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 25, 2012
DECKERS OUTDOOR CORPORATION |
(Exact name of registrant as specified in its charter) |
Delaware |
(State or other jurisdiction of incorporation) |
000-22446 |
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 |
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On October 25, 2012, Deckers Outdoor Corporation (the “Company”) issued a press release announcing its financial results for the three months ended September 30, 2012 and held a conference call regarding these financial results. A copy of the press release is furnished hereto as Exhibit 99.1.
The information in this Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) | Exhibits. | |||
Exhibit No. |
Description |
|||
99.1 | Press release, dated October 25, 2012 |
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 25, 2012 |
/s/ Thomas A. George |
|
Thomas A. George, Chief Financial Officer |
Exhibit 99.1
Deckers Outdoor Corporation Reports Third Quarter 2012 Financial Results
Company Reports Third Quarter Diluted Earnings Per Share of $1.18
Company Repurchased 1.8 Million Shares of Stock in Third Quarter
GOLETA, Calif.--(BUSINESS WIRE)--October 25, 2012--Deckers Outdoor Corporation (NASDAQGS: DECK) today announced financial results for the third quarter ended September 30, 2012.
Third Quarter Review
“Over the past two years, we have raised prices on selective key styles to help mitigate the impact of an 80% increase in our sheepskin and raw material costs over this same period,” stated Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors. “We believe that these selective price increases, particularly during a period of one of the warmest years on record, has pushed us above the consumer’s price-value expectations for the UGG brand. We also believe that this has resulted in softer than expected third quarter sell-through trends in our Company owned stores, and has pushed back the start of the brand’s key selling season at retail this year. However, based on positive consumer feedback, the performance of new product introductions, and market research data, we continue to be confident in the strength and popularity of our brand portfolio and the multiple growth opportunities that still lie ahead.”
“We recently negotiated fall 2013 product costs and based upon the decreases in our product costs for Fall 2013, together with the adverse effect of our price increases, we made the decision to adjust our domestic pricing in mid-September on select Classic styles, retroactive to all orders shipped since July 1,” continued Mr. Martinez. “To support our loyal retailers and consumers during this challenging sales environment we made the strategic decision to pass along a portion of the upcoming savings immediately. We believe this is in the best interests of the brand and will help drive sell-through during the holiday season. ”
Division Summary
UGG Brand
UGG brand net sales for the third quarter decreased 11.6% to $332.8 million compared to $376.7 million for the same period last year. The decrease in sales was driven by lower domestic and international wholesale sales and a decline in same store sales, partially offset by an increase in sales from new retail store openings and an increase in global eCommerce sales.
Teva Brand
Teva brand net sales for the third quarter increased 22.1% to $17.9 million compared to $14.7 million for the same period last year. The sales increase was driven primarily by an increase in international distributor sales, higher international wholesale sales from the brand’s launch in Japan and higher domestic sales.
Sanuk Brand
Sanuk brand net sales for the third quarter increased 17.6% to $18.3 million compared to $15.6 million for the same period last year. The increase in sales was primarily attributable to higher domestic wholesale and eCommerce sales.
Other Brands
Combined net sales of the Company’s other brands decreased 1.1% to $7.3 million for the third quarter compared to $7.4 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 12.8% to $39.1 million for the third quarter compared to $34.7 million for the same period last year. This increase was driven by 29 new stores opened after the third quarter of 2011, partially offset by a same store sales decrease of 13.1% for the thirteen weeks ending September 30, 2012 compared to the thirteen weeks ending October 2, 2011.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 29.3% to $13.3 million for the third quarter compared to $10.3 million for the same period last year. The sales increase was driven primarily by strong performance of the Sanuk brand, increased global sales for UGG brand fall styles plus the addition of new international eCommerce websites.
Stock Repurchase Program
During the third quarter of 2012, the Company repurchased approximately 1,833,000 shares of its common stock under its stock repurchase program for a total of $84.7 million. This brings the Company’s total stock repurchases over the past year to $184.7 million. As of September 30, 2012, the Company had $115.3 million authorized repurchase funds remaining under its $200.0 million stock repurchase program announced in July 2012. Depending on market conditions and other factors, such repurchases may be commenced or suspended at any time without prior notice.
Balance Sheet
At September 30, 2012, cash and cash equivalents were $61.6 million compared to $90.4 million at September 30, 2011. At September 30, 2012, the Company had $275.0 million in outstanding borrowings under its credit facility compared to $45.0 million at September 30, 2011. The decrease in cash and cash equivalents and the increase in outstanding borrowings are primarily attributable to $184.7 million of cash payments for stock repurchases and $76.1 million of cash payments for capital assets, which includes $28.6 million for retail expansion, $27.9 million for the new headquarters facility, $12.0 million for IT infrastructure, and $7.6 million for other capital expenditures.
Inventories at September 30, 2012 increased 36.2% to $486.2 million from $356.9 million at September 30, 2011. By brand, UGG inventory increased $127.8 million to $451.8 million at September 30, 2012, Teva inventory increased $2.2 million to $19.1 million at September 30, 2012, Sanuk inventory decreased $0.6 million to $8.6 million at September 30, 2012, and the other brands’ inventory decreased $0.1 million to $6.7 million at September 30, 2012.
Full-Year 2012 Outlook
Based on third quarter results combined with reduced sales projections, the Company is revising its full year outlook.
Fourth Quarter Outlook
Mr. Martinez concluded, “As we make adjustments to our near-term strategies, including the adjusted pricing and continued focus on the optimal distribution of the UGG products, and to focus on the best interests for the UGG brand in the long term, we believe it is prudent to adopt a more cautious outlook for the fourth quarter. Long-term, the global growth strategies we have put in place remain intact and on course. This is also true of the previous measures we’ve taken to help mitigate the risks to the business. These include supply chain initiatives to reduce our exposure to sheepskin, product diversification to lessen our dependency on Classics and cold weather, and our acquisition of the Sanuk brand, which has helped to balance the seasonality of our business and improve margins. We also remain committed to enhancing shareholder value, evidenced by our aggressive stock repurchase activity over the past several quarters.”
Conference Call Information
The Company’s conference call to review third quarter 2012 results will be broadcast live over the internet today, Thursday, October 25, 2012 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 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. UGG® Australia, Teva®, Sanuk®, TSUBO®, Ahnu®, and MOZO® are registered trademarks of Deckers Outdoor Corporation.
Forward Looking Statements
This press release contains statements regarding our expectations, beliefs and views about our future financial performance, brand strategies and cost structure 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," “assume,” 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, cash flows, the outlook for the Company's markets and the demand for its products. The forward-looking statements in this press release regarding our future financial performance, brand strategies and cost structure 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 results in the future may differ materially from the future financial performance expected at the current time. In addition, the results reported in this press release may differ from actual results filed with the Securities and Exchange Commission (SEC) for the quarter ended September 30, 2012 if material events or circumstances occur between now and the date of our SEC filing. Those risks and uncertainties include, but are not limited to: the recent financial crisis and current global economic uncertainty; the ability to realize returns on our new and existing retail stores; our ability to accurately forecast consumer demand; our ability to anticipate fashion trends; impairment losses on our goodwill, other intangible assets, or tangible assets; the sensitivity of our sales to seasonal and weather conditions; flaws, shortages, or price fluctuations of raw materials that could interrupt product manufacturing and increase product costs; the risks of international commerce of manufacturing in China and Vietnam; the risks of conducting business outside the US, including foreign currency and global liquidity risks; the international markets we sell to are subject to compliance with a variety of laws and political and economic risks; risks related to international trade, import regulations, and security procedures, including unexpected costs and other barriers to markets and impact of free trade agreements; our ability to implement our growth strategies, including our ability to successfully integrate newly acquired businesses or convert international distributors to wholesale models; the success of our customers and the risk of losing one or more of our key customers; our ability to protect our intellectual property rights or deter counterfeiting; our dependence on independent manufacturers to maintain a continuous supply of finished goods that meet our quality standards; liquidity and market risks for our cash and cash equivalents; the risk of attracting or retaining key personnel; the interruption of key business processes and supporting information systems; loss of our warehouses; the impact of increases in petroleum and other energy prices, or demand for ocean containers or other means of transportation; we could be subject to additional income tax liabilities; our ability to compete effectively with our competition; and the volatility of our common stock. 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, 2011, which the Company filed with the SEC on February 29, 2012, and under “Risk Factors” in any subsequent SEC filings. 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 CORPORATION | |||||||
AND SUBSIDIARIES | |||||||
Condensed Consolidated Balance Sheets | |||||||
(Unaudited) | |||||||
(Amounts in thousands) | |||||||
September 30, | December 31, | ||||||
Assets | 2012 | 2011 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 61,636 | 263,606 | ||||
Trade accounts receivable, net | 239,259 | 193,375 | |||||
Inventories | 486,168 | 253,270 | |||||
Prepaid expenses | 13,949 | 8,697 | |||||
Other current assets | 57,760 | 84,540 | |||||
Income taxes receivable | 16,837 | - | |||||
Deferred tax assets | 15,038 | 14,414 | |||||
Total current assets | 890,647 | 817,902 | |||||
Property and equipment, net | 115,314 | 90,257 | |||||
Goodwill | 123,856 | 120,045 | |||||
Other intangible assets, net | 99,733 | 94,449 | |||||
Deferred tax assets | 13,360 | 13,223 | |||||
Other assets | 13,433 | 10,320 | |||||
Total assets | $ | 1,256,343 | 1,146,196 | ||||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Short-term borrowings | $ | 275,000 | - | ||||
Trade accounts payable | 167,957 | 110,853 | |||||
Accrued payroll | 12,411 | 32,594 | |||||
Other accrued expenses | 45,885 | 57,744 | |||||
Income taxes payable | 15,365 | 30,888 | |||||
Total current liabilities | 516,618 | 232,079 | |||||
Long-term liabilities | 57,946 | 72,687 | |||||
Stockholders' equity: | |||||||
Deckers Outdoor Corporation stockholders' equity: | |||||||
Common stock | 353 | 387 | |||||
Additional paid-in capital | 142,985 | 144,684 | |||||
Retained earnings | 538,744 | 692,595 | |||||
Accumulated other comprehensive loss | (303 | ) | (1,730 | ) | |||
Total Deckers Outdoor Corporation stockholders' equity | 681,779 | 835,936 | |||||
Noncontrolling interest |
- | 5,494 | |||||
Total equity | 681,779 | 841,430 | |||||
Total liabilities and equity | $ | 1,256,343 | 1,146,196 | ||||
DECKERS OUTDOOR CORPORATION | |||||||||||||||
AND SUBSIDIARIES | |||||||||||||||
Condensed Consolidated Statements of Comprehensive Income | |||||||||||||||
(Unaudited) | |||||||||||||||
(Amounts in thousands, except for per share data) | |||||||||||||||
Three-month period ended | Nine-month period ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||
Net sales | $ | 376,392 | 414,358 | $ | 797,134 | 773,431 | |||||||||
Cost of sales | 217,099 | 211,505 | 450,974 | 402,188 | |||||||||||
Gross profit | 159,293 | 202,853 | 346,160 | 371,243 | |||||||||||
Selling, general and administrative expenses | 99,684 | 112,192 | 303,326 | 263,185 | |||||||||||
Income from operations | 59,609 | 90,661 | 42,834 | 108,058 | |||||||||||
Other expense (income), net | 607 | 50 | 27 | (131 | ) | ||||||||||
Income before income taxes | 59,002 | 90,611 | 42,807 | 108,189 | |||||||||||
Income tax expense | 15,941 | 28,266 | 11,850 | 33,539 | |||||||||||
Net income | 43,061 | 62,345 | 30,957 | 74,650 | |||||||||||
Other comprehensive (loss) income, net of tax | |||||||||||||||
Unrealized (loss) gain on foreign currency hedging | (968 | ) | 689 | (946 | ) | (753 | ) | ||||||||
Foreign currency translation adjustment | 412 | (274 | ) | 2,373 | (953 | ) | |||||||||
Total other comprehensive (loss) income | (556 | ) | 415 | 1,427 | (1,706 | ) | |||||||||
Comprehensive income | $ | 42,505 | 62,760 | $ | 32,384 | 72,944 | |||||||||
Net income (loss) attributable to: | |||||||||||||||
Deckers Outdoor Corporation | 43,061 | 62,484 | 30,809 | 74,323 | |||||||||||
Noncontrolling interest | - | (139 | ) | 148 | 327 | ||||||||||
$ | 43,061 | 62,345 | $ | 30,957 | 74,650 | ||||||||||
Comprehensive income (loss) attributable to: | |||||||||||||||
Deckers Outdoor Corporation | 42,505 | 62,899 | 32,236 | 72,617 | |||||||||||
Noncontrolling interest | - | (139 | ) | 148 | 327 | ||||||||||
$ | 42,505 | 62,760 | $ | 32,384 | 72,944 | ||||||||||
Net income per share attributable to Deckers | |||||||||||||||
Outdoor Corporation common stockholders: | |||||||||||||||
Basic | $ | 1.19 | 1.62 | $ | 0.82 | 1.93 | |||||||||
Diluted | $ | 1.18 | 1.59 | $ | 0.81 | 1.89 | |||||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 36,129 | 38,603 | 37,534 | 38,595 | |||||||||||
Diluted | 36,577 | 39,190 | 37,994 | 39,276 |
CONTACT:
Deckers Outdoor Corporation
Tom George, 805-967-7611
Chief
Financial Officer
or
Investor Relations:
ICR
Brendon Frey,
203-682-8200