Deckers Outdoor Corporation Reports Third Quarter 2013 Financial Results

  Deckers Outdoor Corporation Reports Third Quarter 2013 Financial Results

Business Wire

GOLETA, Calif. -- October 24, 2013

Deckers Outdoor Corporation (NASDAQ:DECK), a global leader in designing,
marketing, and distributing innovative footwear, apparel and accessories,
today announced financial results for the third quarter ended September 30,
2013.

Third Quarter Review

  *Net sales increased 2.7% to $386.7 million compared to $376.4 million for
    the same period last year.
  *Gross margin improved 90 basis points to 43.2% compared to 42.3% for the
    same period last year.
  *SG&A expenses as a percent of net sales were 31.1% compared to 26.5% for
    the same period last year.
  *Diluted earnings per share was $0.95 compared to $1.18 for the same period
    last year.
  *UGG® brand sales increased 1.3% to $337.0 million compared to $332.8
    million for the same period last year.
  *Teva® brand sales increased 0.6% to $18.0 million compared to $17.9
    million for the same period last year.
  *Sanuk® brand sales increased 0.5% to $18.4 million compared to $18.3
    million for the same period last year.
  *Retail sales increased 34.5% to $52.6 million compared to $39.1 million
    for the same period last year; same store sales increased 1.9% for the
    thirteen weeks ending September 29, 2013 compared to the thirteen weeks
    ending September 30, 2012.
  *eCommerce sales increased 12.2% to $14.9 million compared to $13.3 million
    for the same period last year.
  *Domestic sales decreased 1.4% to $238.8 million compared to $242.2 million
    for the same period last year.
  *International sales increased 10.3% to $147.9 million compared to $134.2
    million for the same period last year.

“The UGG brand has shown great resiliency over the past year driven by
innovative new products and advancements in our marketing, merchandising and
selling strategies,” stated Angel Martinez, President, Chief Executive Officer
and Chair of the Board of Directors. “The fall selling season started well led
by demand for our expanded collection of casual shoes and boots. As we move
further into the back half of the year, sell-through of our core Classic and
slipper collections is accelerating. We are pleased with our current business
trends and believe the Company is well positioned for the upcoming holiday
period. More importantly, we believe the investments we are making in our
brands, distribution platforms and supply chain will strengthen our growth
profile and enhance our profitability over the long-term.”

Division Summary

UGG Brand

UGG brand net sales for the third quarter increased 1.3% to $337.0 million
compared to $332.8 million for the same period last year. The increase in
sales was primarily driven by higher global Direct to Consumer sales,
resulting from new store openings and the launch of new eCommerce websites,
partially offset by lower domestic wholesale sales.

Teva Brand

Teva brand net sales for the third quarter increased 0.6% to $18.0 million
compared to $17.9 million for the same period last year. The increase in sales
was driven by higher worldwide wholesale and Direct to Consumer sales,
partially offset by a decrease in international distributor sales.

Sanuk Brand

Sanuk brand net sales for the third quarter increased 0.5% to $18.4 million
compared to $18.3 million for the same period last year. The increase in sales
was driven primarily by gains in worldwide wholesale sales, as well as an
increase in domestic Direct to Consumer sales, offset by a decrease in
distributor sales primarily in the Asia Pacific region, as well as in Canada.

Other Brands

Combined net sales of the Company’s other brands increased 81.3% to $13.3
million for the third quarter compared to $7.3 million for the same period
last year. The increase was primarily attributable to the addition of the HOKA
ONE ONE® brand which was acquired in September 2012.

Retail Stores

Sales for the global retail store business, which are included in the brand
sales numbers above, increased 34.5% to $52.6 million for the third quarter
compared to $39.1 million for the same period last year. This increase was
driven by 37 new stores opened after the third quarter of 2012, and a 1.9%
same store sales increase for the thirteen weeks ended September 29, 2013
compared to the thirteen weeks ending September 30, 2012.

eCommerce

Sales for the global eCommerce business, which are included in the brand sales
numbers above, increased 12.2% to $14.9 million for the third quarter compared
to $13.3 million for the same period last year. The sales increase was driven
primarily by strong international sales for the UGG brand, and the addition of
new international eCommerce websites.

Balance Sheet

At September 30, 2013, cash and cash equivalents were $84.1 million compared
to $61.6 million at September 30, 2012. The Company had $245.5 million in
outstanding borrowings under its credit facility at September 30, 2013 and
$275.0 million at September 30, 2012. The increase in cash and cash
equivalents and decrease in outstanding borrowings are primarily attributable
to improved inventories and cash provided by operations, partially offset by
$75.2 million of cash payments for capital assets primarily related to retail
expansion and the Company’s new headquarters facility, and also $36.0 million
of cash payments for common stock repurchases made in the fourth quarter 2012.

Inventories at September 30, 2013 decreased 8.6% to $444.6 million from $486.2
million at September 30, 2012. By brand, UGG inventory decreased $52.7 million
to $399.1 million at September 30, 2013, Teva inventory increased $2.4 million
to $21.6 million at September 30, 2013, Sanuk inventory increased $3.9 million
to $12.5 million at September 30, 2013, and the other brands’ inventory
increased $4.8 million to $11.4 million at September 30, 2013.

Full-Year 2013 Outlook

Based on results for the third quarter of 2013 which included a tax benefit of
approximately $2 million related to a lower, non-recurring tax rate combined
with current visibility, the Company updated its full year outlook.

  *The Company still expects full year revenues to increase approximately 8%
    over 2012 levels.
  *The Company now expects full year diluted earnings per share to increase
    approximately 10% over 2012 levels, up from its previous projection of
    approximately 8%.

Fourth Quarter Outlook

Based on results for the third quarter of 2013 which included the shift of
certain SG&A expenses into the fourth quarter combined with current
visibility, the Company updated its fourth quarter 2013 outlook.

  *The Company still expects fourth quarter 2013 revenue to increase
    approximately 14.5% over 2012 levels.
  *The Company now expects fourth quarter 2013 diluted earnings per share to
    increase approximately 32% over 2012 levels, compared to its previous
    projection of approximately 38%.

Conference Call Information

The Company’s conference call to review third quarter 2013 results will be
broadcast live over the internet today, Thursday, October 24, 2013 at 4:30 pm
Eastern Time. The broadcast will be hosted at www.deckers.com. You can access
the broadcast by clicking on the “Investors” tab and then clicking on the
microphone icon on the right side of the screen. The broadcast will be
available for at least 30 days following the conference call. You can also
access the broadcast at www.earnings.com.

About the Company

Deckers Outdoor Corporation is a global leader in designing, marketing and
distributing innovative footwear, apparel and accessories developed for both
everyday casual lifestyle use and high performance activities. The Company’s
portfolio of brands includes UGG® Australia, Teva®, Sanuk®, TSUBO®, Ahnu®,
MOZO®, and HOKA ONE ONE®. Deckers Outdoor products are sold in more than 50
countries and territories through select department and specialty stores, 105
Company-owned and operated retail stores, and select online stores, including
Company-owned websites. Celebrating the 40^th anniversary of its founding in
2013, Deckers Outdoor has a history of building niche footwear brands into
lifestyle market leaders attracting millions of loyal consumers globally. For
more information, please visit www.deckers.com.

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of
Section27A of the Securities Act of 1933, as amended, and Section21E of the
Securities Exchange Act of 1934, as amended, that concern matters that involve
risks and uncertainties that could cause actual results to differ materially
from those anticipated or projected in the forward-looking statements. These
forward-looking statements are intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform Act of 1995.
All statements other than statements of historical fact contained in this
press release, including statements regarding our future financial performance
and business strategies, are forward-looking statements. We have attempted to
identify forward-looking statements by using words such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “may,” “project,” “plan,”
“predict,” “should,” “will,” and similar expressions, or the negative of these
expressions, as they relate to us, our management and our industry, to
identify forward-looking statements. We have based our forward-looking
statements on our current expectations and projections about trends affecting
our business and industry and other future events. Although we do not make
forward-looking statements unless we believe we have a reasonable basis for
doing so, we cannot guarantee their accuracy. As a result, actual results may
differ materially from the results stated in or implied by our forward-looking
statements. Some of the risks, uncertainties and assumptions that may cause
actual results to differ from these forward-looking statements include, but
are not limited to: changes in economic or market conditions; the financial
success of our customers and the risk of losing one or more of our key
customers; our ability to adequately protect our intellectual property rights
and deter counterfeiting; the sensitivity of our sales to seasonality and the
effect of weather conditions; the quality and price of raw materials, most
notably sheepskin; our ability to realize returns on our new and existing
retail stores; our ability to accurately forecast consumer demand; our ability
to anticipate fashion trends; our ability to successfully implement our growth
strategies, including enhancing the position of our brands and expanding our
distribution channels; the impairment of our goodwill and other intangible
assets; our dependence on independent manufacturers located outside of the
U.S., and the challenge of maintaining a continuous supply of quality finished
goods; risks of conducting business outside the U.S., including foreign
currency and global liquidity risks; our ability to protect sensitive customer
and company information and prevent the failure or interruption of key
business processes; our ability to attract and retain key personnel; the loss
of our warehouses; the international markets in which we sell our products are
subject to a variety of laws and political and economic risks; risks related
to international trade, import regulations and security procedures, liquidity
and market risks for our cash and cash equivalents; risks associated with our
revolving credit facility, including negative covenants that may restrict our
ability to take certain actions; tax laws applicable to our business are very
complicated and we could be subject to additional income tax liabilities; our
ability to compete effectively with our competition; the effect of existing
and future litigation on our business; and the volatility of the price of our
common stock. Certain of these risks and uncertainties are more fully
described in the section entitled “Risk Factors” in our Annual Report on Form
10-K for the fiscal year ended December 31, 2012, which we filed with the
Securities and Exchange Commission, or the SEC, on March 1, 2013, as well as
in our other filings with the SEC. In addition, actual results may differ as a
result of additional risks and uncertainties of which we are currently unaware
or which we do not currently view as material to our business.

You are cautioned not to place undue reliance on forward-looking statements
contained in this press release, which speak only as of the date of this press
release. You should read this press release with the understanding that our
future results may be materially different from what we currently expect. We
qualify all of our forward-looking statements by these cautionary statements
and we expressly disclaim any intent or obligation to update any
forward-looking statements after the date hereof to conform such statements to
actual results or to changes in our opinions or expectations, except as
required by applicable law or the rules of the NASDAQ Stock Market.


DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
                                                          
                                                                  
                                                September 30,     December 31,
             Assets                             2013              2012
                                                                  
Current assets:
      Cash and cash equivalents               $ 84,107            110,247
      Trade accounts receivable, net            211,981           190,756
      Inventories                               444,595           300,173
      Prepaid expenses                          15,692            14,092
      Other current assets                      71,321            59,028
      Income taxes receivable                   14,194            -
      Deferred tax assets                       17,756            17,290
         Total current assets                   859,646           691,586
                                                                  
Property and equipment, net                     164,412           125,370
Goodwill                                        128,725           128,725
Other intangible assets, net                    90,986            95,965
Deferred tax assets                             13,523            13,372
Other assets                                    18,646            13,046
                                                                  
         Total assets                         $ 1,275,938         1,068,064
                                                                  
             Liabilities and
             Stockholders' Equity
                                                                  
Current liabilities:
      Short-term borrowings                   $ 245,458           33,000
      Trade accounts payable                    144,306           133,457
      Accrued payroll                           27,012            15,896
      Other accrued expenses                    52,652            59,597
      Income taxes payable                      2,762             25,067
         Total current liabilities              472,190           267,017
                                                                  
Long-term liabilities                           47,919            62,246
                                                                  
Stockholders' equity:
   Deckers Outdoor Corporation
   stockholders' equity:
      Common stock                              345               344
      Additional paid-in capital                150,598           139,046
      Retained earnings                         605,603           600,811
      Accumulated other comprehensive           (717)             (1,400)
      loss
         Total stockholders' equity             755,829           738,801
                                                                  
         Total liabilities and equity         $ 1,275,938         1,068,064
                                                                  
                                                                  

DECKERS OUTDOOR CORPORATION

AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands, except for per share data)

                                   Three-month period      Nine-month period
                                  ended                  ended
                                                           September 30,
                                   September 30,
                                   2013      2012        2013      2012
                                                                       
Net sales                        $ 386,725     376,392   $ 820,570     797,134
Cost of sales                      219,833     217,099     460,287     450,974
Gross profit                       166,892     159,293     360,283     346,160
                                                                       
Selling, general and               120,395     99,684      353,885     303,326
administrative expenses
Income from operations             46,497      59,609      6,398       42,834
                                                                       
Other expense (income), net        795         607         1,238       27
Income before income taxes         45,702      59,002      5,160       42,807
                                                                       
Income tax expense                 12,642      15,941      368         11,850
Net income                         33,060      43,061      4,792       30,957
                                                                       
Other comprehensive income
(loss), net of tax
Unrealized loss on foreign         (1,772)     (968)       (452)       (946)
currency hedging
Foreign currency translation       2,898       412         1,135       2,373
adjustment
Total other comprehensive          1,126       (556)       683         1,427
income (loss)
Comprehensive income             $ 34,186      42,505    $ 5,475       32,384
                                                                       
Net income attributable to:
Deckers Outdoor Corporation        33,060      43,061      4,792       30,809
Noncontrolling interest            -           -           -           148
                                 $ 33,060      43,061    $ 4,792       30,957
                                                                       
Comprehensive income
attributable to:
Deckers Outdoor Corporation        34,186      42,505      5,475       32,236
Noncontrolling interest            -           -           -           148
                                 $ 34,186      42,505    $ 5,475       32,384
                                                                       
Net income per share
attributable to Deckers
Outdoor Corporation common
stockholders:
Basic                            $ 0.96        1.19      $ 0.14        0.82
Diluted                          $ 0.95        1.18      $ 0.14        0.81
                                                                       
Weighted-average common shares
outstanding:
Basic                              34,496      36,129      34,451      37,534
Diluted                            34,794      36,577      34,792      37,994

Contact:

Deckers Outdoor Corporation
Linda Pazin, 805-967-7611
Vice President, Investor Relations & Communications
or
ICR
Brendon Frey, 203-682-8200
 
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