Crocs, Inc. (NASDAQ: CROX) today
reported financial results for the second quarter ended June 30,
2009.
Q2 2009 revenue of $197.7 million exceeded Company guidance for
the quarter. Revenue in the comparable quarter of 2008 was $222.8
million.
On a non-GAAP basis, the Company’s Q2 2009 net loss after taxes
was $5.0 million, or a loss of $0.06 per diluted share, which is
better than the range the Company previously provided when it
guided to a non-GAAP Q2 2009 loss per diluted share of $0.31 to
$0.15. The Company generated non-GAAP income before taxes of $2.6
million in Q2 2009. Non-GAAP Q2 2009 operating results exclude the
effects of the following:
- $34.8 million in impairment and
restructuring charges,
- $16.3 million in additional
stock-based compensation expense related to the previously
announced Q2 2009 tender offer, and
- $3.1 million in net charitable
donations.
These were offset by the following favorable impacts:
- $25.3 million gross margin
impact related to sales of product that had been previously
impaired and
- $3.6 million gain from foreign
currency exchange rate fluctuations during the second quarter.
On a GAAP basis, the Company reported a net loss of $30.3
million in the second quarter of 2009 with a diluted loss per share
of ($0.36), compared to Q2 2008 net income of $2.1 million, or
$0.03 per diluted share.
Year-over-year second quarter changes in the Company’s channel
revenue streams were as follows:
- Retail sales increased 58.9% to
$55.3 million;
- Internet sales increased 24.8%
to $17.4 million; and
- Wholesale sales decreased 28.2%
to $125.0 million.
Changes in the Company’s regional revenue streams during the
same periods were as follows:
- Asia increased 30.5% to $80.0
million;
- Americas decreased 19.4% to
$85.5 million; and
- Europe decreased 41.8% to $32.2
million.
The Company’s second quarter 2009 revenue included $23.7 million
in sales of previously impaired footwear. The Company’s sales of
non-impaired product for Q2 2009 were $174.0 million, which
exceeded the Company’s guidance of sales between $135.0 million and
$160.0 million for second quarter.
Balance Sheet
The Company’s cash and cash equivalents increased 50% to $77.5
million at June 30, 2009 from $51.7 million as of December 31,
2008. The strong quarter end cash position allowed the Company to
completely repay the $17.3 million borrowed under the Company’s
credit facility as of June 30, 2009 subsequent to the end of the
second quarter. The credit facility was extinguished on August 3,
2009, ahead of its September 30, 2009 maturity date. The Company
has signed a term sheet with a well-known lender and intends to
secure a new asset-backed revolving credit facility by the end of
the third quarter.
Inventory decreased 22% since December 31, 2008 to $111.6
million at June 30, 2009 as the Company continued its efforts to
reduce inventory on hand.
The Company had accounts receivable of $67.0 million as of June
30, 2009 compared to $35.3 million at December 31, 2008 as a result
of higher sales in the quarter. Days sales outstanding decreased
from 52.3 days for the three months ended June 30, 2008 to 30.9
days for the three months ended June 30, 2009.
Net capital expenditures in the second quarter of 2009 were $9.7
million compared to $21.3 million the second quarter of 2008.
Working capital improved to $153.0 million during the quarter,
an increase from $145.8 million as of December 31, 2008.
“Our second quarter performance reflects the tangible business
improvements we’re continuing to make and underscores the enduring
consumer appeal of the Crocs brand,” said John Duerden, President
and Chief Executive Officer. “Our top-line results were better than
expected driven by strong gains in our retail channel, as consumers
responded positively to the broad product assortment now available
at our Company-operated locations. We continue to gain market share
in Asia, where our business has been strong in recent quarters. We
strengthened our balance sheet, reducing inventory and repaying all
outstanding borrowings under our credit facility. While we are
encouraged by our progress, we are clearly not satisfied with these
results. We intend to reduce expenses, improve our cash position
and making targeted investments in our systems and procedures to
serve customers better and to increase productivity.”
Duerden continued, “We’ve made substantial progress on the
disposal of our excess inventory in a responsible manner. Our U.S.
distribution facilities have been consolidated down from seven
locations to one, enabling us to provide our product to customers
more effectively and efficiently. As we continue to streamline our
cost base, we expect to reduce our operating losses through the
balance of this year and return to profitability next year.”
Guidance
The Company expects to generate between $150 million and $160
million in revenue during its fiscal third quarter, with a diluted
loss per share between $0.14 and $0.06. This guidance excludes the
effect of one-time and non-recurring charges.
Conference Call Information
A conference call to discuss second quarter fiscal 2009
financial results is scheduled for today (August 6, 2009) at 5:00
PM Eastern Time. A webcast of the call will take place
simultaneously and can be accessed by clicking the ‘Investor
Relations’ link under the Company section on www.crocs.com or at
www.earnings.com. To listen to the broadcast, your computer must
have Windows Media Player installed. If you do not have Windows
Media Player, go to www.earnings.com prior to the call, where you
can download the software for free.
About Crocs, Inc.
Crocs, Inc. is a designer, manufacturer and retailer of footwear
for men, women and children under the Crocs™ brand.
All Crocs™ brand shoes feature Crocs’ proprietary closed-cell
resin, Croslite™, which represents a substantial innovation in
footwear. The Croslite™ material enables Crocs to produce soft,
comfortable, lightweight, superior-gripping, non-marking and
odor-resistant shoes. These unique elements make Crocs™ footwear
ideal for casual wear, as well as for professional and recreational
uses such as boating, hiking, hospitality and gardening. The
versatile use of the material has enabled Crocs to successfully
market its products to a broad range of consumers.
Crocs™ shoes are sold in more than 120 countries and come in a
wide array of colors and styles. Please visit www.crocs.com for
additional information.
Forward-looking statements
The matters regarding the future discussed in this news release
include “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements
involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements to
be materially different from any future results, performances, or
achievements expressed or implied by the forward-looking
statements. These risks and uncertainties include, but are not
limited to, the following: macroeconomic issues, including, but not
limited to, the current global financial crisis; our ability to
obtain adequate financing; our significant expansion in recent
years; our ability to manage our future growth or decline
effectively; changing fashion trends; our defense and the ultimate
outcome of a pending class action lawsuit; our ability to
accurately anticipate and respond to seasonal or quarterly
fluctuations in our operating results; our management and
information systems infrastructure; our ability to obtain and
protect intellectual property rights; our reliance on third party
manufacturing and logistics providers for the production and
distribution of products; our limited manufacturing capacity and
distribution channels; our reliance on a single source supply for
certain raw materials; inherent risks associated with the
manufacture, distribution and sale of our products overseas; our
reliance on market acceptance of the small number of products we
sell; our ability to develop and sell new products; our limited
operating history; our ability to accurately forecast consumer
demand for our products; our ability to maintain effective internal
controls; our ability to attract, assimilate and retain management
talent; retail environment; our ability to effectively market and
maintain a positive brand image; the effect of competition in our
industry; the effect of potential adverse currency exchange rate
fluctuations; and other factors described in our annual report on
Form 10-K under the heading “Risk Factors” and our subsequent
filings with the Securities and Exchange Commission. Readers are
encouraged to review that section and all other disclosures
appearing in our filings with the Securities and Exchange
Commission. We do not undertake any obligation to update publicly
any forward-looking statements, including, without limitation, any
estimate regarding revenues or earnings, whether as a result of the
receipt of new information, future events, or otherwise.
CROCS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (In thousands, except share and per
share data) (Unaudited) Three
Months Ended
June 30,
Six Months Ended
June 30,
2009 2008 2009
2008 Revenues $ 197,722 $ 222,770 $ 332,614 $ 421,310
Cost of sales 96,610 132,482 181,771
245,788 Gross profit 101,112 90,288 150,843 175,522 Selling,
general and administrative expenses 90,983 89,857 163,181 166,833
Restructuring charges 5,915 470 5,953 4,319 Impairment charges
23,655 2,903 23,724 13,716 Charitable contributions expense
5,078 - 5,119 - Loss from operations
(24,519) (2,942) (47,134) (9,346) Interest expense 562 598 1,257
971 Other expense (income) (343) 314 (1,446) (47) Gain on
charitable contributions (2,024) - (2,024)
- Loss before income taxes (22,714) (3,854) (44,921)
(10,270) Income tax expense (benefit) 7,567 (5,986)
7,777 (7,875) Net (loss) income $ (30,281) $ 2,132 $
(52,698) $ (2,395) Net Income (loss) per common share: Basic
($0.36) $ 0.03 ($0.62) ($0.03) Diluted ($0.36)
$ 0.03 ($0.62) ($0.03) Weighted average common shares
outstanding: Basic 84,882,241 82,718,731
84,638,783 82,603,666 Diluted 84,882,241
83,740,782 84,638,783 82,603,666
CROCS, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) (Unaudited)
June 30, 2009 December 31, 2008 ASSETS Current
assets: Cash and cash equivalents $ 77,477 $ 51,665 Restricted cash
813 - Accounts receivable, net 67,050 35,305 Inventories 111,615
143,205 Deferred tax assets, net 11,386 11,364 Income tax
receivable 1,138 24,417 Prepaid expenses and other current assets
21,010 13,415 Total current assets 290,489 279,371
Property and equipment, net 74,475 95,892 Restricted cash
1,795 2,922 Intangible assets, net 34,026 40,892 Deferred tax
assets, net 21,669 21,231 Other assets 15,113 15,691
Total assets $ 437,567 $ 455,999
LIABILITIES AND
STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $
42,296 $ 35,137 Accrued expenses and other current liabilities
48,613 50,076 Accrued restructuring charges 6,445 1,439 Deferred
tax liabilities, net 98 30 Income taxes payable 22,311 24,420
Note payable, current portion of
long-term debt andcapital lease obligations
17,732 22,431 Total current liabilities 137,495
133,533 Deferred tax liabilities, net 5,087 2,917 Long term
restructuring 663 959 Other liabilities 32,374 31,427
Total liabilities 175,619 168,836 Commitments
and contingencies (note 12) Stockholders’ equity:
Common shares, par value $0.001
per share;250,000,000 shares authorized, 86,144,566 and85,620,566
shares issued and outstanding,respectively, at June 30, 2009
and83,543,501 and 83,019,501 shares issued andoutstanding,
respectively, at December 31, 2008
84 84 Treasury Stock, 524,000 shares, at cost (25,022) (25,022)
Additional paid-in capital 256,981 232,037 Deferred compensation
(13) (246) Retained earnings 11,535 64,233 Accumulated other
comprehensive income 18,383 16,077 Total
stockholders’ equity 261,948 287,163 Total
liabilities and stockholders’ equity $ 437,567 $ 455,999
Crocs,
Inc. Reconciliation of GAAP Measures to Non-GAAP
Measures (In thousands, except share and per share data)
(Unaudited)
The Company prepares and reports its financial statements in
accordance with U.S. Generally Accepted Accounting Principles
(“GAAP”). Internally, management monitors the operating performance
of its business using non-GAAP metrics similar to those below.
These non-GAAP measures exclude the effects of foreign exchange
rate loss, restructuring activities, inventory write-down, asset
impairment charges and unusual gross profit on impaired inventory
sales. In management’s opinion, these non-GAAP measures are
important indicators of the continuing operations of our business
and provide better comparability between reporting periods because
they exclude items that may not be indicative of current period
results and provide a better baseline for analyzing trends in our
operations. The Company does not, nor does it suggest that
investors should, consider such non-GAAP financial measures in
isolation from, or as a substitute for, financial information
prepared in accordance with GAAP. The Company believes the
disclosure of the effects of these items increases the reader’s
understanding of the underlying performance of the business and
that such non-GAAP financial measures provide investors with an
additional tool to evaluate our financial results and assess our
prospects for future performance.
Non-GAAP Reconciliations 3 months
ended June 30, 2009 GAAP gross profit 101,112 Net
gross profit effect of sales of previously impaired units (25,259)
(1) Restructuring charges reflected in cost of sales 5,266 (2)
Additional stock-based
compensation expense related to tender offerreflected in cost of
sales
3,056 (3) Non-GAAP gross profit 84,175
3 months ended
3 months ended June 30, 2009 June 30, 2008
GAAP selling, general and administrative expense 90,983
89,857
Additional stock-based
compensation expense related to tender offerreflected in selling,
general and administrative expense
13,261 (3) - Foreign currency (gain)/loss (3,623) (4) (1,099)
Non-GAAP selling, general and administrative expense 81,345 90,956
3 months ended 3 months ended June 30,
2009 June 30, 2008 GAAP loss before income taxes
(22,714) (3,854) Net gross profit effect of sales of previously
impaired units (25,259) (1) - Additional stock-based compensation
expense related to tender offer 16,317 (3) - Foreign currency
(gain)/loss, net of tax (3,623) (4) (1,099) Restructuring charges
11,181 (2) 1,372 Asset impairment 23,655 (5) 2,903 Charitable
contributions expense 5,078 (5) 70 Gain on charitable contributions
(2,024) (5) - Non-GAAP net income (loss) before income taxes 2,611
(608) Tax expense 7,567 (6) (5,986) Non-GAAP net (loss) income
(4,956) 5,378 Non-GAAP net (loss) income per diluted share $ (0.06)
$ 0.06 (1) This pro forma adjustment in the GAAP to Non-GAAP
reconciliations above represents the gross profit realized on sales
of impaired units at selling prices much higher than our previously
estimated net realizable value for those units. Because the amount
presented is accretive to our gross profit percentage during the
quarter ended June 30, 2009 and represents a substantial change to
our previous estimate, management believes that exclusion of the
gross profit on these sales in evaluating our results of operations
provides important information for the reader of our financial
statements as such changes in estimates are not anticipated to be
recurring to the extent or magnitude they occurred during the
quarter. (2) This proforma adjustment in the GAAP to
Non-GAAP reconciliations above represents non-recurring
restructuring charges. Of the $11.2 million in total Q2 2009
restructuring charges, $5.3 million was reflected in cost of sales
and $5.9 million was reflected in its own line item in the
calculation of Q2 2009 operating loss. (3) This proforma
adjustment in the GAAP to Non-GAAP reconciliations above represents
additional stock-based compensation expense incurred as a result of
the acceleration of tendered options from the Q2 2009 tender offer.
The total Q2 2009 additional expense incurred as a result of the
tender offer was $16.3 million, of which $3.0 million was reflected
in cost of sales and $13.3 million was reflected in selling,
general and administrative expense. (4) The proforma
adjustments in this GAAP to Non-GAAP reconciliation represent the
add-back of GAAP charges taken in connection with our quarter
foreign currency exchange rate loss reflected in selling, general
and administrative expense. (5) The proforma adjustments in
this GAAP to Non-GAAP reconciliation represent the add-back of GAAP
charges taken in connection with our quarter asset impairment
charges as well as the expense and related gain on charitable
contributions during the quarter. (6) Represents GAAP-based
tax expense in the quarter. Because total tax expense in the
quarter related only to those jurisdictions where the Company made
money as well as taxes on royalty payments, the assumed tax rate on
the pro-forma adjustments above is zero.
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