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

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.



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