Oakley, Inc. reported first quarter net sales of $199.2 million, an increase of 31.3% from $151.7 million in the same period of 2006. First quarter net income jumped to $5.7 million, or 8 cents per diluted share, from $1.9 million, or 3 cents per diluted share in the first quarter of 2006. First quarter 2007 results included a discrete benefit from an income tax refund which decreased the company's provision for income taxes by approximately $850,000, or a penny per share.

“Our strong first quarter results are a reflection of Oakley's renewed focus on optics, solid growth and execution in our own retail, contribution from our acquisitions, and the successful implementation of process changes that allowed earlier shipment of our spring 2007 product,” said Oakley, Inc. CEO Scott Olivet. “We set a high bar for ourselves in our target 2007 revenue and EPS growth and are pleased that we are off to a strong start.”

“The balanced optics growth across key product types, geographies, and channels, as well as early results of our optics initiatives, gives us confidence that our strategy is working,” continued Olivet. “We executed well against the release of our new sports performance and women's collections, which included integrated worldwide sales and marketing programs. Additionally, our new Rolling O Lab and the re-launch of our Web site provided additional fuel in telling the Oakley story.”

“We remain focused on building solid business platforms capable of driving consistent, profitable growth. Each time we execute, it is imperative to turn the event into a sustainable process,” concluded Olivet. “Throughout 2007 we will continue to develop our ability to connect with consumers on our brand and product messages, develop our apparel line and improve on-time delivery performance, and drive operational excellence with a focus on improved customer service.”

Product Category Net Sales

First quarter optics net sales totaled $144.3 million, up 35.0% from $106.9 million in the same period of 2006. This growth was driven by significant double-digit increases in sunglasses, prescription eyewear, goggles and electronics, and incremental sales from Oliver Peoples, The Optical Shop of Aspen (OSA), and Eye Safety Systems (ESS). First quarter AFA net sales totaled $40.4 million, up 9.7% from $36.8 million in the prior year. AFA growth included significant double-digit contribution from apparel and watches offset by a modest decline in footwear sales due to a narrowed product offering from the 2006 footwear restructuring.

First quarter net sales of other products, which consist of non-Oakley owned brands sold through the company's multi-branded Sunglass Icon and OSA retail stores, increased 80.3% to $14.5 million from $8.0 million and were driven primarily by the acquisition of OSA and the addition of new Sunglass Icon locations.

Segment Net Sales

Global first quarter net sales to wholesale customers were $153.5 million, a 25.4% increase over $122.4 million in the same period of 2006.

First quarter net sales to U.S. wholesale customers totaled $62.8 million, up 21.3% from $51.7 million in the prior year, driven by favorable optics growth, and significant contribution from Oliver Peoples and ESS, partially offset by a decline in AFA sales.

Oakley's first quarter U.S. retail net sales increased 55.7% to $45.7 million, compared with $29.3 million in the same period of 2006. Retail sales growth was driven by a strong increase in comparable store sales, contribution of new Oakley and Sunglass Icon stores added during the last twelve months, contribution from OSA, and a significant double-digit increase in Web and telesales volume.

Geographic Net Sales

First quarter U.S. net sales (wholesale and retail) totaled $108.4 million, an increase of 33.8% from $81.1 million in the prior year's same period.

First quarter net sales in the company's international business were $90.7 million, a 28.5% increase from net sales of $70.6 million in the same period of 2006. A weaker U.S. dollar relative to foreign currencies increased reported international net sales growth by 4.7 percentage points. The company's Americas region saw significant double-digit optics and AFA growth; EMEA (Europe, Middle East and Africa) experienced a significant double-digit increase in optics sales and a moderate increase in AFA; and Asia Pacific had a significant double-digit increase in optics sales and significant increase in AFA net sales.

Gross Margin, Operating Expenses, Tax Rate

Reported first quarter gross profit as a percentage of net sales was 54.3% compared with 53.1% in the first quarter of 2006. First quarter non-GAAP gross margin was 54.3% compared to 53.9% in the same period of 2006. Non-GAAP gross margin excludes losses from changes in fair value of foreign currency derivatives recorded in accordance with SFAS 133, which totaled $1.2 million on a pre-tax basis for the first quarter of 2006. The increase in first quarter 2007 non-GAAP gross margin versus first quarter 2006 non-GAAP gross margin reflects a higher optics sales mix and the favorable impact of increased manufacturing volume. These factors were offset by inventory charges primarily related to international apparel.

First quarter operating expenses totaled $98.3 million, representing 49.4% of net sales, compared to $77.7 million, or 51.3% of net sales in the same period of 2006. Operating expenses as a percent of net sales decreased in research and development, shipping and warehousing, and selling expenses. General and administrative expenses increased by $8.4 million, or 38.6%, from the same period of 2006 due to the impact of acquisitions completed in the last year, increased compensation expense, and increased sales tax expense.

The first quarter provision for income tax was $1.8 million which included a discrete benefit of approximately $850,000, or a penny per diluted share, for an income tax refund. Consequently, the company's tax rate was 24.3% versus 35.0% in the same period of 2006.

Balance Sheet Highlights

Accounts receivable, less allowances, totaled $120.0 million at March 31, 2007, compared to $98.7 million at March 31, 2006.

The company's consolidated inventory totaled $174.3 million at March 31, 2007 compared to $134.6 million at March 31, 2006. This increase was largely driven by acquisitions and the addition of 43 new Oakley and Sunglass Icon stores during the last twelve months.

2007 Guidance

As a result of the discrete income tax refund benefit of approximately $850,000, the company increased its 2007 full-year earnings per share range to 95 cents to 98 cents per diluted share from the previously announced range of 94 cents to 97 cents per diluted share.

The company also announced that it had completed the acquisition of Bright Eyes, an Australian multi-branded sunglass specialty retail chain.

                                   OAKLEY, INC.
                  (Unaudited, in thousands, except per share data)

                                                 Three months ended
                                                      March 31,
                                                  2007       2006
                                                ---------  ---------
 Net sales                                      $ 199,164  $ 151,698
 Cost of goods sold                                91,108     71,113
                                                ---------  ---------
  Gross profit                                    108,056     80,585

 Operating expenses:
  Research and development                          6,017      5,089
  Selling                                          56,921     46,366
  Shipping and warehousing                          5,253      4,549
  General and administrative                       30,132     21,745
                                                ---------  ---------
  Total operating expenses                         98,323     77,749
                                                ---------  ---------
 Operating income                                   9,733      2,836

 Interest expense, net                              2,145        (98)
                                                ---------  ---------
 Income before provision for income taxes           7,588      2,934
 Provision for income taxes                         1,845      1,027
                                                ---------  ---------
 Net income                                     $   5,743  $   1,907
                                                =========  =========

 Diluted net income per share                   $    0.08  $    0.03
 Diluted weighted average shares                   69,525     69,583