Crocs Inc. (NASDAQ:CROX) today reported financial results for the
third quarter ended September 30, 2015.
Third Quarter Highlights:
- Revenue was $274.1 million. On a constant currency basis,
revenue decreased 0.8% as compared to the prior year.
- Net loss attributable to common stockholders on a GAAP basis
was $27.8 million or a loss of $0.37 per share.
- Excluding certain non-recurring and special charges, the
company reported a non-GAAP adjusted net loss attributable to
common shareholders of $19.2 million.
Gregg Ribatt, Chief Executive Officer, said: "We delivered third
quarter sales in line with our revised expectations reflecting
challenges in China and currency. For the third quarter, revenue on
a constant currency basis and adjusted for business model changes
was up 3.7%. Our China business is undergoing changes as we
transition away from under-performing distributors. We faced some
difficult decisions in China and as a result we increased reserves
for doubtful accounts by $19 million at the end of the third
quarter. We also held shipments to several of our China
distributors, which negatively affected Q3 revenue by $4.0
million. However, these actions set us up for improved
business performance in the future.
Ribatt continued "We aggressively cleared out aged and excess
inventory which impacted margins in the quarter, but positions us
for improved results in 2016.Our core business continues to
stabilize around the globe and we believe the strategy we outlined
last July is positioning Crocs for sustained success in the
future. The company continues to make meaningful
progress implementing our strategy which
includes: strengthening our brand; elevating our product
stories; evolving our international business to focus on our six
core markets; strengthening our relationships with key wholesale
partners; improving our direct to consumer capabilities;
simplifying our business model; enhancing our supply chain and
building a best in class management team."
Third quarter financial results & Balance Sheet
In the third quarter of 2015, the company reported a GAAP net
loss attributable to common stockholders of $27.8 million or $0.37
per share, compared with net income of $12.0 million or $0.12 per
diluted share in the same quarter of the prior year.
As outlined in detail in the non-GAAP reconciliations set forth
later in this press release, the company recorded $8.6 million in
non-recurring and special charges in the third quarter of 2015
compared with $17.4 million in non-recurring and special charges in
the third quarter of 2014. Excluding these items the company
reported:
- Non-GAAP operating loss of $12.1 million versus net income of
$18.5 million in the comparable prior year period.
- On a comparable basis, non-GAAP adjusted net loss attributable
to common shareholders of $19.2 million in the quarter versus net
income of $29.4 million in the third quarter of 2014.
Cash and cash equivalents at September 30, 2015, were $168.5
million. Inventory was $190.8 million compared with $171.0
million on December 31, 2014.
Mr. Ribatt stated, "Despite near term challenges in the business
from global currencies and macro level economic conditions in
China, we continue to make steady progress in the strategic
transformation of Crocs. The full impact of our transformation will
be seen during the first half of 2016 as we complete the 18-24
month turnaround process that we have been discussing over the past
year. As part of this process, our new product and marketing
initiatives are driving favorable wholesale bookings that we have
seen from customers around the globe. We believe we are on the
verge of meaningful growth, as our Spring/Summer 2016 line begins
to ship. This is the first product line that our new management
team will have had a chance to impact and we believe this new
product slate will have a positive impact on our operating
results."
Carrie Teffner Appointed Chief Financial Officer
Carrie Teffner is joining the company as chief financial officer
from the company's board of directors effective December 16,
2015. Teffner is the former chief financial officer of
PetSmart, Weber-Stephens, and Timberland. In conjunction with
Teffner's new appointment she will be stepping down from the
company's board of directors.
Mr. Ribatt stated, "We are thrilled to have Carrie Teffner join
the company as chief financial officer. Carrie is a great business
partner and has a strong finance, operations, and strategy
background. We look forward to her joining the company next
month."
Financial Outlook
The company expects Q4 revenue in the $200 to $210 million range
compared to $206.5 million last year.
Stock Repurchase
The company repurchased 2.3 million shares of common stock in
the third quarter of 2015 at an average price of $14.50. The
company ended the quarter at 73.6 million common shares outstanding
and third quarter weighted average shares outstanding was 74.3
million.
Conference Call Information
A teleconference call to discuss third quarter 2015 results is
scheduled for today, Thursday November 5th, 2015, at 8:30 am
EST. The call participation number is (888) 771-4371. A
recording of the conference call will be available two hours after
the completion of the call at (888) 843-7419. International
participants can dial (847) 585-4405 to take part in the conference
call and can access a replay of the call at (630) 652-3042. All of
the above calls will require the input of the conference
identification number 41044719. The call also will
be streamed on the Crocs website, www.crocs.com. An audio
recording of the conference call will be available at www.crocs.com
through December 5, 2015
About Crocs, Inc.
Crocs, Inc. is a world leader in innovative casual footwear for
men, women and children. Crocs offers a broad portfolio of
all-season products, while remaining true to its core molded
footwear heritage. 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 celebrates the fun
of being a little different and encourages fans to "Find Your Fun"
in every colorful pair of shoes. Since its inception in 2002, Crocs
has sold more than 300 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 prospects,
investments in our business and outlook. 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 successfully implement our strategic plans; 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;; 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 November 5, 2015.
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 (Unaudited) ($
thousands, except per share data) |
|
|
|
|
Three Months
Ended September 30, |
Nine Months Ended
September 30, |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Revenues |
$ 274,088 |
$ 302,401 |
$ 881,952 |
$ 991,750 |
Cost of sales |
153,267 |
146,801 |
443,891 |
475,323 |
Restructuring charges |
-- |
583 |
-- |
2,612 |
Gross profit |
120,821 |
155,017 |
438,061 |
513,815 |
Selling, general and administrative
expenses |
135,110 |
143,719 |
429,815 |
434,244 |
Restructuring charges |
981 |
7,585 |
7,454 |
13,895 |
Asset impairment charges |
5,460 |
2,600 |
7,535 |
5,830 |
Income (loss) from operations |
(20,730) |
1,113 |
(6,743) |
59,846 |
Foreign currency transaction gain (loss),
net |
(2,908) |
(1,290) |
(2,631) |
(4,278) |
Interest income |
268 |
424 |
752 |
1,304 |
Interest expense |
(171) |
(366) |
(650) |
(685) |
Other income (loss), net |
405 |
217 |
(6) |
388 |
Income (loss) before income
taxes |
(23,136) |
98 |
(9,278) |
56,575 |
Income tax benefit (expense) |
(888) |
15,669 |
(3,745) |
(8,407) |
Net income (loss) |
$ (24,024) |
$ 15,767 |
$ (13,023) |
$ 48,168 |
|
|
|
|
|
Dividends on Series A convertible preferred
stock |
(3,000) |
(3,067) |
(8,833) |
(8,233) |
Dividend equivalents on Series A convertible
preferred shares related to redemption value accretion and
beneficial conversion feature |
(752) |
(691) |
(2,209) |
(2,030) |
Net income (loss) attributable
to common stockholders |
$ (27,776) |
$ 12,009 |
$ (24,065) |
$ 37,905 |
|
|
|
|
|
Net income per common share: |
|
|
|
|
Basic |
$ (0.37) |
$ 0.12 |
$ (0.32) |
$ 0.38 |
Diluted |
$ (0.37) |
$ 0.12 |
$ (0.32) |
$ 0.37 |
CROCS, INC. AND
SUBSIDIARIES RECONCILIATION OF GAAP MEASURES TO
NON-GAAP MEASURES (UNAUDITED)
In addition to financial measures presented on the basis of
accounting principles generally accepted in the United States of
America ("U.S. GAAP"), we present current period 'adjusted
results', which are non-GAAP financial measures. Adjusted results
of operations exclude the impact of items that management believes
affect the comparability or underlying business trends in our
condensed consolidated financial statements in the periods
presented.
Management uses adjusted results to assist in comparing business
trends from period to period on a consistent non-GAAP basis in
communications with the board of directors, stockholders, analysts
and investors concerning our financial performance. We believe that
these non-GAAP measures are used by, and are useful to, investors
and other users of our financial statements as an additional tool
to evaluate our performance. We believe they also provide a useful
baseline for analyzing trends in our operations. We do not suggest
that investors should consider these non-GAAP measures in isolation
from, or as a substitute for, financial information prepared in
accordance with U.S. GAAP.
|
Three Months
Ended September 30, |
Nine Months Ended
September 30, |
|
2015 |
2014 |
2015 |
2014 |
|
(in
thousands) |
(in
thousands) |
Selling, general and administrative expenses
reconciliation: |
|
|
|
|
GAAP selling, general and
administrative expenses |
$ 135,110 |
$ 143,719 |
$ 429,815 |
$ 434,244 |
Legal settlements,
disbursements and reorganization (1) |
(1,438) |
(1,612) |
(11,814) |
(7,909) |
New ERP implementation (2) |
(712) |
(4,094) |
(9,099) |
(11,122) |
Non-GAAP selling, general and
administrative expenses |
$ 132,960 |
$ 138,013 |
$ 408,902 |
$ 415,213 |
|
|
|
|
|
|
Three Months
Ended September 30, |
Nine Months Ended
September 30, |
|
2015 |
2014 |
2015 |
2014 |
|
(in
thousands) |
(in
thousands) |
Net income attributable to common
stockholders reconciliation: |
|
|
|
|
GAAP net income attributable to
common stockholders |
$ (27,776) |
$ 12,009 |
$ (24,065) |
$ 37,905 |
Legal settlements,
disbursements, asset impairment, reorganization, statutory audits,
and inventory write-downs (3) |
6,898 |
5,108 |
20,349 |
14,635 |
Restructuring (4) |
981 |
8,168 |
7,454 |
16,507 |
New ERP implementation (2) |
712 |
4,094 |
9,099 |
11,122 |
Non-GAAP net income
attributable to common stockholders |
$ (19,185) |
$ 29,379 |
$ 12,837 |
$ 80,169 |
|
(1) This represents certain legal liabilities,
disbursements made to invalid vendors, and reorganization expenses
related to our investment agreement with Blackstone.
(2) This represents operating expenses related to the
implementation of our new enterprise resource planning ("ERP")
system.
(3) This represents certain legal liabilities,
disbursements made to invalid vendors, the impairment of certain
retail locations, reorganization expenses related to our investment
agreement with Blackstone, inventory write-downs, and out-of-period
customs/duty obligations.
(4) This relates to bonuses, consulting fees and other
expenses related to recent restructuring activities.
|
CROCS, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) ($ thousands, except number of
shares) |
|
|
September 30, |
December 31, |
|
2015 |
2014 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 168,466 |
$ 267,512 |
Accounts receivable, net of
allowances of $55,178 and $32,392, respectively |
117,767 |
101,217 |
Inventories |
190,819 |
171,012 |
Deferred tax assets, net |
3,855 |
4,190 |
Income tax receivable |
16,933 |
9,332 |
Other receivables |
11,508 |
11,989 |
Prepaid expenses and other
assets |
29,782 |
30,156 |
Total current assets |
539,130 |
595,408 |
Property and equipment, net |
50,188 |
68,288 |
Intangible assets, net |
87,420 |
97,337 |
Goodwill |
2,030 |
2,044 |
Deferred tax assets, net |
19,570 |
17,886 |
Other assets |
23,587 |
25,968 |
Total assets |
$ 721,925 |
$ 806,931 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 79,160 |
$ 42,923 |
Accrued expenses and other
liabilities |
85,394 |
80,216 |
Deferred tax liabilities,
net |
11,675 |
11,869 |
Accrued restructuring |
2,420 |
4,511 |
Income taxes payable |
10,558 |
9,078 |
Current portion of long-term
borrowings and capital lease obligations |
5,383 |
5,288 |
Total current liabilities |
194,590 |
153,885 |
Long-term income tax payable |
4,335 |
8,843 |
Long-term borrowings and capital lease
obligations |
2,350 |
6,381 |
Long-term accrued restructuring |
237 |
348 |
Other liabilities |
12,430 |
12,277 |
Total liabilities |
213,942 |
181,734 |
Commitments and contingencies |
|
|
Series A convertible preferred
stock, par value $0.001 per share, 1,000,000 shares authorized,
200,000 shares issued and outstanding, redemption amount and
liquidation preference of $203,000 and $203,067 as of September 30,
2015 and December 31, 2014, respectively |
174,888 |
172,679 |
|
|
|
Stockholders' equity: |
|
|
Preferred stock, par value
$0.001 per share, 4,000,000 shares authorized, none
outstanding |
-- |
-- |
Common stock, par value $0.001
per share, 250,000,000 shares authorized, 92,666,222 and 73,634,604
shares issued and outstanding, respectively, as of September 30,
2015 and 92,325,201 and 78,516,566 shares issued and outstanding,
respectively, as of December 31, 2014 |
93 |
92 |
Treasury stock, at cost,
19,331,618 and 13,808,635 shares as of September 30, 2015 and
December 31, 2014, respectively |
(273,915) |
(200,424) |
Additional paid-in capital |
353,174 |
345,732 |
Retained earnings |
301,401 |
325,470 |
Accumulated other comprehensive
loss |
(47,658) |
(18,352) |
Total stockholders' equity |
333,095 |
452,518 |
Total liabilities, commitments
and contingencies and stockholders' equity |
$ 721,925 |
$ 806,931 |
The following tables summarize our total revenue by channel for
the three and nine months ended September 30, 2015 and
2014:
|
|
|
|
|
Three Months
Ended September 30, |
Change |
Constant Currency
Change (1) |
|
2015 |
2014 |
$ |
% |
$ |
% |
|
(in
thousands) |
Wholesale: |
|
|
|
|
|
|
Americas |
$ 48,880 |
$ 53,097 |
$ (4,217) |
(7.9)% |
$ (1,629) |
(3.1)% |
Asia Pacific |
53,411 |
63,972 |
(10,561) |
(16.5) |
(4,343) |
(6.8) |
Europe |
30,260 |
33,691 |
(3,431) |
(10.2) |
2,442 |
7.2 |
Other businesses |
418 |
435 |
(17) |
(3.9) |
(31) |
(7.1) |
Total wholesale |
132,969 |
151,195 |
(18,226) |
(12.1) |
(3,561) |
(2.4) |
Consumer-direct: |
|
|
|
|
|
|
Retail: |
|
|
|
|
|
|
Americas |
59,468 |
61,721 |
(2,253) |
(3.7) |
(1,455) |
(2.4) |
Asia Pacific |
38,374 |
44,387 |
(6,013) |
(13.5) |
(1,786) |
(4.0) |
Europe |
13,813 |
19,494 |
(5,681) |
(29.1) |
(1,561) |
(8.0) |
Total retail |
111,655 |
125,602 |
(13,947) |
(11.1) |
(4,802) |
(3.8) |
E-commerce: |
|
|
|
|
|
|
Americas |
16,321 |
12,657 |
3,664 |
28.9 |
3,891 |
30.7 |
Asia Pacific |
7,094 |
5,487 |
1,607 |
29.3 |
2,192 |
39.9 |
Europe |
6,049 |
7,460 |
(1,411) |
(18.9) |
(91) |
(1.2) |
Total e-commerce |
29,464 |
25,604 |
3,860 |
15.1 |
5,992 |
23.4 |
Total revenues |
$ 274,088 |
$ 302,401 |
$ (28,313) |
(9.4)% |
$ (2,371) |
(0.8)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
Americas |
$ 124,669 |
$ 127,475 |
$ (2,806) |
(2.2)% |
$ 807 |
0.6% |
Asia Pacific |
98,879 |
113,846 |
(14,967) |
(13.1) |
(3,938) |
(3.5) |
Europe |
50,122 |
60,645 |
(10,523) |
(17.4) |
791 |
1.3 |
Total segment revenues |
273,670 |
301,966 |
(28,296) |
(9.4) |
(2,340) |
(0.8) |
Other businesses |
418 |
435 |
(17) |
(3.9) |
(31) |
(7.1) |
Total consolidated
revenues |
$ 274,088 |
$ 302,401 |
$ (28,313) |
(9.4)% |
$ (2,371) |
(0.8)% |
|
(1) Reflects year over year change as if the current period
results were in "constant currency," which is a non-GAAP financial
measure. See "Use of Non-GAAP Financial Measures" above for more
information.
|
Nine Months Ended
September 30, |
Change |
Constant Currency
Change (1) |
|
2015 |
2014 |
$ |
% |
$ |
% |
|
(in
thousands) |
Wholesale: |
|
|
|
|
|
|
Americas |
$ 175,306 |
$ 188,987 |
$ (13,681) |
(7.2)% |
$ (8,479) |
(4.5)% |
Asia Pacific |
218,730 |
261,461 |
(42,731) |
(16.3) |
(26,239) |
(10.0) |
Europe |
105,719 |
126,047 |
(20,328) |
(16.1) |
3,147 |
2.5 |
Other businesses |
970 |
607 |
363 |
59.8 |
304 |
50.1 |
Total wholesale |
500,725 |
577,102 |
(76,377) |
(13.2) |
(31,267) |
(5.4) |
Consumer-direct: |
|
|
|
|
|
|
Retail: |
|
|
|
|
|
|
Americas |
152,394 |
158,924 |
(6,530) |
(4.1) |
(4,890) |
(3.1) |
Asia Pacific |
107,619 |
129,612 |
(21,993) |
(17.0) |
(12,400) |
(9.6) |
Europe |
36,747 |
49,844 |
(13,097) |
(26.3) |
(2,164) |
(4.3) |
Total retail |
296,760 |
338,380 |
(41,620) |
(12.3) |
(19,454) |
(5.7) |
E-commerce: |
|
|
|
|
|
|
Americas |
45,857 |
38,252 |
7,605 |
19.9 |
8,107 |
21.2 |
Asia Pacific |
21,862 |
16,369 |
5,493 |
33.6 |
6,851 |
41.9 |
Europe |
16,748 |
21,647 |
(4,899) |
(22.6) |
(926) |
(4.3) |
Total e-commerce |
84,467 |
76,268 |
8,199 |
10.8 |
14,032 |
18.4 |
Total revenues |
$ 881,952 |
$ 991,750 |
$ (109,798) |
(11.1)% |
$ (36,689) |
(3.7)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
Americas |
$ 373,557 |
$ 386,163 |
$ (12,606) |
(3.3)% |
$ (5,262) |
(1.4)% |
Asia Pacific |
348,211 |
407,442 |
(59,231) |
(14.5) |
(31,789) |
(7.8) |
Europe |
159,214 |
197,538 |
(38,324) |
(19.4) |
58 |
0.0 |
Total segment revenues |
880,982 |
991,143 |
(110,161) |
(11.1) |
(36,993) |
(3.7) |
Other businesses |
970 |
607 |
363 |
59.8 |
304 |
50.1 |
Total consolidated
revenues |
$ 881,952 |
$ 991,750 |
$ (109,798) |
(11.1)% |
$ (36,689) |
(3.7)% |
|
(1) Reflects year over year change as if the current period
results were in "constant currency," which is a non-GAAP financial
measure. See "Use of Non-GAAP Financial Measures" above for more
information
|
CROCS, INC.
SUBSIDIARIES RETAIL STORE COUNTS
(UNAUDITED) |
|
|
December 31,
2014 |
Opened |
Closed |
September 30,
2015 |
Company-operated retail locations |
|
|
|
|
Type |
|
|
|
|
Kiosk/store in store |
100 |
9 |
11 |
98 |
Retail stores |
311 |
10 |
42 |
279 |
Outlet stores |
174 |
10 |
4 |
180 |
Total |
585 |
29 |
57 |
557 |
Operating segment |
|
|
|
|
Americas |
210 |
3 |
15 |
198 |
Asia Pacific |
258 |
24 |
26 |
256 |
Europe |
117 |
2 |
16 |
103 |
Total |
585 |
29 |
57 |
557 |
|
|
|
CROCS, INC. AND
SUBSIDIARIES COMPARABLE STORE SALES
(UNAUDITED) |
|
|
|
|
Constant Currency |
Constant Currency |
|
Three Months Ended |
Three Months Ended |
|
September 30, 2015
(2) |
September 30, 2014
(2) |
Comparable store sales (1) |
|
|
Americas |
(1.6)% |
(3.1)% |
Asia Pacific |
(1.5)% |
(8.8)% |
Europe |
2.9% |
0.1% |
Global |
(0.9)% |
(4.5)% |
|
Constant Currency |
Constant Currency |
|
Nine Months Ended |
Nine Months Ended |
|
September 30, 2015
(2) |
September 30, 2014
(2) |
Comparable store sales (1) |
|
|
Americas |
(3.2)% |
(4.7)% |
Asia Pacific |
(6.7)% |
(5.2)% |
Europe |
2.5% |
0.6% |
Global |
(3.6)% |
(4.1)% |
|
(1) 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 in which 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 thirteenth month post re-opening. Comparable
store sales exclude the impact of our internet channel revenues and
are calculated on a currency neutral basis using historical
quarterly average currency rates.
(2) Reflects quarter-over-quarter and year-over-year change
as if the current period results were in "constant currency," which
is a non-GAAP financial measure. Constant currency is a measure
utilized by management in which current period results have been
restated using 2014 and 2013 average foreign exchange rates,
respectively, for the comparative period to enhance the visibility
of the underlying business trends by excluding the impact of
foreign currency exchange rate fluctuations. We do not suggest that
investors should consider this non-GAAP measure in isolation from,
or as a substitute for, financial information prepared in
accordance with U.S. GAAP.
CONTACT: Investor Contact: Brendon Frey, ICR
(203) 682-8200
Brendon.Frey@icrinc.com
Media Contact: Patrick Rich/Crocs Inc.
(303) 848-7000
prich@crocs.com
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