our customers; 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; the
availability of products, which can affect our ability to fulfill our
customers' orders; the risk that raw materials do not meet our
specifications or that the prices of raw materials may increase, which
would potentially cause a high return rate, a loss of sales or a
reduction in our gross margins; 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; currency risk; delays and unexpected costs that
can result from customs regulations; 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 potential impact of litigation; the
effect of consolidations and restructurings on our customers in the
footwear industry; intense competition within the footwear industry;
the threat that terrorism could disrupt commerce in the U.S. and
abroad; our ability to defend attacks on the validity of our
intellectual property; and our ability to register and protect our
intellectual property in expanding product and geographic markets.
Given these uncertainties, prospective investors are cautioned not to
place undue reliance on such forward-looking statements. The Company
intends to continue its practice of not updating projections until its
next quarterly results announcement. 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 Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2004, the Company's Quarterly Reports on Form
10-Q, the Company's Current Reports on Form 8-K or this news release.
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
Assets 2005 2004
------------ ------------
Current assets:
Cash and cash equivalents $ 11,102,000 10,379,000
Short-term investments ----- 15,475,000
Trade accounts receivable, net 26,245,000 40,226,000
Inventories 66,672,000 30,260,000
Prepaid expenses and other current assets 1,366,000 1,491,000
Deferred tax assets 3,240,000 3,240,000
------------ ------------
Total current assets 108,625,000 101,071,000
Property and equipment, at cost, net 4,211,000 2,838,000
Intangible assets, less applicable
amortization 70,164,000 70,319,000
Other assets 612,000 592,000
------------ ------------
$183,612,000 174,820,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 13,395,000 16,524,000
Accrued expenses 5,625,000 7,968,000
Income taxes payable 7,880,000 6,725,000
------------ ------------
Total current liabilities 26,900,000 31,217,000
------------ ------------
Deferred tax liabilities-noncurrent 2,607,000 2,607,000
Stockholders' equity:
Preferred stock ----- -----
Common stock 123,000 122,000
Additional paid-in capital 73,543,000 71,959,000
Retained earnings 80,210,000 68,591,000
Accumulated other comprehensive income 229,000 324,000
------------ ------------
Total stockholders' equity 154,105,000 140,996,000
------------ ------------
$183,612,000 174,820,000
============ ============
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
Three-month period ended Six-month period ended
June 30, June 30,
-------------------------------------------------
2005 2004 2005 2004
----------- ----------- ------------ -----------
Net sales $40,341,000 40,546,000 104,604,000 84,818,000
Cost of sales 24,372,000 21,640,000 59,068,000 45,506,000
----------- ----------- ------------ -----------
Gross profit 15,969,000 18,906,000 45,536,000 39,312,000
Selling, general and
administrative
expenses 11,292,000 9,632,000 26,460,000 20,410,000
----------- ----------- ------------ -----------
Earnings from
operations 4,677,000 9,274,000 19,076,000 18,902,000
Other expense
(income):
Interest, net 6,000 1,171,000 (63,000) 2,289,000
Other (4,000) 1,000 (3,000) (5,000)
----------- ----------- ------------ -----------
Earnings before
income tax expense 4,675,000 8,102,000 19,142,000 16,618,000
Income tax expense 1,943,000 3,015,000 7,523,000 6,149,000
----------- ----------- ------------ -----------
Net earnings $ 2,732,000 5,087,000 11,619,000 10,469,000
=========== =========== ============ ===========
Net earnings per
share:
Basic $ 0.22 0.47 0.94 1.02
Diluted 0.21 0.43 0.90 0.91
=========== =========== ============ ===========
Weighted-average
shares:
Basic 12,351,000 10,713,000 12,320,000 10,233,000
Diluted 12,886,000 11,920,000 12,909,000 11,505,000
=========== =========== ============ ===========
CONTACT: Deckers Outdoor Corporation
Scott Ash, 805-967-7611
or
Investor Relations:
Integrated Corporate Relations, Inc.
Chad A. Jacobs / Brendon Frey, 203-682-8200