Deckers Outdoor Corporation announced net sales increased 23% for fourth quarter 2002 to $25.8 million versus $20.9 million in the same period last year. Net earnings for the quarter increased to $1,363,000, compared to net earnings of $506,000 last year, and diluted earnings per share increased 160% to $0.13, versus diluted earnings per share of $0.05 in the fourth quarter of 2001. The fourth quarter 2002 results included a $168,000 ($0.02 per share) increase in earnings ($290,000 increase in earnings before income taxes) as a result of the final settlement of the Yeti litigation during the quarter for $4.0 million, which was $290,000 less than previously expected. The fourth quarter 2001 results included a $260,000 ($0.02 per share) increase in earnings from the elimination of a valuation reserve against deferred tax assets.
For the year ended December 31, 2002, net sales increased 8% to $99.1 million versus $91.5 million in the same period last year. Excluding the litigation charges of $3.2 million in 2002 and $2.2 million in 2001, the pro forma earnings before the cumulative effect of accounting change for fiscal year 2002 were $3,459,000, or $0.35 per diluted share, compared to pro forma net earnings of $2,887,000, or $0.30 per diluted share, last year. Including the litigation charges, net earnings before cumulative effect of accounting change for the year ended December 31, 2002 were $1,620,000, or $0.17 per diluted share, compared to net earnings of $1,626,000, or $0.17 per diluted share, for the same period last year.
As previously reported on January 1, 2002, the Company 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 quarter ended March 31, 2002, which was recorded as a cumulative effect of change in accounting principle. In addition, SFAS 142 provides that goodwill no longer be amortized. As a result, the Company recorded no goodwill amortization in the quarter and year ended December 31, 2002; whereas, the Company had recorded goodwill amortization of approximately $200,000 and $800,000, respectively, during the quarter and year ended December 31, 2001.
Douglas Otto, Chairman and CEO stated, “Our strong fourth quarter performance was a great finish to a very important year for our company. Our ability to significantly exceed top and bottom line expectations was primarily a function of strong demand for our Ugg and Teva lines, incremental earnings provided by the Teva acquisition and improved operating efficiencies.”
“Fiscal 2002 represents a milestone year in the history of Deckers, highlighted by several key accomplishments,” Mr. Otto continued. “Strategically, and perhaps most importantly, we acquired the worldwide rights to Teva, our flagship brand. Operationally, we streamlined our business and solidified our management team. On the marketing front we continued our long commitment to supporting the growth of whitewater and outdoor sports, and financially, we expanded revenues to over $99 million while improving our expense leverage.”
Teva sales for the year were $65.1 million compared to $61.2 million last year. Ugg sales for the year increased 24% to a record level of $23.8 million from $19.2 million, and Simple sales were $10.2 million compared to $10.9 million for the same period last year.
“Prior to our acquisition of Teva we had been limited in our ability to fully exploit the true potential of Teva,” further commented Mr. Otto. “With our purchase of Teva now complete, we look forward to unlocking the power of the brand as we continue to expand Teva into new outdoor footwear categories and pursue licensing opportunities outside of footwear. In 2002, Teva continued to dominate the sport sandal category while, at the same time, successfully leveraged into the broader $2 billion rugged outdoor footwear market with the introduction of new product in the hiking, trailrunning, specialty water and rugged outdoor categories. The positive early results from our new category introductions reflect the strength of the Teva name and the true lifestyle nature of the brand.”
Mr. Otto stated, “Ugg recorded its fifth consecutive year of double digit growth in 2002, further establishing its dominance as the world’s premier luxury sheepskin brand. Fueled by national expansion and increased exposure in accounts like Nordstrom and Sports Chalet, as well as new penetration in Herrington Catalog, Neiman Marcus and Victoria’s Secret, Ugg continues to become a more meaningful contributor to our revenue stream, while providing a strong balance to the seasonality of the Teva spring business. Going forward, we will look to build on the momentum we have created as we continue our strategies for product diversification and geographical expansion as well as product extensions through licensing or other arrangements.”
“The hard work devoted to Simple over the past several years was reflected in the brand’s retail performance in 2002, where domestic net sales were up 8% over last year,” continued Mr. Otto. “We believe Simple’s brand equity has favorably endured its repositioning and has re-emerged as a viable alternative in the young adult market. This year we will focus on expanding the brand’s product offerings, growing an athletically inspired business and providing a re-emphasis on the international markets.”
Deckers also increased its guidance for 2003. The Company currently anticipates sales to range from $101 million to $106 million and diluted earnings per share will range from $0.41 to $0.46. For the first quarter ending March 31, 2003, the Company currently expects sales to range from $34 million to $36 million and diluted earnings per share to range between $0.28 and $0.30.
Mr. Otto concluded, “In fiscal 2002, we acquired the Teva brand and took a number of steps to improve our operations and truly set the stage for the future. We move forward with a strong portfolio of lifestyle niche brands and a heightened sense of enthusiasm about our business. We remain dedicated to maximizing the many opportunities for our brands that lie ahead.”
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three-month period ended Year Ended
December 31, December 31,
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2002 2001 2002 2001
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Net sales $ 25,752,000 20,941,000 99,107,000 91,461,000
Cost of sales 16,105,000 12,462,000 57,577,000 52,903,000
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Gross profit 9,647,000 8,479,000 41,530,000 38,558,000
Selling, general and
administrative
expenses 7,098,000 7,974,000 34,954,000 34,040,000
Litigation charge (290,000) ---- 3,228,000 2,180,000
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Earnings from
operations 2,839,000 505,000 3,348,000 2,338,000
Other expense
(income):
Interest, net 464,000 (54,000) 406,000 (308,000)
Other 25,000 11,000 98,000 (165,000)
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Income before income
taxes and cumulative
effect of accounting
change 2,350,000 548,000 2,844,000 2,811,000
Income taxes 987,000 42,000 1,224,000 1,185,000
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Income before
cumulative effect of
accounting
change 1,363,000 506,000 1,620,000 1,626,000
Cumulative effect of
accounting change,
net of
$843,000 income tax
benefit --- --- (8,973,000) ---
------------------------------------------------
Net income (loss) $ 1,363,000 506,000 (7,353,000) 1,626,000
