Crocs Inc. Reports Third Quarter Financial Results and Announces 15 Million Share Increase in Share Repurchase Authorization

Oct 30, 2013, 16:00 ET from Crocs, Inc.

NIWOT, Colo., Oct. 30, 2013 /PRNewswire/ -- Crocs Inc. (NASDAQ: CROX) reported today financial results for the third quarter of 2013. 

(Logo: http://photos.prnewswire.com/prnh/20130912/LA78683LOGO-b)

Third Quarter 2013 Highlights:

  • Revenue of $288.5 million
  • Gross Margin of 53.2 percent
  • Net income of $13.0 million
  • Earnings per diluted share of $0.15
  • Non-GAAP adjusted net income1 per diluted share of $0.18
  • Global cash balance increased by $43.1 million in the quarter

"During the third quarter we saw strong performance in our Asia Pacific region and marked improvement in all channels of our European business," said John McCarvel, President and Chief Executive Officer.  "This positive performance was counterbalanced by weakness in the Americas and Japan where all sales channels performed below our expectations.  The underperformance was especially acute in the Americas where we were impacted by wholesale accounts trimming at once orders to remain lean on inventory coupled with weak consumer confidence affecting our consumer-direct performance."

Share Repurchase Authorization

On October 29, 2013, the company's board of directors approved the repurchase of up to an additional 15.0 million shares under the company's existing stock repurchase authorization.  This brings the total shares available for repurchase by the company under the existing authorization to approximately 17.8 million shares, or approximately 20 percent of the common outstanding shares at September 30, 2013.  The number, price and timing of repurchases will be at the company's sole discretion and will be evaluated depending on market conditions, liquidity needs or other factors. The company's board of directors may suspend, modify or terminate the program at any time without prior notice.

Third Quarter Results

Revenue for the third quarter of 2013 was $288.5 million compared with revenue of $295.6 million reported in the third quarter of 2012.  On a constant currency basis revenue increased 0.9% for the third quarter of 2013. 

For third quarter of 2013, the company had net income of $13.0 million or $0.15 per diluted share, compared with net income of $45.1 million or $0.49 per diluted share in the prior year period.

Adjusting for the impact of the $3.1 million relating to the implementation of a new ERP system including non-cash accelerated depreciation and cash expenses for program management, training and other non-capitalized costs, the company had Non-GAAP adjusted net income of $16.1 million in the quarter or $0.18 per diluted share.

Margins

Gross profit for the third quarter of 2013 was $153.6 million, or 53.2% as a percentage of sales, compared with $160.7 million, or 54.4% as a percentage of sales in the prior year period. The year- over-year decrease in gross profit as a percentage of sales was primarily related to lower wholesale and internet revenue in the Americas and Japan.  Selling, General & Administrative ("SG&A") expenses increased 12.4% to $135.7 million compared with $120.7 million a year ago, due primarily to increases in retail store space, marketing expenses, and the company's ERP project.  As a percentage of sales, SG&A increased to 47.0% compared with 40.8% in the third quarter of 2012. 

(1)

Non-GAAP adjusted net income is a financial measure not calculated in accordance with U.S. Generally Accepted Accounting Principles (non-GAAP). See the non-GAAP reconciliations set forth later in this press release for additional information.

Revenue Results – Channel and Regional

The following tables detail the company's three and nine months 2013 and 2012 revenues:

Three Months Ended September 30,

Change

Constant Currency Change(1)

($ thousands)

2013

2012

$

%

$

%

Channel revenues:

  Wholesale:

    Americas

$

45,134

$

56,445

$

(11,311)

(20.0)

%

$

(10,504)

(18.6)

%

    Asia Pacific

43,268

42,291

977

2.3

1,352

3.2

    Japan

24,536

34,685

(10,149)

(29.3)

(3,807)

(11.0)

    Europe

27,414

22,667

4,747

20.9

3,463

15.3

    Other businesses

37

161

(124)

(77.0)

(118)

(73.3)

      Total Wholesale

140,389

156,249

(15,860)

(10.2)

(9,614)

(6.2)

  Consumer-direct:

    Retail:

      Americas

59,839

58,798

1,041

1.8

1,369

2.3

      Asia Pacific

33,469

28,549

4,920

17.2

5,013

17.6

      Japan

12,397

13,277

(880)

(6.6)

2,285

17.2

      Europe

18,995

11,550

7,445

64.5

6,985

60.5

        Total Retail

124,700

112,174

12,526

11.2

15,652

14.0

    Internet:

      Americas

11,221

16,705

(5,484)

(32.8)

(5,414)

(32.4)

      Asia Pacific

2,669

2,124

545

25.7

573

27.0

      Japan

2,051

2,769

(718)

(25.9)

(192)

(6.9)

      Europe

7,494

5,548

1,946

35.1

1,548

27.9

        Total Internet

23,435

27,146

(3,711)

(13.7)

(3,485)

(12.8)

Total revenues:

$

288,524

$

295,569

$

(7,045)

(2.4)

%

$

2,553

0.9

%

Three Months Ended September 30,

Change

Constant Currency Change(1)

($ thousands)

2013

2012

$

%

$

%

Regional Revenue:

  Americas

$

116,194

$

131,948

$

(15,754)

(11.9)

%

$

(14,549)

(11.0)

%

  Asia Pacific

79,406

72,964

6,442

8.8

6,938

9.5

  Japan

38,984

50,731

(11,747)

(23.2)

(1,714)

(3.4)

  Europe

53,903

39,765

14,138

35.6

11,996

30.2

  Other businesses

37

161

(124)

(77.0)

(118)

(73.3)

Total revenues:

$

288,524

$

295,569

$

(7,045)

(2.4)

%

$

2,553

0.9

%

    

(1)

Current period results have been restated using 2012 average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.

    

Nine Months Ended September 30,

Change

Constant Currency Change(1)

($ thousands)

2013

2012

$

%

$

%

Channel revenues:

  Wholesale:

      Americas

$

195,827

$

187,870

$

7,957

4.2

%

$

9,824

5.2

%

      Asia Pacific

180,205

147,628

32,577

22.1

31,374

21.3

      Japan

78,116

101,863

(23,747)

(23.3)

(6,645)

(6.5)

      Europe

107,689

97,773

9,916

10.1

8,166

8.4

      Other businesses

200

333

(133)

(39.9)

(135)

(40.5)

        Total Wholesale

562,037

535,467

26,570

5.0

42,584

8.0

  Consumer-direct:

    Retail:

      Americas

156,784

149,296

7,488

5.0

8,167

5.5

      Asia Pacific

93,937

79,290

14,647

18.5

14,195

17.9

      Japan

30,625

31,476

(851)

(2.7)

6,131

19.5

      Europe

46,734

25,158

21,576

85.8

21,076

83.8

        Total Retail

328,080

285,220

42,860

15.0

49,569

17.4

    Internet:

      Americas

39,267

46,700

(7,433)

(15.9)

(7,298)

(15.6)

      Asia Pacific

7,553

5,322

2,231

41.9

2,181

41.0

      Japan

6,074

6,997

(923)

(13.2)

404

5.8

      Europe

20,996

18,603

2,393

12.9

1,786

9.6

        Total Internet

73,890

77,622

(3,732)

(4.8)

(2,927)

(3.8)

Total revenues:

$

964,007

$

898,309

$

65,698

7.3

%

$

89,226

9.9

%

Nine Months Ended September 30,

Change

Constant Currency Change(1)

($ thousands)

2013

2012

$

%

$

%

Regional Revenue:

  Americas

$

391,878

$

383,866

$

8,012

2.1

%

$

10,693

2.8

%

  Asia Pacific

281,695

232,240

49,455

21.3

47,750

20.6

  Japan

114,815

140,336

(25,521)

(18.2)

(110)

(0.1)

  Europe

175,419

141,534

33,885

23.9

31,028

21.9

  Other businesses

200

333

(133)

(39.9)

(135)

(40.5)

Total revenues:

$

964,007

$

898,309

$

65,698

7.3

%

$

89,226

9.9

%

     

(1)

Current period results have been restated using 2012 average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.

Other Financial Information

Comparable Store Sales Results

Comparable store sales on a constant currency basis for the three months ended September 30, 2013 compared with the prior year period were as follows:

Constant Currency

Constant Currency

Three Months Ended

Three Months Ended

Comparable store sales growth (1)

September 30, 2013 (2)

September 30, 2012 (2)

Americas

(8.3)

%

5.5

%

Asia Pacific

6.0

(2.2)

Japan

(16.3)

(15.1)

Europe

8.8

0.9

Total

(4.2)

%

1.0

%

 

Comparable store sales on a constant currency basis for the nine months ended September 30, 2013 compared with the prior year period were as follows:

Constant Currency

Constant Currency

Nine Months Ended

Nine Months Ended

Comparable store sales growth (1)

September 30, 2013 (2)

September 30, 2012 (2)

Americas

(5.1)

%

3.7

%

Asia Pacific

7.2

5.9

Japan

(16.1)

(11.2)

Europe

3.1

7.5

Total

(2.4)

%

3.1

%

(1)

Current period results have been restated using 2012 average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.

(2)

Comparable store status is determined on a monthly basis. Comparable store sales begin in the thirteenth month of a store's operation. Stores in which selling square footage has changed more than 15% as a result of a remodel, expansion or reduction are excluded until the thirteenth month they have comparable prior year sales. Temporarily closed stores are excluded from the comparable store sales calculation during the month of closure. Location closures in excess of three months are excluded until the thirteen month post re-opening.

Balance Sheet

Cash and cash equivalents at September 30, 2013 were $332.5 million, an increase of 13.0% compared with December 31, 2012.  Inventories at September 30, 2013 were $176.1 million, up 6.9% compared with inventory at December 31, 2012.

Backlog

Backlog at September 30, 2013 was $398.6 million compared with $395.5 million in the prior year period.  On a constant currency basis backlog at September 30, 2013 was an estimated 4% higher than the prior year period. 

Financial Outlook

For the fourth quarter of 2013, the company expects revenue between $220 million and $225 million and a loss between $(0.20) and $(0.23) per share.  This outlook includes $(0.03) per share of ERP implementation expense and reflects an impact of $(0.04) for currency translation.

Conference Call Information

A conference call to discuss Crocs' third quarter 2013 results is scheduled for today (October 30, 2013) 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 and at www.earnings.com. An audio replay of the webcast will be available on the Crocs website for one year.

Interested parties are advised to log on to the live webcast at least fifteen minutes prior to the call in order to download the necessary software.

About Crocs, Inc.

Crocs, Inc. is a world leader in innovative casual footwear for men, women and children. Crocs offers several distinct shoe collections with more than 300 four-season footwear styles. All Crocs™ shoes feature Croslite™ material, a proprietary, revolutionary technology that gives each pair of shoes the soft, comfortable, lightweight, non-marking and odor-resistant qualities that Crocs fans know and love. Crocs fans "Get Crocs Inside" every pair of shoes, from the iconic clog to new sneakers, sandals, boots and heels. Since its inception in 2002, Crocs has sold more than 200 million pairs of shoes in more than 90 countries around the world.

Visit www.crocs.com for additional information.

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 include, but are not limited to, statements regarding future revenue and earnings, backlog, future orders, prospects, investments in our business, outlook and product pipeline. 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 conditions; the effect of competition in our industry; 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 ability to  accurately forecast consumer demand for our products; our ability to develop and sell new products; our ability to obtain and protect intellectual property rights; the effect of potential adverse currency exchange rate fluctuations and other international operating risks; our ability to open and operate additional retail locations; 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.

All information in this document speaks as of October 30, 2013.  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 INCOME (UNAUDITED)

Three Months Ended

Nine Months Ended

September 30,

September 30,

($ thousands, except per share data)

2013

2012

2013

2012

Revenues  

$

288,524

$

295,569

$

964,007

$

898,309

Cost of sales  

134,943

134,826

443,710

396,682

  Gross profit  

153,581

160,743

520,297

501,627

Selling, general and administrative expenses  

135,674

120,729

414,119

349,737

Asset impairment

-

-

202

819

  Income from operations  

17,907

40,014

105,976

151,071

Foreign currency transaction losses, net  

1,043

21

4,457

2,670

Interest income

(853)

(151)

(1,676)

(1,057)

Interest expense

44

377

519

556

Other (income) expense, net  

13

71

180

(690)

  Income before income taxes  

17,660

39,696

102,496

149,592

Income tax expense (benefit)

4,624

(5,384)

25,143

14,642

  Net income

$

13,036

$

45,080

$

77,353

$

134,950

Net income per common share:

  Basic  

$

0.15

$

0.50

$

0.88

$

1.50

  Diluted

$

0.15

$

0.49

$

0.87

$

1.48

 

    

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

September 30,

December 31,

($ thousands, except number of shares)

2013

2012

ASSETS

Current assets:

   Cash and cash equivalents 

$

332,491

$

294,348

   Accounts receivable, net of allowances of $14,626 and $13,315, respectively 

120,079

92,278

   Inventories 

176,118

164,804

   Deferred tax assets, net 

5,647

6,284

   Income tax receivable 

16,666

5,613

   Other receivables 

17,201

24,821

   Prepaid expenses and other current assets 

30,869

24,967

        Total current assets 

699,071

613,115

Property and equipment, net 

94,233

82,241

Intangible assets, net 

69,081

59,931

Deferred tax assets, net 

33,529

34,112

Other assets 

50,672

40,239

        Total assets 

$

946,586

$

829,638

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Accounts payable 

$

66,198

$

63,976

   Accrued expenses and other current liabilities 

99,277

81,371

   Deferred tax liabilities, net 

2,383

2,405

   Income taxes payable 

27,868

8,147

   Current portion of long-term borrowings and capital lease obligations 

4,262

2,039

        Total current liabilities 

199,988

157,938

Long term income tax payable 

32,457

36,343

Long-term borrowings and capital lease obligations

9,345

4,596

Other liabilities 

14,571

13,361

        Total liabilities 

256,361

212,238

Commitments and contingencies

Stockholders' equity:

   Preferred shares, par value $0.001 per share, 5,000,000 shares authorized, none outstanding 

-

-

   Common shares, par value $0.001 per share, 250,000,000 shares authorized, 91,643,474 and 88,426,104 shares issued and outstanding, respectively, at September 30, 2013 and 91,047,297 and 88,662,845 shares issued and outstanding, respectively, at December 31, 2012 

92

91

   Treasury stock, at cost, 3,217,370 and 2,384,452 shares, respectively 

(56,198)

(44,214)

   Additional paid-in capital 

319,516

307,823

   Retained earnings 

411,365

334,012

   Accumulated other comprehensive income 

15,450

19,688

        Total stockholders' equity 

690,225

617,400

        Total liabilities and stockholders' equity 

$

946,586

$

829,638

    

 

CROCS, INC. AND SUBSIDIARIES

NON-GAAP NET INCOME RECONCILIATIONS (UNAUDITED)

 (In thousands)

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 the non-GAAP metrics constant currency and Non-GAAP adjusted net income. Constant currency excludes the effects of foreign exchange rate fluctuations by restating current period results using the prior year average exchange rates. Non-GAAP adjusted net income excludes the impact of new enterprise resource planning system ("ERP") implementation expenses, a one-time net expense related to the resolution of a statutory tax audit in Brazil and the accelerated depreciation and amortization of our current ERP system. In management's opinion, these non-GAAP measures are used by, and are useful to, investors and other users of our financial statements in evaluating operating performance by providing better comparability between reporting periods because they exclude items that may not be indicative of overall business trends 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.    

The following is a reconciliation of our net income, the most directly comparable U.S. GAAP measure, to Non-GAAP adjusted net income:

Three Months Ended September 30,

Nine Months Ended September 30,

Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income:

2013

2012

2013

2012

GAAP net income

$

13,036

$

45,080

$

77,353

$

134,950

 New ERP implementation (1)

2,137

-

4,246

-

 Brazil tax credits (2)

-

-

6,094

-

 Depreciation and amortization (3)

952

-

2,587

-

Non-GAAP adjusted net income

$

16,125

$

45,080

$

90,280

$

134,950

Non-GAAP adjusted net income per diluted share

$

0.18

$

0.49

$

1.02

$

1.48

(1) This proforma adjustment in the GAAP to Non-GAAP reconciliations above represents expenses related to the implementation of a new ERP system.

(2) This proforma adjustment in the GAAP to Non-GAAP reconciliations above represents a one-time net expense related to the resolution of a statutory tax audit in Brazil. In April 2013, the State of Sao Paulo, Brazil government ("Brazil") assessed sales taxes, interest and penalties for the period April 2009 to May 2011. We had previously tendered these taxes using Brazil obligations purchased from third parties at a discount.  On May 22, 2013, we applied for amnesty in order to receive a significant reduction in penalties and interest, agreed to amend our 2009 through 2012 tax returns to remove the Brazil obligations, and agreed to settle the assessment in cash to Brazil. In June 2013, cash payment was made to Brazil, in full satisfaction of the Brazil assessment. Brazil is making court-ordered payments to holders of the Brazil obligations along with accrued interest.   The Company anticipates that the Brazil obligations (plus accrued interest) will be paid by Brazil in accordance with the court-orders.  The Company is carrying the Brazil obligations at the original discounted cost to the Company and intends to hold the Brazil obligations until paid by Brazil. The net impact of the above is a $6.1 million charge to operating income, and the carrying balance of the Brazil obligations in investments is $3.5 million. 

(3) This proforma adjustment in this GAAP to Non-GAAP reconciliation represents the add-back of accelerated depreciation and amortization on tangible and intangible items related to our current ERP system and supporting platforms that will no longer be utilized once the implementation of a new ERP is complete.

    

CROCS, INC. AND SUBSIDIARIES

RETAIL STORE COUNTS

(UNAUDITED)

September 30,

September 30,

Company-operated retail locations:

2012

 Opened 

 Closed 

2013

Type:

   Kiosk/Store in Store 

133

26

(37)

122

   Retail Stores 

245

95

(25)

315

   Outlet Stores 

121

40

(4)

157

      Total 

499

161

(66)

594

Operating segment:

   Americas 

189

45

(26)

208

   Asia Pacific

197

59

(35)

221

   Japan

36

15

(1)

50

   Europe 

77

42

(4)

115

      Total 

499

161

(66)

594

    

CROCS, INC. AND SUBSIDIARIES

BACKLOG

(UNAUDITED)

September 30,

($ thousands)

2013

2012

Americas

$

120,913

$

137,999

Asia Pacific

150,350

136,382

Japan

52,000

70,655

Europe

75,338

50,433

Total backlog(1)

$

398,601

$

395,469

(1) We receive a significant portion of orders as preseason orders, generally four to six months prior to shipment date. We provide customers with price incentives to participate in such preseason programs to enable us to better plan our production schedule, inventory and shipping needs. Unfulfilled customer orders as of any date are referred to as backlog and represent orders scheduled to be shipped at a future date. Backlog as of a particular date is affected by a number of factors, including seasonality, manufacturing schedule and the timing of product shipments. Further, the mix of future and immediate delivery orders can vary significantly period over period. Due to these factors and since the unfulfilled orders can be canceled at any time prior to shipment by our customers, backlog may not be a reliable measure of future sales and comparisons of backlog from period to period may be misleading. In addition, our historical cancellation experience may not be indicative of future cancellation rates. While all orders in the backlog are subject to cancellation by customers, we expect that the majority of these orders will be fulfilled within one year.

 

SOURCE Crocs, Inc.



RELATED LINKS

http://www.crocs.com