<PAGE>
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.
<PAGE>
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
<PAGE>
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
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
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three-month period ended
June 30
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
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
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Six-month period ended
June 30
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
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
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six-month period ended
June 30
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
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
------------ ------------
</TABLE>
(Continued)
<PAGE>
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows, Continued
(Unaudited)
<TABLE>
<CAPTION>
Six-month period ended
June 30
--------------------------
1996 1995
----------- ------------
<S> <C> <C>
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
------------ ------------
------------ ------------
</TABLE>
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.
<PAGE>
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:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------------- ----------------
<S> <C> <C>
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
-------------- ----------------
-------------- ----------------
</TABLE>
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
<PAGE>
<PAGE>
Exhibit 11.1
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Statement of Computation of Earnings per Share
(Unaudited)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED
JUNE 30,
-------------------------
1996 1995
------------ ----------
<S> <C> <C>
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
------------ ----------
------------ ----------
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6154000
<SECURITIES> 0
<RECEIVABLES> 23527000
<ALLOWANCES> 2517000
<INVENTORY> 16103000
<CURRENT-ASSETS> 47322000
<PP&E> 5113000
<DEPRECIATION> 2158000
<TOTAL-ASSETS> 73646000
<CURRENT-LIABILITIES> 8257000
<BONDS> 9341000
0
0
<COMMON> 93000
<OTHER-SE> 55955000
<TOTAL-LIABILITY-AND-EQUITY> 73646000
<SALES> 56322000
<TOTAL-REVENUES> 56322000
<CGS> 32637000
<TOTAL-COSTS> 32637000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 985000
<INTEREST-EXPENSE> 508000
<INCOME-PRETAX> 4517000
<INCOME-TAX> 2014000
<INCOME-CONTINUING> 2503000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2503000
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
