-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N+VU229fAqf9zr2sH9W5DzkPYYy6XbK0swup0J+BstsABzcLiv8+yVAwq8CUJPBg jP/EfNTtzx4L7ogjKcI7NA== 0000910521-96-000010.txt : 19960823 0000910521-96-000010.hdr.sgml : 19960823 ACCESSION NUMBER: 0000910521-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960807 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DECKERS OUTDOOR CORP CENTRAL INDEX KEY: 0000910521 STANDARD INDUSTRIAL CLASSIFICATION: 3021 IRS NUMBER: 770346633 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22446 FILM NUMBER: 96604680 BUSINESS ADDRESS: STREET 1: P O BOX 5022 CITY: CARPINTERIA STATE: CA ZIP: 93013 BUSINESS PHONE: 8056847722 FORMER COMPANY: FORMER CONFORMED NAME: DECKERS FOOTWEAR CORP DATE OF NAME CHANGE: 19930811 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark one) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File Number 0-22446 DECKERS OUTDOOR CORPORATION - - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 95-3015862 - - ------------------------------------------------------------------------------ (State or other jurisdiction of IRS Employer Identification incorporation or organization) 1140 MARK AVENUE, CARPINTERIA, CALIFORNIA 93013 - - ------------------------------------------------------------------------------ (Address of principal executive offices) (zip code) Registrant's telephone number, including area code (805) 684-7722 ---------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- ------- The number of shares outstanding of Registrant's Common Stock, par value $.01 on July 31, 1996 was 9,254,131. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Table of Contents PAGE Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 1 Condensed Consolidated Statements of Earnings for the Three-Month Period Ended June 30, 1996 and 1995 2 Condensed Consolidated Statements of Earnings for the Six-Month Period Ended June 30, 1996 and 1995 3 Condensed Consolidated Statements of Cash Flows for the Six-Month Period Ended June 30, 1996 and 1995 4-5 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 Part II. Other Information Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signature 13 DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited)
ASSETS June 30, December 31, 1996 1995 ------------ ------------ Current assets: Cash and cash equivalents $ 6,154,000 3,222,000 Trade accounts receivable, less allowance for doubtful accounts of $2,517,000 and $2,625,000 as of June 30, 1996 and December 31, 1995, respectively 21,010,000 19,716,000 Inventories 16,103,000 19,556,000 Prepaid expenses and other current assets 1,816,000 2,542,000 Refundable income taxes 213,000 2,969,000 Deferred tax assets 2,026,000 2,026,000 ------------ ------------ Total current assets 47,322,000 50,031,000 Property and equipment, at cost, net 2,955,000 3,273,000 Intangible assets, less applicable amortization 19,295,000 16,907,000 Note receivable from supplier 2,932,000 2,839,000 Other assets, net 1,142,000 1,867,000 ------------ ------------ $ 73,646,000 74,917,000 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 1,054,000 ---- Current maturities of long-term debt 118,000 111,000 Trade accounts payable 2,545,000 3,020,000 Accrued expenses 3,680,000 3,131,000 Income taxes payable 860,000 ---- ------------ ------------ Total current liabilities 8,257,000 6,262,000 ------------ ------------ Long-term debt, less current maturities 9,341,000 15,170,000 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value. Authorized 5,000,000 shares; none issued ---- ---- Common stock, $.01 par value. Authorized 20,000,000 shares; issued and outstanding 9,254,131 and 9,242,375 shares at June 30, 1996 and December 31, 1995, respectively 93,000 92,000 Additional paid-in capital 28,999,000 28,940,000 Retained earnings 26,956,000 24,453,000 ------------ ------------ Total stockholders' equity 56,048,000 53,485,000 ------------ ------------ $ 73,646,000 74,917,000 ------------ ------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (Unaudited)
Three-month period ended June 30 -------------------------- 1996 1995 ------------ ------------ Net sales $ 27,550,000 21,781,000 Cost of sales 16,455,000 12,718,000 ------------ ------------ Gross profit 11,095,000 9,063,000 Selling, general and administrative expenses 8,540,000 7,090,000 ------------ ------------ Earnings from operations 2,555,000 1,973,000 Other expense (income): Interest expense, net 226,000 68,000 Minority interest in net loss of subsidiary (18,000) ---- Loss on disposal of property, plant and equipment 349,000 ---- Miscellaneous expense (income) 151,000 (35,000) ------------ ------------ Earnings before income taxes 1,847,000 1,940,000 Income taxes 823,000 805,000 ------------ ------------ Net earnings $ 1,024,000 1,135,000 ------------ ------------ ------------ ------------ Net earnings per common and common equivalent shares $ 0.11 0.12 ------------ ------------ ------------ ------------ Weighted average common and common equivalent shares outstanding 9,325,000 9,285,000 ------------ ------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (Unaudited)
Six-month period ended June 30 -------------------------- 1996 1995 ------------ ------------ Net sales $ 56,322,000 57,864,000 Cost of sales 32,637,000 31,339,000 ------------ ------------ Gross profit 23,685,000 26,525,000 Selling, general and administrative expenses 18,389,000 16,462,000 ------------ ------------ Earnings from operations 5,296,000 10,063,000 Other expense (income): Interest expense, net 508,000 15,000 Minority interest in net loss of subsidiary (81,000) ---- Loss on disposal of property, plant and equipment 349,000 ---- Miscellaneous expense 3,000 52,000 ------------ ------------ Earnings before income taxes 4,517,000 9,996,000 Income taxes 2,014,000 4,148,000 ------------ ------------ Net earnings $ 2,503,000 5,848,000 ------------ ------------ ------------ ------------ Net earnings per common and common equivalent shares $ 0.27 0.62 ------------ ------------ ------------ ------------ Weighted average common and common equivalent shares outstanding 9,306,000 9,447,000 ------------ ------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited)
Six-month period ended June 30 -------------------------- 1996 1995 ------------ ------------ Cash flows from operating activities: Net earnings $ 2,503,000 5,848,000 ------------ ------------ Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 974,000 684,000 Provision for doubtful accounts 985,000 296,000 Stock compensation ---- 17,000 Minority interest in net loss of subsidiary (81,000) ---- Loss on disposal of property, plant and equipment 349,000 ---- Changes in assets and liabilities (Increase) decrease in: Trade accounts receivable (2,279,000) (7,940,000) Inventories 3,453,000 5,526,000 Prepaid expenses and other current assets 726,000 (300,000) Note receivable from supplier (93,000) (645,000) Refundable income taxes 2,756,000 ---- Other assets 350,000 (178,000) Increase (decrease) in: Accounts payable (475,000) (264,000) Accrued expenses 630,000 427,000 Income taxes payable 860,000 (1,514,0000) ------------ ------------ Total adjustments 8,155,000 (3,891,000) ------------ ------------ Net cash provided by operating activities 10,658,000 1,957,000 ------------ ------------ Cash flows from investing activities: Purchase of property, plant and equipment (595,000) (1,062,000) Payment for acquisition of Ugg (495,000) ---- Net proceeds from the sale of short-term investments ---- 4,850,000 Cash paid for purchase of Alp assets ---- (10,000) Other (192,000) ---- ------------ ------------ Net cash provided by (used in) investing activities (1,282,000) 3,778,000 ------------ ------------
(Continued) DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows, Continued (Unaudited)
Six-month period ended June 30 -------------------------- 1996 1995 ----------- ------------ Cash flows from financing activities: Cash received from borrowings under credit facility $ 1,750,000 8,500,000 Repayments of notes payable and long-term debt (7,572,000) (7,142,000) Proceeds from issuances of common stock 60,000 12,000 Repurchase of common stock ---- (4,900,000) Cash paid for repurchase of outstanding stock options in a subsidiary (725,000) ---- Other 43,000 (3,000,000) ------------ ------------ Net cash used in financing activities (6,444,000) (6,530,000) ------------ ------------ Net increase (decrease) in cash and cash equivalents 2,932,000 (795,000) Cash and cash equivalents at beginning of period 3,222,000 2,872,000 ------------ ------------ Cash and cash equivalents at end of period $ 6,154,000 2,077,000 ------------ ------------ ------------ ------------ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 524,000 103,000 Income taxes 183,000 4,132,000 ------------ ------------ ------------ ------------
Supplemental disclosure of noncash investing and financing activities: In connection with the repurchase of outstanding stock options of a subsidiary from the Founder of the subsidiary during the six-month period ended June 30, 1996, the Company gave consideration of $2,111,000, consisting of $725,000 of cash, notes payable to the Founder (net of imputed interest) aggregating $1,011,000 and the forgiveness of a $375,000 note receivable from the Founder. The Company allocated the entire purchase price to goodwill. In connection with the acquisition of substantially all of the assets of Alp Sport Sandals during the six-month period ended June 30, 1995, the Company acquired net assets aggregating $1,258,000 for cash consideration and $1,066,000 of indebtedness. See accompanying notes to condensed consolidated financial statements. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (1) GENERAL The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation for each of the periods presented. The results of operations for interim periods are not necessarily indicative of results to be achieved for full fiscal years. As contemplated by the Securities and Exchange Commission (SEC) under Rule 10-01 of Regulation S-X, the accompanying consolidated financial statements and related footnotes have been condensed and do not contain certain information that will be included in the Company's annual consolidated financial statements and footnotes thereto. For further information, refer to the consolidated financial statements and related footnotes for the year ended December 31, 1995 included in the Company's Annual Report on Form 10-K. (2) EARNINGS PER SHARE Net earnings per share is based on the weighted average number of common and common equivalent shares outstanding. Common stock equivalents represent the number of shares which would be issued assuming the exercise of common stock options and reduced by the number of shares which could be purchased with the proceeds from the exercise of those options. Fully diluted net earnings per share are not presented since the amounts do not differ significantly from the primary net earnings per share presented. (3) INVENTORY Inventory at June 30, 1996 and December 31, 1995 is summarized as follows:
June 30, December 31, 1996 1995 -------------- ---------------- Raw materials $ 1,800,000 1,892,000 Work in process 1,055,000 1,379,000 Finished goods 13,248,000 16,285,000 -------------- ---------------- Total inventory $ 16,103,000 19,556,000 -------------- ---------------- -------------- ----------------
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements, Continued (Unaudited) (4) INCOME TAXES Income taxes for the interim periods were computed using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management. (5) REPURCHASE OF STOCK OPTIONS In connection with the acquisition of Simple Shoes, Inc. ("Simple") in 1993, the founder and President of Simple (the "Founder") retained an option to acquire up to a 10% interest in Simple. On April 4, 1996, the Company entered into an agreement, effective January 1, 1996, to reacquire such option from the Founder for $2,500,000, less the $300,000 exercise price of the option. The Company made the first installment payment in April 1996 and the remaining non-interest bearing installment of $1,100,000 is due January 1, 1997. The Company allocated the entire purchase price to goodwill, which is being amortized over the remaining 18 year life of the goodwill. (6) STOCK-BASED COMPENSATION Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS 123), which was issued in October 1995. This statement encourages, but does not require, a fair value based method of accounting for employee stock options or similar equity instruments. FAS 123 allows an entity to elect to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APBO No. 25), but requires pro forma disclosures of net earnings and earnings per share as if the fair value based method of accounting had been applied. The Company has elected to continue to measure compensation cost under APBO No. 25, "Accounting for Stock Issued to Employees," and will comply with the pro forma disclosure requirements in its December 31, 1996 Annual Report on Form 10-K. The adoption of FAS 123 had no impact on the Company's financial position or results of operations. (7) IMPAIRMENT OF LONG-LIVED ASSETS Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which was issued in March 1995. This statement establishes accounting standards for the recognition and measurement of impairment of long-lived assets, certain identifiable intangibles and goodwill either to be held or disposed of. The adoption of FAS 121 did not have a material impact on the Company's financial position or results of operations. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995 Net sales increased by $5,769,000 or 26.5% between the three months ended June 30, 1996 and 1995. In the second quarter of 1995, the Company's Teva registered trademark line was adversely impacted by the poor overall retail markets and an abundance of sport sandals in the marketplace. However, in the second quarter of 1996, the Company experienced increased demand from retailers for its Teva registered trademark line as the retailers began to clear out their excess sport sandal inventories and as the competition for the Company's sport sandals declined. As a result, sales of the Teva registered trademark line increased from $15,526,000 for the three months ended June 30, 1995 to $17,414,000 for the three months ended June 30, 1996, a 12.2% increase. Sales of Teva registered trademark products represented 71.3% and 63.2% of net sales in the three months ended June 30, 1995 and 1996, respectively. In addition,the Company experienced a continued increase in the net sales of footwear under the Simple registered trademark product line, which increased 73.1%, from $5,282,000 to $9,141,000 between the three months ended June 30, 1995 and 1996. Overall, international sales for all of the Company's products increased 18.9% from $4,054,000 to $4,821,000, representing 18.6% of net sales in 1995 and 17.5% in 1996. The combination of these factors lead to an increase in the volume of footwear sold, which increased from 789,000 pairs during the three months ended June 30, 1995 to 1,110,000 pairs during the three months ended June 30, 1996, a 40.7% increase. The weighted average wholesale price per pair sold during these respective periods decreased from $28.07 to $25.08, or by 10.7%. The decrease in the average wholesale price reflects the continued sale of the remaining 1995 Teva registered trademark sport sandals at discounted prices, which selling prices approximated the carrying value of the inventory. In addition, the Company reduced the prices of certain Teva registered trademark styles since the second quarter of 1995 in order to promote a more even distribution of price points between the high and low points. The Company believes that having such an even price point distribution will place one or more styles at each desired price level. Cost of sales increased by $3,737,000 to $16,455,000 for the three months ended June 30, 1996, compared with $12,718,000 for the three months ended June 30, 1995, an increase of 29.4%. Gross profit increased by $2,032,000, or 22.4%, to $11,095,000 for the three months ended June 30, 1996 from $9,063,000 for the three months ended June 30, 1995 and decreased as a percentage of net sales to 40.3% from 41.6%. The decrease in gross profit margin as a percentage of net sales was primarily due to the sale of 1995 closeout inventory at discounted prices as well as the reduction in prices on certain Teva registered trademark styles for the 1996 season, as discussed above. Selling, general and administrative expenses increased by $1,450,000, or 20.5%, between the three months ended June 30, 1995 and June 30, 1996, but decreased as a percentage of net sales from 32.6% in 1995 to 31.0% in 1996. The increase was primarily due to the addition of the operations of Ugg Holdings, Inc.; increased sales commissions resulting from the increase in net sales; and increased payroll costs. The decrease as a percentage of net sales occurred as certain selling, general and administrative expenses include certain fixed costs and, therefore, total selling, general and administrative expenses do not fluctuate proportionately with changes in sales volume. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Income taxes were $823,000 for the three months ended June 30, 1996, representing an effective income tax rate of 44.6%, compared with income taxes of $805,000 for the three months ended June 30, 1995, representing an effective income tax rate of 41.5%. The increase in the effective income tax rate from 1995 to 1996 is largely a result of the goodwill associated with the acquisition of Ugg Holdings, Inc. which is not deductible for income tax reporting purposes. In addition, the Company experienced non-deductible losses at certain subsidiaries which are consolidated for financial reporting purposes but which are not consolidated for income tax reporting purposes. The Company had net earnings of $1,024,000 for the three months ended June 30, 1996 as compared with net earnings of $1,135,000 for the three months ended June 30, 1995, a decrease of 9.8%, for the reasons discussed above. SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 Net sales decreased by $1,542,000 or 2.7% between the six months ended June 30, 1996 and 1995. Although the first quarter of 1995 had been the best quarter ever for sales of the Company's Teva registered trademark line, in the first quarter of 1996 the Company continued to be impacted by the poor overall retail markets and the abundance of sport sandals in the marketplace which had begun in the second quarter of 1995. This decline in Teva registered trademark line sales for the first quarter of 1996 in comparison to the first quarter of 1995 was partially offset by the increased Teva registered trademark line sales in the second quarter in comparison to the second quarter of last year; as previously discussed. As a result, net sales of the Teva registered trademark line decreased from $45,729,000 for the six months ended June 30, 1995 to $36,014,000 for the six months ended June 30, 1996, a 21.2% decrease. Sales of Teva registered trademark line products represented 79.0% and 63.9% of net sales in the six months ended June 30, 1995 and 1996, respectively. While Teva registered trademark line sales declined in comparison to the prior year period, the Company experienced a continued increase in the net sales of footwear under the Simple registered trademark product line, which increased 70.4%, from $10,050,000 to $17,124,000 between the six months ended June 30, 1995 and 1996. Overall, international sales for all of the Company's products increased 41.6% from $9,788,000 to $13,856,000,representing 16.9% of net sales in 1995 and 24.6% in 1996. The combination of these factors lead to a net increase in the volume of footwear sold, which increased from 2,052,000 pairs during the six months ended June 30, 1995 to 2,217,000 pairs during the six months ended June 30, 1996, an 8.0% increase. The weighted average wholesale price per pair sold during these respective periods decreased from $28.84 to $25.74, or by 10.7%. The decrease in the average wholesale price reflects the continued sale of the remaining 1995 Teva registered trademark line sport sandals at discounted prices, which selling prices approximated the carrying value of the inventory. In addition, the Company reduced the prices of certain Teva registered trademark line styles since the six months ended June 30, 1995, in order to promote a more even distribution of price points between the high and low points. The Company believes that having such an even price point distribution will place one or more styles at each desired price level. Cost of sales increased by $1,298,000 to $32,637,000 for the six months ended June 30, 1996, compared with $31,339,000 for the six months ended June 30, 1995, an increase of 4.1%. Gross profit decreased by $2,840,000, or 10.7%, to $23,685,000 for the six months ended June 30, 1996 from $26,525,000 for the six months ended June 30, 1995 and decreased as a percentage of net sales to 42.1% from 45.8% The decrease in gross profit margin as a percentage of net sales was primarily due to the sale of 1995 closeout inventory at discounted prices as well as the reduction in prices on certain Teva registered trademark line styles for the 1996 season, as discussed above. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Selling, general and administrative expenses increased by $1,927,000, or 11.7%, between the six months ended June 30, 1995 and June 30, 1996 and increased as a percentage of net sales from 28.4% in 1995 to 32.6% in 1996. The increase was primarily due to an increase in the reserve for potential uncollectable receivables; the addition of the operations of Ugg Holdings, Inc.; and increased payroll costs. The increase as a percentage of net sales also occurred as certain selling, general and administrative expenses include certain fixed costs and, therefore, total selling, general and administrative expenses do not fluctuate proportionately with changes in sales volume. Income taxes were $2,014,000 for the six months ended June 30, 1996, representing an effective income tax rate of 44.6%, compared with income taxes of $4,148,000 for the six months ended June 30, 1995, representing an effective income tax rate of 41.5%. The increase in the effective income tax rate from 1995 to 1996 is largely a result of the goodwill associated with the acquisition of Ugg Holdings, Inc. which is not deductible for income tax reporting purposes. In addition, the Company experienced non-deductible losses at certain subsidiaries which are consolidated for financial reporting purposes but which are not consolidated for income tax reporting purposes. The Company had net earnings of $2,503,000 for the six months ended June 30, 1996 as compared with net earnings of $5,848,000 for the six months ended June 30, 1995, a decrease of 57.2%, for the reasons discussed above. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, working capital was $39,065,000 including $6,154,000 of cash and cash equivalents. Cash provided by operating activities aggregated $10,658,000 for the six months ended June 30, 1996. The Company has a revolving credit facility with a bank (the "Facility"), providing a maximum borrowing availability of $25,000,000 based on certain eligible assets, as defined. The Facility can be used for working capital and general corporate purposes and expires August 1, 2000. Borrowings bear interest at the bank's prime rate (8.25% at June 30, 1996) plus up to 0.25%, depending on whether the Company satisfies certain financial ratios. Alternatively, the Company may elect to have borrowings bear interest at LIBOR plus 1.5% to 1.75%, depending on whether the Company satisfies such financial ratios. Up to $7,000,000 of borrowings may be in the form of letters of credit. The Facility is secured by substantially all assets of the Company. As of June 30, 1996, the Company had $8,000,000 in borrowings outstanding under the Facility. The agreement underlying the Facility includes certain restrictive covenants which, among other things, require the Company to maintain certain financial tests. The Company was in compliance with all requirements as of June 30, 1996. The Company has an agreement with a supplier to provide financing for the initial start-up and the expansion of the supplier's operations, as well as for working capital needs. At June 30, 1996, $2,932,000 was outstanding. The note is secured by all assets of the supplier and bears interest at the prime rate (8.25% at June 30, 1996) plus 1%. Capital expenditures totaled $595,000 for the six months ended June 30, 1996. The Company's capital expenditures related primarily to the purchase of production molds, machinery and equipment, the continued expansion of the Company's facilities and upgrades to the Company's computer systems. The Company currently has no material future commitments for capital expenditures. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES In connection with the acquisition of Ugg Holdings, Inc. in 1995, the Company is required to make payments to the former shareholders equal to 2 1/2% of net sales of Ugg Holdings, Inc. for the years ending March 31, 1996 through March 31, 2000, an amount equal to earnings before income taxes of Ugg Holdings, Inc., as adjusted for certain items, for the year ended March 31, 1996 and an additional $500,000 payment in March 2000. In May 1996, the Company made a $495,000 payment to the former shareholders related to its required payments for the year ended March 31, 1996. The Company allocated the entire payment amount to goodwill, which is being amortized over the remaining 29 year life of the goodwill. The Company believes that internally generated funds, the available borrowings under its existing credit facilities and the cash on hand will provide sufficient liquidity to enable it to meet its current and foreseeable working capital requirements. SEASONALITY Financial results for the outdoor and footwear industries are generally seasonal. Based on the Company's historical product mix, the Company would expect greater sales in the first and second quarters than in the third and fourth quarters. However, the Company anticipates that the recent acquisition of Ugg Holdings, Inc., the expansion of the Simple product sales and the acquisition of a 50% interest in Trukke Winter Sports Products, Inc., which are counterseasonal to the Company's sport sandal line, will help reduce the impact of seasonality. OTHER The Company believes that the relatively moderate rates of inflation in recent years have not had a significant impact on its net sales or profitability. DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Part II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. Not applicable Item 2. CHANGES IN SECURITIES. Not applicable Item 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On May 20, 1996, the Company held its Annual Meeting of Stockholders. At the meeting, Douglas B. Otto and Gene E. Burleson were each re-elected as Class III directors until the Annual Meeting of Stockholders to be held in 1999, until such director has been duly elected and qualified or until such director has otherwise ceased to serve as a director. For Douglas B. Otto, 8,373,342 votes were cast in favor and 57,254 votes were withheld. For Gene E. Burleson, 8,394,667 votes were cast in favor and 35,929 were withheld. There were no broker non-votes. The stockholders also ratified the selection of KPMG Peat Marwick LLP as the Company's independent auditors. 8,400,253 votes were cast in favor of the ratification; 19,545 were voted against; and 10,798 abstained. There were no broker non-votes. The stockholders also approved the Company's 1995 Employee Stock Purchase Plan. 8,326,255 votes were cast in favor of the approval; 88,726 votes were voted against; and 15,615 votes abstained. There were no broker non-votes. Item 5. OTHER INFORMATION. Not applicable Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) EXHIBITS Exhibit 11.1 Statement of Computation of Earnings per Share. (b) REPORTS ON FORM 8-K. None DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. (REGISTRANT) Deckers Outdoor Corporation BY (SIGNATURE) /S/ Diana M. Wilson (NAME AND TITLE) Diana M. Wilson, Chief Operating and Financial Officer, Vice President and Secretary (Duly Authorized Officer and Principal Financial and Accounting Officer) (DATE) August 6, 1996 EX-11 2 Exhibit 11.1 DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Statement of Computation of Earnings per Share (Unaudited)
THREE-MONTH PERIOD ENDED JUNE 30, ------------------------- 1996 1995 ------------ ---------- Net earnings $ 1,024,000 1,135,000 Less: earnings attributed to holders of stock options in a subsidiary of the Company (assuming exercise) ---- 13,000 ------------ ---------- Net earnings available to common stockholders $ 1,024,000 1,122,000 ------------ ---------- ------------ ---------- Weighted average common stock outstanding 9,247,000 9,242,000 Common stock equivalents - stock options 78,000 43,000 ------------ ---------- 9,325,000 9,285,000 ------------ ---------- ------------ ---------- Net earnings per share $ 0.11 0.12 ------------- ---------- ------------- ---------- SIX-MONTH PERIOD ENDED JUNE 30, ------------------------- 1996 1995 ------------ ---------- Net earnings $ 2,503,000 5,848,000 Less: earnings attributed to holders of stock options in a subsidiary of the Company (assuming exercise) ---- 37,000 ------------ ---------- Net earnings available to common stockholders $ 2,503,000 5,811,000 ------------ ---------- ------------ ---------- Weighted average common stock outstanding 9,245,000 9,405,000 Common stock equivalents - stock options 61,000 42,000 ------------ ---------- 9,306,000 9,447,000 ------------ ---------- ------------ ---------- Net earnings per share $ 0.27 0.62 ------------ ---------- ------------ ----------
EX-27 3
5 This schedule contains summary financial information extracted from the company's unaudited financial statements for the quarter ended June 30, 1996 and is qualified in its entirety by reference to such financial statements. 6-MOS DEC-31-1996 JUN-30-1996 6154000 0 23527000 2517000 16103000 47322000 5113000 2158000 73646000 8257000 9341000 0 0 93000 55955000 73646000 56322000 56322000 32637000 32637000 0 985000 508000 4517000 2014000 2503000 0 0 0 2503000 .27 .27
-----END PRIVACY-ENHANCED MESSAGE-----