Crocs, Inc. (NASDAQ: CROX) today reported financial results for
the third quarter ended September 30, 2010.
Revenue for the third quarter of 2010 increased 30% to $215.6
million, over recurring revenue of $165.7 million reported in the
third quarter of 2009. Recurring revenue is a non-GAAP measure that
excludes impaired product sales of $11.5 million in the third
quarter of 2009. On a GAAP basis, third quarter revenue increased
22% year-over-year.
Net income for the third quarter 2010 improved to $25.0 million,
or $0.28 per diluted share compared to net income of $22.1 million,
or $0.25 per diluted share in the third quarter 2009.
Excluding a one-time tax benefit of $3.0 million, or $0.03 per
diluted share, and other non-recurring charges, non-GAAP net income
was $22.1 million or $0.25 per diluted share in the third quarter
2010. This compares to third quarter 2009 equivalent non-GAAP net
income of $1.8 million, or $0.02 per diluted share.
Year-over-year third quarter changes in the Company’s channel
revenue streams, as reported, were as follows:
- Wholesale sales increased 16% to $123.9
million;
- Retail sales increased 35% to $72.5
million;
- Internet sales increased 19% to $19.2
million.
Changes in the Company’s regional revenue streams, as reported,
during the same quarterly periods were as follows:
- Americas increased 31% to $104
million;
- Asia increased 16% to $79 million;
- Europe increased 9% to $32.6
million.
Gross profit for the third quarter of 2010 increased 32% to
$118.8 million, or 55.1% as a percentage of sales, from $89.9
million, or 50.7% of sales in same period last year. Selling,
General, & Administrative expenses (including foreign exchange,
restructuring, impairment, and charitable contributions) increased
13% to $91.4 million versus $80.9 million a year ago. As a
percentage of sales, SG&A decreased to 42.4% from 45.7% in the
third quarter of 2009.
Balance Sheet
The Company’s cash and cash equivalents as of September 30, 2010
increased 88% to $143.1 million compared to $76.0 million at
September 30, 2009. The Company had no bank debt at September 30,
2010.
Inventory grew 25% to $142.5 million at September 30, 2010 from
$113.7 million at September 30, 2009. The increase is a result of
multiple factors including a 37% increase in backlog as of
September 30, 2010, an increase of 44 retail locations over the
third quarter 2009, strong new product sell through and the support
of 21% higher anticipated fourth quarter revenue. For the quarter
ended September 30, 2010, our inventory turnover was 3.0 on an
annualized basis.
The Company ended the third quarter of 2010 with accounts
receivable of $81.3 million compared to $65.8 million at September
30, 2009.
John McCarvel, President and Chief Executive Officer, commented,
“Our improved operating results continued to be driven by growing
consumer demand for our expanded product assortment. After a strong
summer selling season we began shipping significantly more of our
back-to-school and fall products to our global network of wholesale
accounts and distributors versus a year ago. We witnessed similar
trends in our consumer direct channel where weekly sell-through
rates of our new products exceeded internal projections. Our sales
performance year-to-date has been very encouraging and helped fuel
the 60% significant increase in our spring / summer 2011
backlog.”
Guidance
For the fourth quarter of 2010, the Company expects revenue of
approximately $165 million, a 21% increase over fourth quarter
2009. The company expects fourth quarter inventory to decrease
approximately 10% from the third quarter 2010. The Company expects
diluted earnings per share for the fourth quarter 2010 to increase
to approximately $0.02 per diluted share versus a diluted loss per
share of ($0.13) for the fourth quarter 2009.
Conference Call Information
A conference call to discuss Crocs’ third quarter 2010 financial
results is scheduled for today (November 4, 2010) 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.
A world leader in innovative casual footwear for men, women and
children, Crocs, Inc. (NASDAQ: CROX), offers several distinct shoe
collections with more than 120 styles to suit every lifestyle. As
lighthearted as they are lightweight, Crocs™ footwear provides
profound comfort and support for any occasion and every season. All
Crocs™ branded shoes feature Croslite™ material, a proprietary,
revolutionary technology that produces soft, non-marking, and
odor-resistant shoes that conform to your feet.
Crocs™ products are sold in 129 countries. Every day, millions
of Crocs™ shoe lovers around the world enjoy the exceptional form,
function, versatility and feel-good qualities of these shoes while
at work, school and play.
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
effectively manage our future growth or declines in revenue;
changing fashion trends; our ability to maintain and expand
revenues and gross margin, our management and information systems
infrastructure; our ability to repatriate cash held in foreign
locations in a timely and cost-effective manner; our ability to
develop and sell new products; our ability to obtain and protect
intellectual property rights; the effect of competition in our
industry; and the effect of potential adverse currency exchange
rate fluctuations; and other factors described in our most recent
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,
2010 2009 2010 2009
Revenues $ 215,605 $ 177,141 $ 610,503 $ 509,756 Cost of
sales 96,797 87,291 273,072
269,115 Gross profit 118,808 89,850 337,431
240,641 Selling, general and administrative expenses 92,192 77,995
261,017 240,654 Foreign Currency Transaction gains, net (908 )
(1,032 ) (2,329 ) (1,247 ) Restructuring charges - 17 2,539 5,916
Impairment charges - 1,722 141 25,447 Charitable contributions
expense 78 2,178 496
7,296 Income (loss) from operations 27,446
8,970 75,567 (37,425 ) Interest expense 153 155 445 1,412 Gain on
charitable contributions (19 ) (810 ) (135 ) (2,833 ) Other
(income) expense 137 (125 ) 87
(833 ) Income (loss) before income taxes 27,175 9,750 75,170
(35,171 ) Income tax (benefit) expense 2,179
(12,318 ) 12,173 (4,541 ) Net income (loss) $
24,996 $ 22,068 $ 62,997 $ (30,630 ) Net
income (loss) per common share: Basic $ 0.29 $ 0.26 $
0.73 ($0.36 ) Diluted $ 0.28 $ 0.25 $
0.72 ($0.36 )
CROCS, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data) (Unaudited)
September 30, 2010 December
31, 2009 September 30, 2009 ASSETS
Current assets: Cash and cash equivalents $ 143,057 $ 77,343 $
76,021 Restricted cash 577 1,144 245 Accounts receivable, net
81,303 50,458 65,794 Inventories 142,531 93,329 113,703 Deferred
tax assets, net 7,973 7,358 12,088 Income tax receivable 9,597
8,611 8,248 Other Receivables 11,008 16,140 7,580 Prepaid expenses
and other current assets 13,699 12,871
13,567 Total current assets 409,745 267,254 297,246
Property and equipment, net 65,882 71,084 70,738 Restricted
cash 1,675 1,506 2,358 Intangible assets, net 42,416 35,984 34,501
Deferred tax assets, net 18,859 18,479 22,507 Marketable Securities
1,040 866 - Other assets 15,054 14,565
15,623 Total assets $ 554,671 $ 409,738
$ 442,973
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 66,763 $ 23,434 $ 37,432
Accrued expenses and other current liabilities 65,216 53,589 55,443
Accrued restructuring charges 1,844 2,616 3,149 Income taxes
payable 18,188 6,377 16,308 Note payable, current portion of
long-term debt and capital lease obligations 1,861
640 628 Total current liabilities
153,872 86,656 112,960 Long-term debt and capital lease
obligations 1,235 912 1,391 Deferred tax liabilities, net 2,085
2,192 5,355 Long-term restructuring - 520 580 Other liabilities
32,532 31,838 30,043
Total liabilities 189,724 122,118
150,329 Commitments and contingencies
Stockholders’ equity: Common shares, par value $0.001 per share;
250,000,000 shares authorized, 87,705,254 and 87,136,697 shares
issued and outstanding, respectively, at September 30, 2010 and
86,224,760 and 85,659,581 shares issued and outstanding,
respectively, at December 31, 2009 and 86,167,242 and 85,643,242
shares issued and outstanding, respectively, at September 30, 2009.
87 85 85 Treasury Stock, at cost, 568,557 and 565,179 and
524,000 shares, respectively (23,610 ) (25,260 ) (25,022 )
Additional paid-in capital 273,418 266,472 259,205 Retained
earnings 85,152 22,155 33,603 Accumulated other comprehensive
income 29,900 24,168 24,773
Total stockholders’ equity 364,947
287,620 292,644 Total liabilities and
stockholders’ equity $ 554,671 $ 409,738 $ 442,973
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 non-recurring revenues from impaired inventory sales and
a one-time tax benefit resulting from the restructuring of our
international operations. 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 3
months ended September 30, 2010 September 30,
2009 GAAP revenue 215,605 177,141 Effect on revenue from
sales of previously impaired units - (11,480 )
(1)
Non-GAAP revenue 215,605 165,661
3 months
ended 3 months ended September 30, 2010
September 30, 2009 GAAP gross profit 118,808 89,850
Effect on gross profit from sales of previously impaired units -
(9,644 )
(1)
Restructuring charges included in cost of goods sold 91 459
(2)
Non-GAAP gross profit 118,899 80,665
3 months ended
September 30, 2010
GAAP Diluted EPS to
Non-GAAP Diluted EPS
3 months ended
September 30, 2009
GAAP Diluted EPS to
Non-GAAP Diluted EPS
GAAP net income/(loss) 24,996 0.28 22,068 0.25 One-time tax benefit
(3,000 ) (14,400 )
(3)
Effect on gross profit from sales of previously impaired units -
(9,644 )
(1)
Asset impairment - 1,722
(2)
Total restructuring charges 91 476
(2)
Tax impact on above adjustments:(4) (17 )
(4)
1,593
(4)
Non-GAAP net (loss) income 22,070 0.25
1,815 0.02 (1) This pro forma adjustment in
the GAAP to Non-GAAP reconciliations above represents the revenue
from impaired units at selling prices higher than our previously
estimated net realizable value for those units. Because the amounts
presented represent a substantial change to our previous estimate,
management believes that excluding these revenues in evaluating our
results of operations provides important information for the reader
of our financial statements as these items are not anticipated to
be recurring to the extent or magnitude they occurred during prior
quarters. (2) This proforma adjustment in the GAAP to
Non-GAAP reconciliations above represents non-recurring
restructuring and asset impairment charges. (3) Represents
benefits from the restructuring of our international operations and
cost sharing arrangements which resulted in one-time benefits from
a reduction in certain tax accruals during the periods presented.
(4) The assumed tax rates used for the three months ended
September 30, 2010 and 2009 were 19.1% and 21.4%, respectively.
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