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Press release from Business Wire

Deckers Outdoor Corporation Reports Record Third Quarter Financial Results

<p class=' bwalignc'> <b>Company Reports Third Quarter Sales Increased 21.7% to a Record of $277.9 Million</b> </p> <p class=' bwalignc'> <b>Third Quarter Diluted EPS Increased 24.4% to a Record $1.07 on a Post-Split Basis, Compared to Diluted EPS of $0.86 a Year Ago on a Post-Split Basis</b> </p> <p class=' bwalignc'> <b>Company Raises 2010 Sales and Earnings Outlook</b> </p>

Thursday, October 28, 2010

Deckers Outdoor Corporation Reports Record Third Quarter Financial Results16:00 EDT Thursday, October 28, 2010 GOLETA, Calif. (Business Wire) -- Deckers Outdoor Corporation (NASDAQGS: DECK) today announced financial results for the third quarter ended September 30, 2010. Third Quarter Highlights Net sales increased 21.7% to $277.9 million versus $228.4 million last year. Gross margin improved 420 basis points to 47.1% versus 42.9% a year ago. Diluted EPS increased 24.4% to $1.07 compared to $0.86 a year ago. The Company completed a three-for-one stock split, in the form of a stock dividend paid on July 2, 2010. All share and per share data in this release and accompanying tables have been adjusted to reflect the impact of such split for all periods presented. UGG® brand sales increased 20.2 % to $255.8 million versus $212.8 million last year. Teva® brand sales increased 51.7% to $13.7 million compared to $9.0 million a year ago. International sales increased 48.2% to $73.2 million versus $49.4 million last year. Retail sales increased 63.3% to $20.2 million compared to $12.3 million last year; same store sales rose 17.9%. Angel Martinez, President, Chief Executive Officer and Chairman of the Board of Directors, stated: “The strong performance of our new fall lines helped fuel sales gains across each of our distribution channels and geographic regions compared to the third quarter of last year. We continue to successfully expand the UGG brand's market share by developing more compelling products including boots, casuals and sneakers that target a wider consumer audience. The global response to our fall collection has been very encouraging, with sell-through rates accelerating as we've moved into the fourth quarter. At the same time, the strong momentum the Teva brand experienced during the first half of the year is carrying over into the second half. This was driven by increased shipments of our fall collection, led by an expanded offering of closed toe products coupled with strong in-season demand for our sandal assortment. We are encouraged by the current trends in our business and believe we are well positioned for a very good holiday selling season.” Division SummaryUGG® Brand UGG brand net sales for the third quarter increased 20.2% to $255.8 million compared to $212.8 million for the same period last year. The sales gain was primarily attributable to an increase in global shipments of fall product versus the same period a year ago, coupled with strong sales of the fall line at company owned retail stores. Teva® Brand Teva brand net sales increased 51.7% to $13.7 million for the third quarter compared to $9.0 million for the same period last year. The increase in sales was driven by higher reorders of the expanded spring line of open and closed toe footwear in the third quarter compared with the year ago period, an increase in domestic shipments of the fall line, as well as from the Company assuming control of direct distribution in the Benelux region. Other Brands Combined net sales of the Company's other brands increased 26.5% to $8.4 million for the third quarter compared to $6.6 million for the same period last year. The increase in sales was driven by an increase in domestic shipments of fall product. eCommerce Sales for the eCommerce business, which are included in the brand sales numbers above, increased 3.8% to $8.7 million for the third quarter compared to $8.4 million for the same period last year. Retail Stores Sales for the retail store business, which are included in the brand sales numbers above, increased 63.3% to $20.2 million for the third quarter compared to $12.3 million for the same period last year, driven by eight new stores that opened since September 30, 2009 and a same store sales increase of 17.9% for those stores that were open for the full three month periods ended September 30, 2009 and 2010. Share Repurchases During the third quarter, the Company repurchased approximately 170,000 shares of its common stock under its stock repurchase program for a total of approximately $7.4 million. As of September 30, 2010, the Company had approximately $20 million authorized repurchase funds remaining under its $50 million stock repurchase program announced in June 2009. Depending on market conditions and other factors, such purchases may be commenced or suspended at any time without prior notice. Full-Year 2010 Outlook Based on better than expected third quarter results combined with higher projected sales for the UGG and Teva brands, the Company is raising its full-year outlook. The Company now expects its full-year revenue to increase approximately 16% over 2009 levels, compared to previous guidance of approximately 14%. The Company now expects its full-year diluted earnings per share to increase approximately 22% over the non-GAAP diluted EPS of $2.98 in 2009, compared to previous guidance of approximately 16%. This guidance assumes a gross profit margin of approximately 49% and SG&A as a percentage of sales of approximately 25%. The non-GAAP diluted EPS of $2.98 in 2009 has been adjusted to reflect the three-for-one stock split, in the form of a stock dividend, that was distributed in July 2010, and excluded pre-tax non-cash impairment charges of $1.0 million, or $0.02 per diluted share, as discussed in the related earnings release. Fiscal 2010 guidance includes a reduction of net income of approximately $8.0 million pre-tax, with a diluted EPS impact of approximately $0.13, resulting from estimates of incremental expenses associated with the continuing transition to wholesale sales for the Teva brand in the Benelux region and France, and incremental expenses and a shift in sales from 2010 to 2011 associated with the expected transitions in January 2011 to wholesale sales for the UGG, Teva and Simple brands in the United Kingdom as well as the UGG and Simple brands in the Benelux region and France. Fiscal 2010 guidance also assumes an effective tax rate of 36.8% compared to 36.2% in 2009 due to the impact on international income from the aforementioned incremental expenses and shift in profit. Fourth Quarter Outlook The Company reiterated its outlook for both the fourth quarter 2010 revenue and diluted EPS to increase approximately 8% over 2009 levels. This guidance includes incremental expenses and a shift in sales from 2010 to 2011 associated with the upcoming transitions described above and assumes a gross profit margin of approximately 52% and SG&A as a percentage of sales of approximately 21%. The Company's conference call to review third quarter fiscal 2010 results will be broadcast live over the internet today, Thursday, October 28, 2010 at 4:30 pm Eastern Time. The broadcast will be hosted at www.deckers.com and www.earnings.com. Deckers Outdoor Corporation strives to be a premier lifestyle marketer that builds niche brands into global market leaders by designing and marketing innovative, functional and fashion-oriented footwear developed for both high performance outdoor activities and everyday casual lifestyle use. Teva®, Simple® Shoes, UGG® Australia, TSUBO®, and Ahnu® 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” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, some of which may be beyond our control, actual operating results in the future may differ materially from the future financial performance expected at the current time. In addition, the results reported in this release may differ from actual results filed with the Securities and Exchange Commission (SEC) for the quarter ended September 30, 2010 if material events or circumstances occur between now and our SEC filing. Those risks and uncertainties include, among others: the continued decline of the global economy; the ability to realize returns on our new and existing retail stores; our ability to anticipate fashion trends; a decline in wholesaler, distributer, or direct consumer demand or inventory needs; impairment charges related to a decline in the value of our brands' intangible assets below their carrying values; shortages or price fluctuations of raw materials that could interrupt product manufacturing and increase product costs; increased costs of manufacturing in China and actions by the Chinese government; currency fluctuations; our ability to implement our growth strategy; the success of our customers, their ability to perform and obtain credit in an adverse economic environment and the risk of losing one or more of our key customers; our ability to develop and adequately 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 and store our products; the risk that retailers could postpone or cancel existing orders; unpredictable events and circumstances and currency risks related to our international operations; volatile credit and equity markets; liquidity and market risks for our cash equivalents and short-term investments; the risk of losing key personnel or the interruption of key information technology systems; a delay, increase in cost, or interruption in the delivery of merchandise to our customers; the sensitivity of our sales to seasonal and weather conditions; and we could be subject to additional income tax liabilities. 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, 2009, which the Company filed with the SEC on March 1, 2010, and under “Risk Factors” in any subsequent filings with the SEC. 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 or valuation of the Company.   DECKERS OUTDOOR CORPORATIONAND SUBSIDIARIESCondensed Consolidated Balance Sheets(Unaudited)(Amounts in thousands)               September 30,December 31,Assets20102009   Current assets: Cash and cash equivalents $ 250,536 315,862 Restricted cash 200 300 Short-term investments - 26,120 Trade accounts receivable, net 142,232 76,427 Inventories 197,313 85,356 Prepaid expenses and other current assets 7,921 7,210 Deferred tax assets 9,712 9,712 Total current assets 607,914 520,987   Restricted cash 200 400 Property and equipment, at cost, net 42,907 35,442 Intangible assets, net 25,239 23,940 Deferred tax assets 16,704 16,704 Other assets 4,214 1,570   Total assets $ 697,178 599,043   Liabilities and Stockholders' Equity   Current liabilities: Trade accounts payable $ 73,202 47,331 Accrued payroll 20,575 20,869 Other accrued expenses 9,879 12,985 Income taxes payable 23,109 19,685 Total current liabilities 126,765 100,870   Long-term liabilities 8,091 6,269   Stockholders' equity: Deckers Outdoor Corporation stockholders' equity: Common stock 385 129 Additional paid-in capital 136,971 125,431 Retained earnings 424,228 365,304 Accumulated other comprehensive income 174 494 Total Deckers Outdoor Corporation stockholders' equity 561,758 491,358 Noncontrolling interest 564 546 Total equity 562,322 491,904   Total liabilities and equity $ 697,178 599,043   DECKERS OUTDOOR CORPORATIONAND SUBSIDIARIESCondensed Consolidated Statements of Income(Unaudited)(Amounts in thousands, except for per share data)           Three-month period endedNine-month period endedSeptember 30,September 30,2010200920102009   Net sales $ 277,879 228,414 570,865 465,188 Cost of sales 146,926 130,463 301,262   267,539 Gross profit 130,953 97,951 269,603 197,649   Selling, general and administrative expenses 64,639 44,871 161,252 121,018 Impairment loss - - -   1,000 Income from operations 66,314 53,080 108,351 75,631   Other income, net 213 105 775   1,942 Income before income taxes 66,527 53,185 109,126 77,573   Income tax expense 24,555 19,434 40,104   28,702   Net income 41,972 33,751 69,022 48,871 Net loss (income) attributable to the noncontrolling interest 171 74 (18 ) 173   Net income attributable to Deckers Outdoor Corporation $ 42,143 33,825 69,004   49,044   Net income per share attributable to Deckers Outdoor Corporation common stockholders: Basic $ 1.09 0.87 1.79 1.25 Diluted $ 1.07 0.86 1.76   1.24   Weighted-average common shares: Basic 38,615 38,928 38,638 39,183 Diluted 39,228 39,210 39,258   39,480   DECKERS OUTDOOR CORPORATIONAND SUBSIDIARIESReconciliation of Non-GAAP Measures(Unaudited)(Amounts in thousands, except for per share data)     Twelve-monthperiod endedDecember 31, 2009GAAP Presentation Net income attributable to Deckers Outdoor Corporation $ 116,786   Net income per share attributable to Deckers Outdoor Corporation common stockholders: Basic $ 2.99 Diluted $ 2.96   Weighted-average shares: Basic 39,024 Diluted 39,393   Reconciliation to Non-GAAP Measures Income before income taxes $ 183,223   Add back impairment charges 1,000   Income before income taxes, excluding impairment charges 184,223   Income tax expense (1) 66,666   Net income excluding impairment charges 117,557   Net income attributable to the noncontrolling interest (133)   Net income excluding impairment charges attributable to Deckers Outdoor Corporation $ 117,424   Net income per share excluding impairment charges attributable to Deckers Outdoor Corporation common stockholders: Basic $ 3.01 Diluted $ 2.98   (1) The non-GAAP income tax expense assumes the same effective tax rate as the GAAP income tax expense for the period presented.   Use of Non-GAAP Financial Measures   To supplement the actual and forecast results in accordance with U.S. generally accepted accounting principles (GAAP), for the applicable period, the Company also used non-GAAP measures of net income and earnings per share, which are adjusted from the GAAP-based results to exclude non-cash impairment charges. This adjustment is not in accordance with or an alternative for GAAP. This adjustment is provided to enhance an overall understanding of the Company's financial performance for the applicable period and is an indicator management uses for planning and forecasting future periods.   The excluded item represents non-cash impairment charges associated with the write-down of the Company's TSUBO trademarks because management does not believe these expenses are indicative of the Company's core business. Even though such items have occurred in the past and may recur in future periods, it is driven by events that are not directly related to the Company's ongoing core business operations. These financial measures are not to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP. Deckers Outdoor CorporationChief Financial OfficerTom George, 805-967-7611orInvestor Relations:ICR, Inc.Brendon Frey, 203-682-8200