Crocs, Inc. (NASDAQ: CROX) today reported financial results for
the third quarter ended September 30, 2009.
Third quarter 2009 revenues increased 1.7% to $177.1 million
compared to revenues of $174.2 million in the year ago period,
ahead of the Company’s guidance for revenues between $150 and $160
million. The Company’s third quarter 2009 revenue included $11.5
million in planned sales of previously impaired footwear.
The Company reported net income of $22.1 million in the third
quarter of 2009 with diluted earnings per share of $0.25, compared
to a third quarter 2008 net loss of $148.0 million, or ($1.79) per
diluted share. Third quarter 2009 net income includes the effects
of the following:
- $9.6 million gross margin impact
related to sales of product that had been previously impaired,
- $1.0 million gain from foreign
currency exchange rate fluctuations during the 2009 third quarter,
and
- $14.4 million one-time tax
benefit related to a change in the Company’s corporate tax
structure.
These positive effects on net income were partially offset by
the unfavorable impacts of $3.6 million in impairment and
restructuring charges and net charitable donations.
On a non-GAAP basis, the Company’s third quarter 2009 net income
after taxes and excluding certain other one-time items was $0.6
million, or $0.01 per diluted share.
Year-over-year third quarter changes in the Company’s channel
revenue streams were as follows:
- Retail sales increased 39.6% to
$53.9 million;
- Internet sales increased 61.0%
to $16.1 million; and
- Wholesale sales decreased 14.7%
to $107.1 million.
Changes in the Company’s regional revenue streams during the
same periods were as follows:
- Asia increased 7.4% to $68.0
million;
- Europe increased 1.7% to $29.9
million; and
- Americas decreased 2.8% to $79.3
million.
Balance Sheet
The Company’s cash and cash equivalents as of September 30, 2009
increased nearly 50% since December 31, 2008 to $76.0 million,
despite fully repaying previously-outstanding debt of $17.3 million
during the quarter. During the quarter, the Company also secured a
new asset-backed credit facility with up to $30.0 million in
borrowings available, which is intended to provide additional
liquidity and flexibility in the future.
Inventory of $113.7 million at September 30, 2009 was 20.6%
lower than at December 31, 2008 resulting in a trailing twelve
month inventory turnover of 3 times.
The Company ended the third quarter of 2009 with accounts
receivable of $65.8 million compared to $35.3 million at December
31, 2008 as a result of higher sales in the quarter. Days sales
outstanding decreased from 37.5 days for the three months ended
September 30, 2008 to 34.2 days for the three months ended
September 30, 2009.
Net capital expenditures in the third quarter of 2009 were $6.1
million compared to $18.3 million the third quarter of 2008.
“Our third quarter results were driven by the continuing
strength of our consumer-direct businesses and the favorable
effects of our cost reduction programs,” said John Duerden,
President and Chief Executive Officer. “While we are encouraged by
our top-line growth and return to profitability in the quarter, the
normal seasonality of our business will make it difficult to
maintain profitability in the fourth quarter. However, future
wholesale bookings for the spring 2010 line are strong in all
regions. When coupled with the launch of our new, targeted
marketing programs, this provides us with increased confidence that
we will return to profitability during 2010. In the meantime, we
will continue to invest in the products, systems, processes and
customer relationships necessary to deliver the best long-term
results.”
Guidance
The Company expects to generate between $110 million and $115
million in revenue during its fiscal fourth quarter, with a loss
per diluted share between ($0.20) and ($0.15). This guidance
excludes the effect of fluctuations in foreign currency, charitable
contributions and one-time and non-recurring charges. Guidance
includes the effect of impaired inventory sales and will on a
go-forward basis.
Conference Call Information
A conference call to discuss Crocs’ third quarter 2009 financial
results is scheduled for today (November 5, 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 125 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
September 30,
Nine Months Ended
September 30,
2009 2008 2009 2008 Revenues $
177,141 $ 174,187 $ 509,756 $ 595,497 Cost of sales 87,291
171,788 269,115 417,575
Gross profit 89,850 2,399 240,641 177,922 Selling, general
and administrative expenses 76,963 104,391 239,407 270,959
Restructuring charges 17 2,450 5,916 6,769 Impairment charges 1,722
31,584 25,447 45,301 Charitable contributions expense 2,178
- 7,296 265
Income (loss) from operations 8,970 (136,026 ) (37,425 ) (145,372 )
Interest expense 155 413 1,412 1,385 Gain on charitable
contributions (810 ) - (2,833 ) - Other (income) expense
(125 ) (734 ) (833 ) (782 ) Income (loss)
before income taxes 9,750 (135,705 ) (35,171 ) (145,975 ) Income
tax (benefit) expense (12,318 ) 12,275
(4,541 ) 4,399 Net income (loss) $ 22,068 $
(147,980 ) $ (30,630 ) $ (150,374 ) Net income (loss) per common
share: Basic $ 0.26 ($1.79 ) ($0.36 )
($1.82 ) Diluted $ 0.25 ($1.79 ) ($0.36 )
($1.82 ) Weighted average common shares outstanding: Basic
85,514,385 82,854,419 84,933,858
82,687,861 Diluted 87,479,318
82,854,419 84,933,858 82,687,861
CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands,
except share data) (Unaudited)
September 30, 2009 December 31, 2008 ASSETS
Current assets: Cash and cash equivalents $ 76,021 $ 51,665
Restricted cash 245 - Accounts receivable, net 65,794 35,305
Inventories 113,703 143,205 Deferred tax assets, net 12,088 11,364
Income tax receivable 8,248 24,417 Prepaid expenses and other
current assets 21,147 13,415
Total current assets
297,246 279,371 Property and equipment, net 70,738 95,892
Restricted cash 2,358 2,922 Intangible assets, net 34,501 40,892
Deferred tax assets, net 22,507 21,231 Other assets 15,623
15,691 Total assets $ 442,973 $ 455,999
LIABILITIES AND STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 37,432 $ 35,137 Accrued expenses
and other current liabilities 55,345 50,076 Accrued restructuring
charges 3,149 1,439 Deferred tax liabilities, net 98 30 Income
taxes payable 16,308 24,420 Note payable, current portion of
long-term debt and capital lease obligations 628
22,431 Total current liabilities 112,960 133,533
Long-term debt and capital lease obligations 1,391 -
Deferred tax liabilities, net 5,355 2,917 Long-term restructuring
580 959 Other liabilities 30,043 31,427
Total liabilities 150,329 168,836
Commitments and contingencies (note 12) Stockholders’
equity:
Common shares, par value $0.001
per share; 250,000,000 sharesauthorized, 86,167,242 and 85,643,242
shares issued andoutstanding, respectively at September 30, 2009
and 83,543,501and 83,019,501 shares issued and outstanding,
respectively atDecember 31, 2008
85 84 Treasury Stock, 524,000 shares, at cost (25,022 ) (25,022 )
Additional paid-in capital 259,205 232,037 Deferred compensation -
(246 ) Retained earnings 33,603 64,233 Accumulated other
comprehensive income 24,773 16,077
Total stockholders’ equity 292,644 287,163
Total liabilities and stockholders’ equity $ 442,973
$ 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 9 months ended
September 30, 2009 September 30, 2009 GAAP
gross profit 89,850 240,641 Net gross profit effect of sales of
previously impaired units (9,644 ) (1) (41,585 ) (1) Restructuring
charges reflected in cost of sales 459 (2) 5,779 (2)
Additional stock-based
compensation expense related to tender offerreflected in cost of
sales
- 3,056 (3) Non-GAAP gross profit
80,665 207,891
3 months
ended 9 months ended September 30, 2009
September 30, 2009 GAAP selling, general and
administrative expense 76,963 239,407
Additional stock-based
compensation expense related to tender offerreflected in selling,
general and administrative expense
- 13,261 (3 ) Foreign currency (gain)/loss (1,032 ) (4 )
(1,246 ) (4 ) Non-GAAP selling, general and administrative
expense 77,995 227,392
3
months ended 9 months ended September 30, 2009
September 30, 2009 GAAP Income/(loss) before income
taxes 9,750 (35,171 ) Net gross profit effect of sales of
previously impaired units (9,644 ) (1 ) (41,585 ) (1 ) Additional
stock-based compensation expense related to tender offer - 16,317
(3 ) Foreign currency (gain)/loss, net of tax (1,032 ) (4 ) (1,246
) (4 ) Restructuring charges 476 (2 ) 11,695 Asset impairment 1,722
(5 ) 25,447 (5 ) Charitable contributions expense 2,178 (5 ) 7,296
(5 ) Gain on charitable contributions (810 ) (5 )
(2,833 ) (5 ) Non-GAAP net income (loss) before income taxes
2,640 (20,080 ) Tax expense 2,082 (6 ) 9,859 (6 )
One-time tax benefit (14,400 ) (7 ) (14,400 ) (7 )
Non-GAAP net (loss) income 558 (29,939 )
Non-GAAP net (loss) income per diluted share $ 0.01 $ (0.36
) (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
three and nine months ended September 30, 2009 and represents a
substantial change to our previous estimate of realizable value,
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 $0.5
million in total Q3 2009 restructuring charges, $459 thousand was
reflected in cost of sales and the remaining amount was reflected
in its own line item in the calculation of Q3 2009 operating loss.
For the nine months ended September 30, 2009, $5.8 million was
reflected in cost of sales with the remaining amount reflected in
its own line item in the calculation of operating loss for the nine
months ended September 30, 2009. (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. These amounts are reflected in
our reconciliations for the nine month period ended September 30,
2009 only. (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 tax expense, net of the $14.4
million one-time tax benefit in the quarter (See Note 7). 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. (7) Represents a one-time tax benefit
resulting from the restructuring of our international operations
and cost sharing arrangements, resulting in a one-time benefit of
$11.8 million from a reduction in certain taxes previously accrued
with an associated accrual for uncertain tax benefits of $2.6
million.
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