Not a fun week.
Dave and Dr. Jeff,
I am still curious as to how you both arrived at 19 cents for 3Q earnings. My expectation all along is that OO stock price would be sideways until Q3 results, and that OO would beat estimates, analysts would revise future earnings and recommendations, and Dave and I would sell (or wait till January to sell). Jeff, I presumed you would continue to dart in and out as you gauge the technical winds. Sadly, the footwear issue may keep analysts on the sideline until they see footwear results. This means a "hold" even if Q3 is great.
Here, by the way, is how I believe an analyst would arrive at 16 cents for Q3 (condensed version).
Known facts: Oakley sales to Rays in Q3 of 1996 were 26.7 m. (Oakley now calls the 26.7 m. figure, which was an 82% increase over the previous year, an aberration that caused all the problems in the first place). In Q2 of 1997 sales to Rays were roughly only 13 m. Sales to non-rays in Q3 of 1996 were roughly 41 m. In Q2 of 1997 they were roughly 42 m (an increase of 4% over Q2 1996).
Assume a similar 4% increase for non-rays sales from Q3/Q3 to 42.5 m. (Of course, hot products like the Fives and X-metals may add to this, but cooling older products subtract from this). Now assuming Rays Q3 returns to normal, say 20 m., total sales will be 62.5 m. (only 5 m. below the sizzling hot Q3 1996, but about the same as Q2 1996.) Now in 1996, this would have meant a .22 cent profit, but costs of goods are higher (margins are lower). Extrapolating from 1997 Q2 costs of goods sold (34.6%), costs should be at 21.6 m. Gross profit is 41 million.
Lets look at costs: The operating expenses in Q2 were 21.2 m. I1ll only add one half a million to cover the added cost of selling and shipping extra product (but it is probably more, since Oakley1s salespersons are on commission). Therefore total operating expenses might be roughly 21.7 m.
So, total operating income before the interest expense is 19.2 m. (41 million less 21.6 million). Take off 1/2 m. for the interest expense they are now incurring, and we are left with 18.7 m. Subtract income tax of 7.2 m. (at 38.5%), and we are left with a grand total of 11.5 million. Divide this by 70.7 million shares and you get.... 16.3 cents in earnings. Each added million dollars in pre-tax profits adds roughly 1 cent to the earnings per share.
Anyway... there it is for what it's worth. Comments Dave and Jeff? Others?
David |
