Deckers Outdoor Corporation Reports First Quarter Financial Results

Deckers Outdoor Corporation (NASDAQ: DECK) today announced financial results for the first quarter ended March 31, 2007.

First Quarter Highlights

Net sales increased 29.6% to $72.6 million versus $56.0 million last year.

Gross margin increased 210 basis points to 46.2% compared to 44.1% a year ago.

Diluted EPS increased 70.5% to $0.75 versus $0.44 last year.

Angel Martinez, President and Chief Executive Officer, stated, “We begin 2007 with a solid first quarter highlighted by double digit sales increases for Teva®, UGG® and Simple®. Our ability to once again exceed expectations was primarily driven by strong full price selling for the UGG® brand coupled with positive consumer reaction to our reengineered Teva® product line, which underscores our ongoing efforts to revitalize the brand at retail and our strategic decision to target a younger, more active demographic. At the same time, Simple® continued to gain important shelf space at retail while further building its leadership position in sustainable footwear. Looking ahead, we believe we are well positioned to capitalize on our future growth opportunities and we remain confident in our ability to achieve both our near- and long-term objectives.”

Segment Summary

Teva®

Teva Brand net sales for the first quarter increased 11.6% to $38.7 million compared to $34.7 million for the same period last year. Sales were driven by demand for new styles, particularly the performance water series featuring higher price point products such as the Karnali Wraptor, Toachi and Sunkosi, along with solid sell-through of men’s and women’s casuals including updated versions of the Dozer.

UGG®

UGG Brand net sales for the first quarter increased 67.7% to $29.8 million compared to $17.8 million for the same period a year ago. The improvement in sales was attributable to greater demand and increased distribution for the expanded spring line which now consists of espadrilles, sandals, flip flops and boots.

Simple®

Simple Brand net sales increased 14.0% to $4.0 million for the first quarter compared to $3.5 million for the same period last year. Simple product sales were up year-over-year as a result of heightened brand awareness, a broader product assortment, and the addition of several new influential accounts, including Urban Outfitters, Bloomingdales, David Z. and Kitson.

Consumer Direct

Sales for the Consumer Direct business, which are included in the brand sales numbers above, increased 69.7% to $11.1 million compared to $6.5 million for the same period a year ago, mostly due to an increase in UGG Brand internet sales. In addition, results for the first quarter of 2007 included sales from the Company’s new UGG Brand flagship store in New York City and two new retail outlet stores in Wrentham, MA and Riverhead, NY, which were not in operation in the first quarter of 2006.

Full-Year 2007 Outlook

The Company increased its full year revenue growth target to approximately 25% over 2006, up from previous guidance of approximately 15%.

The Company increased its full year diluted earnings per share growth target to approximately 15% over 2006 before the impairment charge, up from previous guidance of approximately 5%

Fiscal 2007 guidance includes approximately $5.2 million of stock compensation expense, an increase of $3.1 million over 2006.

Second Quarter Outlook

The Company currently expects second quarter 2007 revenue to increase approximately 15% and diluted earnings per share to decrease approximately 80% compared to 2006.

The Company’s conference call to review first quarter fiscal 2007 results will be broadcast live over the internet today, Thursday, April 26, 2007 at 4:30 pm Eastern Time. The broadcast will be hosted at www.deckers.com and www.earnings.com.

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. Teva®, Simple® and UGG® are registered trademarks of Deckers Outdoor Corporation.

This news release contains statements regarding our expectations, beliefs and views about our future financial performance which are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as “believe,”"expect,”"anticipate,”"intend,”"plan,”"estimate,”"project,” or future or conditional verbs such as “will,”"would,”"should,”"could,” or “may” or by the fact that such statements relate to future, and not just historical, events or circumstances, including statements related to anticipated revenues, expenses, earnings, operating cash flows, the outlook for the Company’s markets and the demand for its products. The forward-looking statements in this news release regarding our future financial performance are based on currently available information as of the date of this release, and because our business is subject to a number of risks and uncertainties, actual operating results in the future may differ significantly from the future financial performance expected at the current time. Those risks and uncertainties include, among others: our ability to anticipate fashion trends, consumer demand or inventory needs; whether the UGG brand will continue to grow at the same rate it has experienced in the recent past; shortages or price fluctuations of raw materials that could interrupt product manufacturing and increase product costs; our ability to implement our growth strategy; the success of our customers and the risk of losing one or more of our key customers; our ability to develop and protect our brands and intellectual property; the risk that counterfeiting can harm our sales or our brand image; our dependence on independent manufacturers to supply our products; the risk that retailers could postpone or cancel existing orders; unpredictable events and circumstances and currency risks related to our international operations; the risk of losing key personnel; and the sensitivity of our sales to seasonal and weather conditions. Certain of these risks and uncertainties, as well as others, are more fully described under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 which we filed with the Securities and Exchange Commission on March 16, 2007. Readers are cautioned not to place undue reliance on forward-looking statements contained in this news release, which speak only as of the date of this release. The Company undertakes no obligation to publicly release or update the results of any revisions to forward-looking statements, which may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The risks and uncertainties highlighted herein should not be assumed to be the only items that could affect the future performance of the Company.

DECKERS OUTDOOR CORPORATION

AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)

 

 

March 31,

December 31,

Assets

2007 

2006 

 

Current assets:

Cash and cash equivalents

$

25,553 

34,255 

Short-term investments

84,234 

64,637 

Trade accounts receivable, net

36,400 

49,571 

Inventories

34,157 

32,375 

Prepaid expenses and other current assets

2,447 

2,199 

Deferred tax assets

4,386 

4,386 

Total current assets

187,177 

187,423 

 

Restricted cash

1,000 

—- 

Property and equipment, at cost, net

8,224 

7,770 

Intangible assets, less applicable amortization

54,322 

54,399 

Deferred tax assets

327 

327 

Other assets

53 

54 

 

$

251,103 

249,973 

 

Liabilities and Stockholders’ Equity

 

Current liabilities:

Trade accounts payable

$

15,279 

21,053 

Accrued expenses

5,064 

7,204 

Income taxes payable

5,492 

7,478 

Total current liabilities

25,835 

35,735 

 

Stockholders’ equity:

Common stock

126 

126 

Additional paid-in capital

82,967 

81,761 

Retained earnings

141,656 

131,958 

Accumulated other comprehensive income

519 

393 

Total stockholders’ equity

225,268 

214,238 

 

$

251,103 

249,973 

DECKERS OUTDOOR CORPORATION

AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Unaudited)

(Amounts in thousands, except for per share data)

 

 

Three-month period ended

March 31,

2007 

2006 

 

Net sales

$

 

72,575 

56,004 

Cost of sales

39,054 

31,304 

Gross profit

33,521 

24,700 

 

Selling, general and administrative expenses

18,345 

15,786 

Income from operations

15,176 

8,914 

 

Other (income) expense

Interest, net

(989)

(580)

Other

1 

– - - 

Income before income taxes

16,164 

9,494 

 

Income taxes

6,466 

3,845 

 

Net income

$

 

9,698 

5,649 

 

Net income per share:

Basic

$

 

0.77 

0.45 

Diluted

0.75 

0.44 

 

Weighted-average shares:

Basic

12,595 

12,468 

Diluted

12,932 

12,763