FOOTHILL RANCH, Calif., Jul 18, 2002 (BUSINESS WIRE) –

Oakley, Inc. (NYSE:OO) today announced financial results for its second quarter ended June 30, 2002.

Net sales for the quarter increased 10.6 percent to a record $145.1 million, compared with last year’s net sales of $131.2 million. U.S. net sales excluding Oakley’s retail store operations increased 11.4 percent to $77.0 million from $69.1 million; net sales from retail store operations were $8.8 million in the quarter, up from $1.5 million last year. Total U.S. net sales increased 21.5 percent in the second quarter to $85.8 million from $70.6 million. International net sales decreased 2.1 percent to $59.3 million compared with $60.6 million in last year’s second quarter.

Pretax income for the second quarter increased 1.8 percent to a record $34.4 million from $33.8 million in last year’s second quarter. Net income for the second quarter totaled $22.3 million, or $0.32 per diluted share, compared with net income of $23.6 million, or $0.34 per diluted share, in last year’s comparable period which included a benefit of $0.03 per share from a reduced tax rate.

Oakley Chief Operating Officer Link Newcomb commented, “Our solid second quarter results were highlighted by record revenues and a return to growth in pretax income, reinforcing Oakley’s worldwide brand strength in an uncertain retail environment and marking the completion of our full recovery from the challenges with which we were presented last year. With a strong slate of new products, Oakley’s sunglass sales grew at a 5.0 percent rate, driven by a 15.3 percent increase in average selling prices on an 8.9 percent decrease in unit volume. Global net sales of $26.7 million in the second quarter to Luxottica’s Sunglass Hut retail chain, the company’s largest customer, were equal to year-ago levels and reflect the tremendous progress we’ve made in our renewed relationship.

“Continuing a trend that began in early 2001, half of our year-over-year gross sales growth in the quarter came from new product categories — athletic footwear, apparel, watches and prescription eyewear. In total, new category gross sales grew 47.9 percent to $32.4 million from $21.9 million and accounted for 20.3 percent of second quarter gross sales compared with 15.9 percent in last year’s second quarter.

“Our backlog on June 30, 2002 was $61.4 million, the highest ever reported and 17.2 percent above the $52.4 million level of one year ago,” Newcomb continued. “The backlog reflects continued strong demand, coupled with a $3.0 million increase in sunglass backorders resulting from sunglass delivery shortfalls that occurred throughout the second quarter, limiting sunglass sales growth worldwide. The backorders were most significant for certain new product styles affected by vendor capacity constraints and also reflect demand that exceeded expectations, especially from Sunglass Hut. We believe the majority of these issues will be favorably resolved during the third quarter. The backlog also reflects an approximate 11 percent increase in combined apparel and goggle prebooks. Orders in both product categories have proven better than we had originally anticipated at the end of the prior quarter.

“We remain on schedule with our retail expansion plans and expect to achieve our goal of opening 18 to 20 new Iacon stores and 8 to 10 new O-Stores and Vaults over the course of 2002.”

Newcomb concluded, “We continue to expect full year 2002 net sales growth approaching 25 percent and are raising our earnings per diluted share guidance for 2002 to $0.83, representing a 15.3 percent increase from $0.72 per diluted share in 2001, which included a one-time benefit of $0.06 per diluted share resulting from a lower tax rate. Excluding the 2001 tax rate benefit, our current 2002 earnings per diluted share guidance represents growth of 26 percent. With a balance sheet in excellent condition, strong second quarter results and increased guidance for 02, we stand ready to utilize the $3.8 million remaining under our current $20 million stock buyback program if our stock price during these challenging market conditions continues to trade at a substantial discount to its historical earnings multiple.”

Second Quarter Financial Analysis

An 11.4 percent increase in second quarter U.S. net sales to $77.0 million (excluding sales from Oakley’s retail store operations) reflected a 2.5 percent increase in net sales to Sunglass Hut and a 15.8 percent increase in net sales through other domestic channels, including strong increases in net sales to Oakley Premium Dealers and new retail accounts. In addition, direct Internet sales and related telesales jumped 61 percent in the second quarter to $3.1 million.

Second quarter net sales through Oakley’s retail stores, including sales through the Iacon stores acquired October 31, 2001, reached $8.8 million, compared with $1.5 million in the second quarter of 2001. During the quarter, the company opened 6 new Iacon stores, bringing the total to 51, and 1 new Oakley store, bringing the total to 8.

Oakley’s international net sales decreased slightly in the quarter to $59.3 million from $60.6 million reflecting a weak retail environment in Europe and Japan, the transition to direct distribution in Brazil from the previous independent distributor, and significant sunglass backorders due to the delivery issues discussed above. International net sales for the quarter were more adversely affected by the backorders than U.S. net sales due to the longer lead times required for delivery outside the U.S. Net sales improved considerably from recent trends in Canada and Africa, and increased for the first time in four quarters in Australia and New Zealand.

Second quarter gross margins were 62.7 percent compared with 64.2 percent in last year’s second quarter. Gross margins reflected a higher contribution from footwear and apparel products which carry lower gross margins than the company’s eyewear products, coupled with higher sales discounts, partially offset by improved sunglass gross margins. Operating expenses were 38.9 percent of net sales in the quarter, compared with 37.7 percent last year. Operating margins were 23.8 percent compared with 26.5 percent in the prior year period.

The company’s consolidated inventory totaled $82.5 million at June 30, 2002, compared with $78.5 million at March 31, 2002 and $78.4 million at June 30, 2001. Accounts receivable days sales outstanding (DSO) were 59 at June 30, 2002, compared with 69 at March 31, 2002. Short-term borrowings net of cash were reduced approximately $32.8 million during the second quarter to a positive net cash position of $2.1 million at June 30, 2002, with no balance outstanding on the company’s $75 million U.S. line of credit.

Tax Rate Returns to 35 Percent

The company’s tax rate was 35 percent in the second quarter, where it is expected to remain throughout 2002. In 2001 a one-time tax benefit associated with the company’s foreign operations reduced the effective tax rate to 30 percent in the second quarter and to 29 percent for the full year, resulting in a benefit of $0.03 per share and $0.06 per share, respectively.

About Oakley, Inc.

Oakley: a world brand, driven to ignite the imagination through the fusion of art and science. Building on its legacy of innovative, market-leading, premium sunglasses, the company also offers an expanding line of premium performance footwear, apparel, accessories, watches and prescription eyewear to consumers in more than 70 countries. Trailing-12-month revenues through June 30, 2002 totaled $458.9 million and generated net income of $45.5 million — a 9.9 percent net margin. Oakley, Inc. press releases, SEC filings and the company’s Annual Report are available at no charge through the company’s Web site at www.oakley.com.

Safe Harbor Disclaimer

This press release contains certain statements of a forward-looking nature. Such statements are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The accuracy of such statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including: risks related to the company’s ability to manage rapid growth; the ability to identify qualified manufacturing partners; the ability to coordinate product development and production processes with those partners; the ability of those manufacturing partners and the company’s internal production operations to increase production volumes on raw materials and finished goods in a timely fashion in response to increasing demand and enable the company to achieve timely delivery of finished goods to its retail customers; the ability to provide adequate fixturing to existing and future retail customers to meet anticipated needs and schedules; the dependence on eyewear sales to Sunglass Hut which is owned by a major competitor and, accordingly, could materially alter or terminate its relationship with the company; the company’s ability to expand distribution channels and its own retail operations in a timely manner; unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by retailers; continued weakening of economic conditions could reduce demand for products sold by the company and could adversely affect profitability, especially of the company’s retail operations; further terrorist acts, or the threat thereof, could continue to adversely affect consumer confidence and spending, could interrupt production and distribution of product and raw materials and could, as a result, adversely affect the company’s operations and financial performance; the ability of the company to integrate acquisitions; the ability to continue to develop and produce innovative new products and introduce them in a timely manner; the acceptance in the marketplace of the company’s new products and changes in consumer preferences; reductions in sales of products, either as the result of economic or other conditions or reduced consumer acceptance of a product, could result in a buildup of inventory; the ability to source raw materials and finished products at favorable prices to the company; the potential effect of periodic power crises on the company’s operations including temporary blackouts at the company’s facilities; foreign currency exchange rate fluctuations; and other risks outlined in the company’s SEC filings, including but not limited to the Annual Report on Form 10-K for the year ended December 31, 2001 and other filings made periodically by the company. The company undertakes no obligation to update this forward-looking information.

CONTACT:Oakley Inc., Foothill RanchGar Jackson, 949/672-6985gjackson@oakley.comorPondel/Wilkinson ParhamRon Parham, 503/297-0472 (Investor Relations)rparham@pondel.comements are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The accuracy of such statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including: risks related to the company’s ability to manage rapid growth; the ability to identify qualified manufacturing partners; the ability to coordinate product development and production processes with those partners; the ability of those manufacturing partners and the company’s internal production operations to increase production volumes on raw materials and finished goods in a timely fashion in response to increasing demand and enable the company to achieve timely delivery of finished goods to its retail customers; the ability to provide adequate fixturing to existing and future retail customers to meet anticipated needs and schedules; the dependence on eyewear sales to Sunglass Hut which is owned by a major competitor and, accordingly, could materially alter or terminate its relationship with the company; the company’s ability to expand distribution channels and its own retail operations in a timely manner; unanticipated changes in general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by retailers; continued weakening of economic conditions could reduce demand for products sold by the company and could adversely affect profitability, especially of the company’s retail operations; further terrorist acts, or the threat thereof, could continue to adversely affect consumer confidence and spending, could interrupt production and distribution of product and raw materials and could, as a result, adversely affect the company’s operations and financial performance; the ability of the company to integrate acquisitions; the ability to continue to develop and produce innovative new products and introduce them in a timely manner; the acceptance in the marketplace of the company’s new products and changes in consumer preferences; reductions in sales of products, either as the result of economic or other conditions or reduced consumer acceptance of a product, could result in a buildup of inventory; the ability to source raw materials and finished products at favorable prices to the company; the potential effect of periodic power crises on the company’s operations including temporary blackouts at the company’s facilities; foreign currency exchange rate fluctuations; and other risks outlined in the company’s SEC filings, including but not limited to the Annual Report on Form 10-K for the year ended December 31, 2001 and other filings made periodically by the company. The company undertakes no obligation to update this forward-looking information.

CONTACT:Oakley Inc., Foothill RanchGar Jackson, 949/672-6985gjackson@oakley.comorPondel/Wilkinson ParhamRon Parham, 503/297-0472 (Investor Relations)rparham@pondel.com