-----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, FOoLy69Isn4RawHMGMut+7Re5AIoC02hbWJe0QenRGXGa7dp6W4YK4IYyvC8n3RA X1MxcyXrU8AEP7pzAO3kag== 0001157523-03-005649.txt : 20031022 0001157523-03-005649.hdr.sgml : 20031022 20031022094509 ACCESSION NUMBER: 0001157523-03-005649 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031022 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031022 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DECKERS OUTDOOR CORP CENTRAL INDEX KEY: 0000910521 STANDARD INDUSTRIAL CLASSIFICATION: RUBBER & PLASTICS FOOTWEAR [3021] IRS NUMBER: 953015862 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22446 FILM NUMBER: 03950941 BUSINESS ADDRESS: STREET 1: 495A SOUTH FAIRVIEW AVENUE CITY: GOLETA STATE: CA ZIP: 93117 BUSINESS PHONE: 8059677611 MAIL ADDRESS: STREET 1: 495-A S FAIRVIEW AVE CITY: GOLETA STATE: CA ZIP: 93117 FORMER COMPANY: FORMER CONFORMED NAME: DECKERS FOOTWEAR CORP DATE OF NAME CHANGE: 19930811 8-K 1 a4498837.txt DECKERS OUTDOOR 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 Or 15(d) of the Securities Exchange Act Of 1934 Date of Report (Date of earliest event reported): October 22, 2003 DECKERS OUTDOOR CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 0-22446 95-3015862 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 495A South Fairview Avenue, Goleta, California 93117 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (805) 967-7611 ---------------------------- None - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 7. Financial Statements and Exhibits. (c) Exhibits. Exhibit No. Description ----------- ----------- 99.1 Press release, dated October 22, 2003 Item 12. Results of Operations and Financial Condition. On October 22, 2003, Deckers Outdoor Corporation issued a press release announcing financial results for the quarter ended September 30, 2003. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein. SIGNATURES 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 hereunto duly authorized. Deckers Outdoor Corporation Date: October 22, 2003 /s/ M. Scott Ash ------------------------------------- M. Scott Ash, Chief Financial Officer EX-99 3 a4498837_ex991.txt DECKERS OUTDOOR EXHIBIT 99.1 Exhibit 99.1 Deckers Outdoor Corporation Reports Third Quarter Financial Results GOLETA, Calif.--(BUSINESS WIRE)--Oct. 22, 2003--Deckers Outdoor Corporation (NASDAQ: DECK) -- Exceeds First Call Earnings Per Share Consensus Estimate -- Sales Increase 40% to a Record $24.9 million -- Raises Guidance for Fiscal 2003; Introduces Guidance for 2004 -- Company Announces Intention to Repurchase $5.5 Million of Preferred Stock Deckers Outdoor Corporation (NASDAQ: DECK) today announced financial results for the third quarter and nine months ended September 30, 2003. For the third quarter, net sales increased 40.4% to a record $24.9 million compared to $17.7 million in the same period last year. Net earnings for the quarter were $481,000, or $0.04 per diluted share, compared to a net loss of $2,547,000, or ($0.27) per diluted share for the third quarter of last year. The prior year third quarter included a special litigation charge of $2,117,000 (after tax), or ($0.22) per diluted share. The pre-tax litigation charge was $3,518,000. For the nine months ended September 30, 2003, net sales increased 16.3% to $85.3 million compared to $73.4 million in the same period last year. Net earnings for the first nine months of fiscal 2003 increased to $6,690,000, or $0.57 per diluted share, compared to net earnings before cumulative effect of change in accounting principle described below of $257,000, or $0.03 per diluted share last year. The prior year nine- month period included the aforementioned special litigation charge of $2,117,000 (after tax), or ($0.22) per diluted share. As previously reported, on January 1, 2002 Deckers implemented Statement of Financial Accounting Standards No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets, which requires that goodwill and intangible assets with indefinite useful lives no longer be amortized to earnings but instead be reviewed periodically for impairment. The implementation of SFAS 142 resulted in a goodwill impairment charge of approximately $9.0 million during the nine months ended September 30, 2002, which was recorded as a cumulative effect of a change in accounting principle, presented net of its tax impact. Mr. Douglas Otto, Chairman and CEO stated, "Our record top line performance for the third quarter was driven by the continued robust growth of Ugg and higher than anticipated sell-throughs at Teva. With the introduction of new Ugg product and fueled by substantial editorial and celebrity exposure, we continue to experience a heightened demand for the Ugg brand beyond its historical Holiday selling period, which has allowed us to add new accounts and further expand our geographic presence. In addition, the strong response to our Teva sandal offering that we experienced this summer carried over into fall and several of our closed-toe product offerings continued to retail well." For the third quarter, net sales of Teva products increased 59% to $9.0 million versus $5.7 million in the same period last year. Net sales of Ugg also increased 44% to $14.1 million compared to $9.8 million last year. Net sales of the Simple brand were $1.8 million versus $2.2 million in the same period last year. Gross margin for the third quarter increased to 38.2% from 37.8% for the third quarter last year largely due to the addition of the higher gross margin Internet and catalog sales and lower overhead costs per pair, partially offset by an increased impact of closeout sales and inventory write-downs. Selling, general and administrative expenses decreased to 31.0% of sales for the current quarter compared to 42.2% for the third quarter last year as a result of several factors including a decrease in bad debt expense and the continuing favorable impact of the Teva acquisition, which eliminated approximately $246,000 of royalties and $234,000 of Teva license cost amortization, combined with the Company's ability to control operating costs during a period of increasing sales. The Company also announced that its Board of Directors has authorized the repurchase of the entire $5.5 million of preferred stock previously issued to Mark Thatcher in connection with the acquisition of the Teva worldwide assets. The Company stated that the transaction is expected to occur during the fourth quarter of 2003. In connection with the repurchase, the Company will pay Mr. Thatcher a premium of approximately $425,000, which is treated as a capital transaction and accordingly will have no impact on the Company's net earnings for 2003. However, in accordance with Generally Accepted Accounting Principles (GAAP) the premium will reduce earnings available for common shareholders and, therefore, is expected to negatively impact the fourth quarter earnings per share by approximately $0.04 per share. However, going forward, the transaction is expected to eliminate approximately 1.5 million shares from the Company's average diluted shares outstanding calculation beginning in 2004, effectively eliminating approximately 13% of the dilution from the EPS calculation. In addition, during the fourth quarter, the Company expects to make a $2 million early repayment of a portion of its outstanding subordinated debt, which is otherwise not due until 2008. In connection with the repayment, Deckers will not incur a pre-payment fee but will record a $100,000 charge to write off a pro rata share of the related loan costs in the fourth quarter. Going forward, by replacing the higher interest-bearing subordinated debt with lower interest-bearing senior debt, the Company expects to save approximately $200,000 to $250,000 of interest costs over each of the next five years beginning in 2004. The Company intends to complete the subordinated debt repayment and preferred stock repurchase transactions using a combination of the Company's cash flows, borrowing availability under its line of credit and a $3.5 million increase in its senior term debt. In total, the transactions are expected to reduce earnings per diluted share in the fourth quarter of 2003 by approximately $0.04, but should provide an improvement of approximately $0.12 per diluted share in 2004 and each year thereafter. All per share estimates are based upon the estimated weighted average outstanding shares. Changes in stock prices and other stock transactions would impact those estimates. Mr. Otto stated, "The decision by our Board to make an early repayment of subordinated debt and to redeem the preferred stock reflects our ongoing commitment to maximizing shareholder value and our dedication to further reducing our interest expense going forward. Our ability to do these transactions ahead of schedule underscores the health of our business and the continued strength of our cash flows." Deckers updated its guidance for the fourth quarter ending December 31, 2003. The Company currently expects fourth quarter sales to range between $28 million and $30 million and diluted earnings per share to range from $0.06 to $0.08, inclusive of the estimated $0.04 per share negative impact of the preferred stock repurchase and subordinated debt pre-payment. In comparison, during the fourth quarter of 2002 the Company reported sales of $25.8 million and earnings per share of $0.13. It is important to note that last year's fourth quarter results included a one-time after tax gain of $168,000, or $0.02 per diluted share, related to the final settlement of the Yeti litigation. In addition, due to the timing of the Teva acquisition, which closed on November 25, 2002, the Company paid slightly more than one month of interest on the borrowings associated with the purchase. In the fourth quarter of fiscal 2003 the Company expects to pay three full months of interest on the aforementioned borrowing, aggregating approximately an additional $650,000, or $0.03 per diluted share. Also, given the timing of the Teva acquisition, there are no substantial incremental royalty savings between the fourth quarters of 2003 and 2002 as the vast majority of fourth quarter royalty savings were already realized last year. Accounting for these various items, the fourth quarter 2002 diluted earnings per share excluding the $0.02 gain on litigation settlement and including an additional two months of interest of $0.03 would have yielded a pro forma diluted earnings per share of $0.08; whereas, the expected fourth quarter 2003 diluted earnings per share excluding the $0.04 for debt repayment and preferred stock repurchase would yield a pro forma estimate of approximately $0.10 to $0.12, a 25% to 50% improvement compared to the $0.08 pro forma 2002 amount. See the accompanying table entitled "Pro Forma Diluted Earnings Per Share Comparison" for a presentation of this reconciliation in tabular format. The Company also raised its guidance for the fiscal year ending December 31, 2003. The Company now expects 2003 sales to range between $113 million and $115 million and diluted earnings per share to range from $0.62 to $0.64. The Company expects its Teva sales to be $74 million to $75 million, Simple to be approximately $8 million and Ugg to be $31 million to $32 million. The Company is introducing guidance for fiscal 2004. Deckers currently anticipates its fiscal 2004 sales to be in the range of $126 million to $132 million, including $82 to $84 million for Teva, $9 to $11 million for Simple and $35 to $37 million for Ugg. Deckers currently expects its diluted earnings per share for fiscal 2004 to range from $0.92 to $0.96. Mr. Otto concluded, "We are very pleased with our positive momentum as we head into the holiday and look forward to a strong ending to the fiscal year. Over the past several months we have made some significant progress from both a financial and operational standpoint. Ugg brand awareness continues to strengthen and, as we approach our one-year anniversary for the acquisition of Teva, we continue to further our leadership position in the marketplace. We remain dedicated to capitalizing on the opportunities that we have created." 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 the Company's estimates regarding sales and earnings per share results for the fourth quarter of 2003 and for the years ending December 31, 2003 and 2004 and its expectations regarding the repurchase of the preferred stock and repayment of the subordinated debt including expectations regarding the timing of the transactions as well as the estimated impact on current and future earnings. These forward-looking statements are based on the Company's expectations as of today, October 22, 2003. 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. The Company intends to continue its practice of not updating forward-looking statements until its next quarterly results announcement. In addition, such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance or achievements 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, 2002. Among the factors that could impact results are the general economic conditions and strength or weakness in the retail environments in which the Company's products are sold. In addition, the Company's sales are highly dependent on consumer preferences, which are difficult to assess and can shift rapidly. Any shift in consumer preferences away from one or more of the Company's product lines could result in lower sales as well as obsolete inventory, both of which could adversely affect the Company's results of operations, financial condition and cash flows. The Company also depends on its customers continuing to carry and promote its various lines. Availability of products can also affect the Company's ability to meet its customers' orders. Sales of the Company's products, particularly those under the Teva(R) and Ugg(R) lines, are very sensitive to weather conditions. Extended periods of unusually cold weather during the spring and summer could adversely impact demand for the Company's Teva(R) line. Likewise, unseasonably warm weather during the fall and winter months could adversely impact demand for the Company's Ugg(R) product line. The Company's ability to repurchase the preferred stock and repay its subordinated debt is also subject to available cash flows and borrowing availability, which are dependent on factors including the Company's growth rate, the continued strength of the Company's brands, its ability to respond timely to changes in consumer preferences, its ability to collect its receivables in a timely manner, its ability to effectively manage its inventory, and the volume of letters of credit used to purchase product, among other risk factors. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. 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 2002 Annual Report on Form 10-K, the Quarterly Reports on Form 10-Q or this news release. (Tables to follow) DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Unaudited) September 30, December 31, Assets 2003 2002 ------------- ------------- Current assets: Cash and cash equivalents $ 1,941,000 3,941,000 Trade accounts receivable, net 18,014,000 20,851,000 Inventories 22,432,000 17,067,000 Prepaid expenses and other current assets 566,000 783,000 Deferred tax assets 1,919,000 1,919,000 ------------- ------------- Total current assets 44,872,000 44,561,000 Property and equipment, at cost, net 3,222,000 3,864,000 Intangible assets, less applicable amortization 70,641,000 70,773,000 Deferred tax assets 1,428,000 1,428,000 Other assets 1,407,000 1,786,000 ------------- ------------- $ 121,570,000 122,412,000 ============= ============= Liabilities and Stockholders' Equity Current liabilities: Notes payable and current installments of long-term debt $ 3,541,000 3,951,000 Trade accounts payable 5,818,000 12,916,000 Accrued expenses 3,761,000 4,509,000 Income taxes payable 4,215,000 732,000 ------------- ------------- Total current liabilities 17,335,000 22,108,000 ------------- ------------- Long-term debt, less current installments 31,015,000 35,077,000 Stockholders' equity: Preferred stock 5,500,000 5,500,000 Common stock 96,000 95,000 Additional paid-in capital 26,836,000 26,210,000 Retained earnings 40,588,000 33,898,000 Accumulated other comprehensive income (loss) 200,000 (476,000) ------------- ------------- Total stockholders' equity 73,220,000 65,227,000 ------------- ------------- $ 121,570,000 122,412,000 ============= ============= DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) Three-month period ended Nine-month period ended September 30, September 30, ------------------------- ----------------------- 2003 2002 2003 2002 ------------ ----------- ----------- ----------- Net sales $24,894,000 17,727,000 85,338,000 73,355,000 Cost of sales 15,392,000 11,029,000 47,764,000 41,472,000 ------------ ----------- ----------- ----------- Gross profit 9,502,000 6,698,000 37,574,000 31,883,000 Selling, general and administrative expenses 7,720,000 7,489,000 23,027,000 27,856,000 Litigation costs 0 3,518,000 0 3,518,000 ------------ ----------- ----------- ----------- Earnings (loss) from operations 1,782,000 (4,309,000) 14,547,000 509,000 Other expense (income): Interest, net 981,000 (31,000) 3,412,000 (58,000) Other (1,000) 45,000 (15,000) 73,000 ------------ ----------- ----------- ----------- Income (loss) before income taxes and cumulative effect of accounting change 802,000 (4,323,000) 11,150,000 494,000 Income taxes (benefit) 321,000 (1,776,000) 4,460,000 237,000 ------------ ----------- ----------- ----------- Income (loss) before cumulative effect of accounting change 481,000 (2,547,000) 6,690,000 257,000 Cumulative effect of accounting change, net of $843,000 income tax benefit --- --- --- (8,973,000) ------------ ----------- ----------- ----------- Net income (loss) $ 481,000 (2,547,000) 6,690,000 (8,716,000) ============ =========== =========== =========== Basic income (loss) per common share before cumulative effect of accounting change $ 0.05 (0.27) 0.70 0.03 Cumulative effect of accounting change --- --- --- (0.97) ----------- ----------- ----------- ----------- Basic net income (loss) per common share $ 0.05 (0.27) 0.70 (0.94) =========== =========== =========== =========== Average basic common shares 9,657,000 9,339,000 9,582,000 9,307,000 =========== =========== =========== =========== Diluted income (loss) per common share before cumulative effect of accounting change $ 0.04 (0.27) 0.57 0.03 Cumulative effect of accounting change --- --- --- (0.93) ----------- ----------- ----------- ----------- Diluted net income (loss) per common share $ 0.04 (0.27) 0.57 (0.90) =========== =========== =========== =========== Average diluted common shares 12,037,000 9,339,000 11,716,000 9,642,000 =========== =========== =========== =========== DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES Pro Forma Diluted Earnings Per Share Comparison (Unaudited) Pro Forma ------------------------------ Three-month period ended December 31, ------------------------------ 2003 2002 --------------- -------------- Diluted earnings per share $ 0.06 - $0.08 $ 0.13 Gain on litigation settlement ---- $ (0.02) Additional two months of interest ---- $ (0.03) Preferred stock repurchase premium and subordinated debt loan cost write-off $ 0.04 ---- --------------- -------------- Pro forma diluted earnings per share $ 0.10 - $0.12 $ 0.08 =============== ============== The pro forma diluted earnings per share reconciliation above is used to demonstrate the pro forma expected diluted earnings per share for the three months ended December 31, 2003 compared to the three months ended December 31, 2002. The pro forma diluted earnings per share are the result of an adjustment to the Company's earnings (as reported under generally accepted accounting principles) by excluding non-recurring items of gain and loss. The Company believes that a comparison of the resulting adjusted numbers can be a useful measure of the Company's intrinsic performance. This table should be read in conjunction with the discussion within the text of the accompanying press release and is subject to the discussion regarding forward- looking statements in the last paragraph of the press release. CONTACT: Deckers Outdoor Corporation Scott Ash, 805/967-7611 or Investor Relations: Integrated Corporate Relations, Inc. Chad A. Jacobs/Brendon E. Frey, 203/222-9013 -----END PRIVACY-ENHANCED MESSAGE-----