Foothill Ranch, Calif. (PRWEB) April 23, 2007
Oakley, Inc. (NYSE:OO) today announced financial results for its first quarter ended March 31, 2007. Oakley (http://Oakley.com) generated first quarter net sales of $199.2 million, an increase of 31.3 percent from $151.7 million in the same period of 2006. First quarter net income was $5.7 million, or $0.08 per diluted share, compared with net income of $1.9 million, or $0.03 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 $0.01 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. Chief Executive Officer 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 percent 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 percent 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 percent 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 percent 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 percent 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 percent 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 percent 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 percent 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 percent compared with 53.1 percent in the first quarter of 2006. First quarter non-GAAP gross margin was 54.3 percent compared to 53.9 percent 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. A reconciliation of non-GAAP gross margin to GAAP gross profit as a percentage of sales is included in the accompanying financial tables.
First quarter operating expenses totaled $98.3 million, representing 49.4 percent of net sales, compared to $77.7 million, or 51.3 percent 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 percent, 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 $0.01 per diluted share, for an income tax refund. Consequently, the company's tax rate was 24.3 percent versus 35.0 percent 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.
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 $0.95 to $0.98 per diluted share from the previously announced range of $0.94 to $0.97 per diluted share. This guidance excludes any impact from the adoption of Financial Accounting Standards Board issued Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48) or substantial changes in foreign currency exchange rates.
The company also announced that it had completed the acquisition of Bright Eyes, an Australian multi-branded sunglass specialty retail chain.
Stock Repurchase Program
There is approximately $23.3 million available under the stock repurchase plans approved by the company's Board of Directors. There were no shares repurchased during the first quarter of 2007.
Conference Call Information
As indicated in a press release that was issued on April 5, the company will conduct a conference call today at 1:30 p.m. PDT. Interested investors can hear a simultaneous Webcast at http://investor.oakley.com. A telephonic replay of the call will be available Thursday, April 19, through midnight April 26, 2007 and can be accessed from the United States and Canada at 888-266-2081 and from international locations at 703-925-2533; passcode: 845955. Additionally, the conference call will be available on the company's http://investor.oakley.com Web site under News and Events until April 19, 2008.
About Oakley, Inc.
Oakley is a global leader in sport performance optics including premium sunglasses, goggles, and prescription eyewear. Headquartered in Southern California, the company's optics brand portfolio includes Dragon, Eye Safety Systems, Fox Racing, Mosley Tribes, Oliver Peoples, and Paul Smith Spectacles. In addition to its global wholesale business, the company operates retail chains including Bright Eyes, Oakley Stores, Sunglass Icon and The Optical Shop of Aspen. The company also offers a wide selection of Oakley-branded apparel, footwear, watches and accessories. Additional information is available at http://oakley.com.