Exhibit 99.1
Deckers Outdoor Corporation Reports
Third Quarter Financial Results
GOLETA, Calif.--(BUSINESS WIRE)--Oct. 27, 2005--Deckers Outdoor
Corporation:
-- Third Quarter Sales Increase 24% to a Record Third Quarter
of $69.2 million --
-- Third Quarter Earnings Per Diluted Share Increase 37% to a
Record Third Quarter $0.63 --
-- Company Revises Fourth Quarter and Fiscal 2005 Guidance --
-- Company Introduces Fiscal 2006 Guidance --
Deckers Outdoor Corporation (NASDAQ: DECK) today announced
financial results for the third quarter and nine months ended
September 30, 2005.
For the third quarter, net sales increased 24.0% to $69.2 million
compared to $55.8 million in the same period last year. Net earnings
for the quarter increased 40.0% to $8.2 million or $0.63 per diluted
share, compared to net earnings of $5.8 million, or $0.46 per diluted
share for the third quarter of last year.
For the nine months ended September 30, 2005, net sales increased
23.6% to $173.8 million compared to $140.6 million in the same period
last year. Net earnings for the first nine months of fiscal 2005
increased 21.3% to $19.8 million or $1.54 per diluted share, compared
to net earnings of $16.3 million, or $1.37 per diluted share in the
same period last year.
The Company also announces that it was recently named to Forbes
Magazine's "200 Best Small Companies" for the second consecutive year,
where it was ranked 80, up from 133 last year, and was added to
Fortune Magazine's "100 Fastest Growing Companies" list during the
quarter, where it was ranked 15.
"Our strong third quarter results were primarily driven by robust
sales of UGG footwear, coupled with a significant gross margin
improvement and control of operating expenses which allowed us to
expand our operating margin by 350 basis points," Mr. Angel Martinez,
President and CEO stated. "UGG experienced strong full price selling
during the quarter as consumers positively responded to our fall and
holiday line. We were particularly pleased with the initial launch of
our new Fashion Collection, driven by our Uptown and Cargo boots, and
our expanded casual offerings, which are helping us to further
diversify our UGG product line and attract new customers. We are also
very happy with the continued strength in our Classic and Ultra
collections, as well as the success we've seen with our slipper
collection.
Including sales from both the wholesale divisions and the Internet
and catalog retailing business, Teva sales for the third quarter were
$9.7 million compared to $11.9 million in the same period last year, a
decrease of 18.4%, due to lower domestic closeout sales and lower
international sales compared to the third quarter last year. UGG sales
increased 46.2% to $57.3 million for the third quarter compared to
$39.2 million for the same period last year, driven by strong sales
across the board. Simple sales decreased 54.4% to $2.1 million for the
third quarter compared to $4.6 million for the same period last year,
as the third quarter of 2004 included approximately $2.7 million of
sales of the Simple sheep offering, a program which the Company
discontinued in late 2004. Sales for the Internet and catalog
retailing business, which are included in the brand sales numbers
above, aggregated approximately $3.4 million for the third quarter of
2005 compared to $5.4 million for the third quarter of 2004 due to the
greater availability of UGG product at local retailers in 2005.
Gross margin for the third quarter increased 220 basis points to
42.0% from 39.8% for the third quarter last year due to a combination
of factors, including a reduced impact of closeout sales and inventory
write-downs, the elimination of the airfreight costs incurred in the
third quarter of last year, and lower production overhead costs per
pair. Selling, general and administrative expenses ("SG&A") increased
$2.2 million in the third quarter compared to the same period last
year due to increased warehousing costs, bad debt expense and
commissions on higher sales. SG&A as a percentage of sales improved to
21.8% of net sales for the third quarter compared to 23.1% for the
third quarter last year, largely due to the continued leverage of
operating costs on the higher sales volume. The resulting operating
earnings improved to 20.3% of net sales for the quarter compared to
16.8% for the third quarter last year.
Overall, inventories increased to $66.8 million at September 30,
2005 from $27.0 million at September 30, 2004 primarily related to
Fall/Winter 2005 UGG inventory. The Company made a strategic decision
to bring in its Fall/Winter 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 $56.2 million at
September 30, 2005 compared to $14.9 million at September 30, 2004;
Teva inventories decreased to $7.6 million at September 30, 2005
compared to $9.0 million at September 30, 2004; and, Simple
inventories decreased to $3.0 million at September 30, 2005 compared
to $3.2 million at September 30, 2004. The Company's management stated
that it expects the inventory level to be reduced substantially by the
end of the year.
Mr. Martinez continued, "While we are still very encouraged about
our prospects for the remainder of the year, given the current retail
climate and our accelerated investment in marketing, product
development and international and retail infrastructures we believe
that it is prudent to adopt a more conservative outlook with regard to
the fourth quarter."
Deckers is updating its guidance for the fourth quarter ending
December 31, 2005. The Company currently expects net sales for the
fourth quarter to range between $72 million and $75 million and
earnings per diluted share to range from $0.60 to $0.64. For fiscal
2005, the Company expects 2005 net sales to range between $246 million
and $249 million, and diluted earnings per share to range from $2.13
to $2.17. The Company expects net sales for fiscal 2005 to range from
$85 million to $86 million for Teva, to be approximately $8 million
for Simple and to range from $153 million to $155 million for UGG. The
Company is also considering repatriating its offshore cash back to the
U.S. pursuant to section 965 of the American Jobs Creation Act during
the fourth quarter of 2005. In the event that the Company elects to do
so, it will result in a one-time increase in income tax expense in the
fourth quarter. Any resulting incremental taxes are not included in
the guidance above.
The Company is also introducing guidance for fiscal 2006. Deckers
currently anticipates its fiscal 2006 net sales to be in the range of
$255 million to $265 million and expects its earnings per diluted
share for fiscal 2006 to range from $2.00 to $2.15. With regard to its
current view on fiscal 2006, Deckers made the strategic decision to
reinvest in its business in 2006 in order to better position the
Company for the long-term, including investments in marketing and
advertising, development of its international and retail
infrastructures, and investment in product development and design.
Mr. Martinez concluded, "We continue to be very confident about
the future prospects for Teva, UGG and Simple. However, to ensure that
each of our brands maximizes its full potential, we believe it is
important to take this opportunity to enhance our current operating
platform in order to better support our long-term growth strategy. We
remain focused on successfully executing our business plan and
returning significant value to our stockholders."
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
plans to increase its marketing and advertising expenditures, plans to
further develop its international and retail infrastructures, plans to
increase spending on product development and design, expectations that
the inventory level will be reduced substantially by the end of the
year, the Company's estimates regarding net sales and earnings per
diluted share results for the fourth quarter of 2005 and for the full
years ending December 31, 2005 and 2006, sales expectations for each
of the brands, expectations of focusing on successfully executing the
Company's business plan and returning significant value to its
stockholders, among others. These forward-looking statements are
inherently uncertain and are based on the Company's expectations as of
today, October 27, 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)
September 30, December 31,
Assets 2005 2004
-------------- ------------
Current assets:
Cash and cash equivalents $ 19,081,000 10,379,000
Short-term investments ----- 15,475,000
Trade accounts receivable, net 44,121,000 40,226,000
Inventories 66,768,000 30,260,000
Prepaid expenses and other current
assets 1,514,000 1,491,000
Deferred tax assets 3,240,000 3,240,000
------------ ------------
Total current assets 134,724,000 101,071,000
Property and equipment, at cost, net 4,877,000 2,838,000
Intangible assets, less applicable
amortization 70,087,000 70,319,000
Other assets 71,000 592,000
------------ ------------
$209,759,000 174,820,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 15,542,000 16,524,000
Accrued expenses 5,379,000 7,968,000
Income taxes payable 10,651,000 6,725,000
------------ ------------
Total current liabilities 31,572,000 31,217,000
------------ ------------
Long-term debt 13,200,000 -----
Deferred tax liabilities-noncurrent 2,607,000 2,607,000
Stockholders' equity:
Common stock 124,000 122,000
Additional paid-in capital 73,669,000 71,959,000
Retained earnings 88,360,000 68,591,000
Accumulated other comprehensive income 227,000 324,000
------------ ------------
Total stockholders' equity 162,380,000 140,996,000
------------ ------------
$209,759,000 174,820,000
============ ============
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
Three-month period ended Nine-month period ended
September 30, September 30,
--------------------------------------------------
2005 2004 2005 2004
----------- ----------- ------------ ------------
Net sales $69,193,000 55,797,000 173,797,000 140,615,000
Cost of sales 40,123,000 33,562,000 99,191,000 79,068,000
----------- ----------- ------------ ------------
Gross profit 29,070,000 22,235,000 74,606,000 61,547,000
Selling, general and
administrative
expenses 15,052,000 12,877,000 41,512,000 33,287,000
----------- ----------- ------------ ------------
Earnings from
operations 14,018,000 9,358,000 33,094,000 28,260,000
Other expense
(income):
Interest, net 167,000 (28,000) 104,000 2,261,000
Other --- 5,000 (3,000) ---
----------- ----------- ------------ ------------
Earnings before
income tax expense 13,851,000 9,381,000 32,993,000 25,999,000
Income tax expense 5,701,000 3,559,000 13,224,000 9,708,000
----------- ----------- ------------ ------------
Net earnings $ 8,150,000 5,822,000 19,769,000 16,291,000
=========== =========== ============ ============
Net earnings per
share:
Basic $ 0.66 0.50 1.60 1.52
Diluted 0.63 0.46 1.54 1.37
=========== =========== ============ ============
Weighted-average
shares:
Basic 12,358,000 11,651,000 12,333,000 10,706,000
Diluted 12,856,000 12,748,000 12,872,000 11,921,000
=========== =========== ============ ============
CONTACT: Deckers Outdoor Corporation
Scott Ash, 805-967-7611
or
Investor Relations:
Integrated Corporate Relations, Inc.
Chad A. Jacobs/Brendon E. Frey
203-682-8200