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Crocs, Inc. Reports Third Quarter 2016 Financial Results

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NIWOT, Colo., Nov. 09, 2016 (GLOBE NEWSWIRE) -- Crocs, Inc. (NASDAQ: CROX) today reported financial results for the three months ended September 30, 2016.

Third Quarter Highlights:

  • Revenues were in-line with guidance at $245.9 million for the three months ended September 30, 2016. On a constant currency basis, revenues decreased 11.6%, compared to the three months ended September 30, 2015.

  • Improved inventory management resulted in a $21.4 million, or 11.2%, decrease in inventory as of September 30, 2016 compared to September 30, 2015.

Gregg Ribatt, Chief Executive Officer, said: "We continue to manage our business tightly in what remains a challenging consumer environment. Revenues were in-line with our expectations while gross margin exceeded our guidance by approximately 200 basis points as we further limited off-price selling and promotional activities. At the same time, we reduced our inventories 11% compared with last year. Looking ahead, we continue to plan conservatively given the current top-line headwinds. We are working hard to drive quality growth through our product, marketing, and distribution strategies and we remain confident that the steps we've taken to build a better business model will result in increased profitability and greater shareholder value."

Third Quarter Operating Results

In the third quarter of 2016, the company reported GAAP net loss attributable to common stockholders of $5.4 million, or $0.07 per basic and diluted share, compared to a net loss attributable to common stockholders of $27.8 million, or $0.37 per basic and diluted share, in the same quarter of the prior year.

As outlined in detail in the GAAP to non-GAAP reconciliations set forth later in this press release, the company recorded net charges of $3.3 million unrelated to our core business in the three months ended September 30, 2016, compared to $8.6 million in the three months ended September 30, 2015. Excluding these items, the company reported on a comparable basis, non-GAAP adjusted net loss attributable to common shareholders of $2.0 million in the three months ended September 30, 2016, versus non-GAAP adjusted net loss attributable to common shareholders of $19.2 million in the three months ended September 30, 2015.

Balance Sheet

Cash and cash equivalents as of September 30, 2016 were $150.2 million compared to $143.3 million as of December 31, 2015. Inventory was $169.4 million as of September 30, 2016 compared to $190.8 million as of September 30, 2015.

The company did not repurchase any shares during the three or nine months ended September 30, 2016.

Financial Outlook

The company expects fourth quarter 2016 revenues in the $185.0 to $195.0 million range compared to $208.7 million in the fourth quarter of 2015. For the year ended December 31, 2016, the company expects revenues to be $1,034.0 million to $1,044.0 million.

Conference Call Information

A teleconference call to discuss third quarter 2016 results is scheduled for today, Wednesday, November 9, 2016, 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 43651803. 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 November 9, 2017.

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 65 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 9, 2016. 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
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share amounts)
 
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
 2016 2015 2016 2015
Revenues$245,888  $274,088  $848,856  $881,952 
Cost of sales123,454  153,267  427,416  443,891 
Gross profit122,434  120,821  421,440  438,061 
Selling, general and administrative expenses122,719  135,110  386,112  429,815 
Asset impairment charges930  5,460  1,695  7,535 
Restructuring charges  981    7,454 
Income (loss) from operations(1,215) (20,730) 33,633  (6,743)
Foreign currency transaction gain (loss), net1,379  (2,908) (1,568) (2,631)
Interest income178  268  558  752 
Interest expense(184) (171) (661) (650)
Other income (expense), net(1) 405  (108) (6)
Income (loss) before income taxes157  (23,136) 31,854  (9,278)
Income tax expense(1,690) (888) (7,704) (3,745)
Net income (loss)$(1,533) $(24,024) $24,150  $(13,023)
        
Dividends on Series A convertible preferred stock$(3,000) $(3,000) $(9,000) $(8,833)
Dividend equivalents on Series A convertible preferred shares related to redemption value accretion and beneficial conversion feature (819) (752) (2,406) (2,209)
Net income (loss) attributable to common stockholders$(5,352) $(27,776) $12,744  $(24,065)
Net income (loss) per common share:       
Basic$(0.07) $(0.37) $0.15  $(0.32)
Diluted$(0.07) $(0.37) $0.14  $(0.32)
        
Weighted average shares outstanding used in computing earnings per share       
Basic73,493  74,332  73,323  76,318 
Diluted73,493  74,332  74,730  76,318 

 

 
CROCS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
 
  September 30, 
 2016
  December 31, 
 2015
ASSETS   
Current assets:   
Cash and cash equivalents$150,216  $143,341 
Accounts receivable, net of allowances of $50,412 and $49,364, respectively101,651  83,616 
Inventories169,376  168,192 
Income tax receivable6,979  10,233 
Other receivables17,793  14,233 
Prepaid expenses and other assets29,925  26,334 
Total current assets475,940  445,949 
Property and equipment, net of accumulated depreciation of $104,213 and $97,650, respectively 45,820  49,490 
Intangible assets, net75,740  82,297 
Goodwill2,586  1,973 
Deferred tax assets, net6,699  6,608 
Other assets18,388  21,703 
Total assets$625,173  $608,020 
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
Accounts payable$50,881  $63,336 
Accrued expenses and other liabilities90,194  92,573 
Income taxes payable9,173  6,416 
Current portion of borrowings and capital lease obligations3,593  4,772 
Total current liabilities153,841  167,097 
Long-term income tax payable4,965  4,547 
Long-term borrowings and capital lease obligations27  1,627 
Other liabilities13,848  13,120 
Total liabilities172,681  186,391 
    
Series A convertible preferred stock178,063  175,657 
Stockholders' equity:   
Preferred stock   
Common stock94  94 
Treasury stock, at cost(284,176) (283,913)
Additional paid-in capital361,688  353,241 
Retained earnings241,205  227,463 
Accumulated other comprehensive loss(44,382) (50,913)
Total stockholders' equity274,429  245,972 
Total liabilities and stockholders' equity$625,173  $608,020 
 

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 ("GAAP"), we present "Non-GAAP selling, general, and administrative expenses", "Non-GAAP cost of sales", and "Non-GAAP adjusted net income (loss) attributable to common stockholders", which are non-GAAP financial measures. Adjusted results exclude the impact of items that management believes affect the comparability or underlying business trends in our consolidated financial statements in the periods presented.

We also present certain information related to our current period results of operations through "constant currency", which is a non-GAAP financial measure and should be viewed as a supplement to our results of operations and presentation of reportable segments under GAAP. Constant currency represents current period results that have been recasted using prior year 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.

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 useful to investors and other users of our consolidated financial statements as an additional tool for evaluating operating performance. We believe they also provide a useful baseline for analyzing trends in our operations. Investors should not consider these non-GAAP measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

CROCS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(UNAUDITED)
 
  Three Months Ended September 30,   Nine Months Ended September 30, 
 2016 2015 2016 2015
 (in thousands)
Selling, general and administrative expenses reconciliation:       
GAAP selling, general and administrative expenses$122,719  $135,110  $386,112  $429,815 
Reorganization charges (1)  (573) (458) (4,126)
Customs audit settlements (2)    (354)  
ERP implementation (3)  (712)   (9,099)
Improper disbursements and related legal fees (4)  (631)   (5,653)
Legal settlements (5)  (234)   (2,035)
Total adjustments  (2,150) (812) (20,913)
Non-GAAP selling, general and administrative expenses $122,719  $132,960  $385,300  $408,902 


  Three Months Ended September 30,   Nine Months Ended September 30, 
 2016 2015 2016 2015
 (in thousands)
Cost of sales reconciliation:       
GAAP cost of sales$123,454  $153,267  $427,416  $443,891 
Customs audit settlements (6)                      (3,344)    (2,694)  
Statutory audits (7)            (1,000)
Non-GAAP cost of sales$120,110  $153,267  $424,722  $442,891 


  Three Months Ended September 30,   Nine Months Ended September 30, 
 2016 2015 2016 2015
 (in thousands)
Net income (loss) attributable to common stockholders reconciliation:       
GAAP net income (loss) attributable to common stockholders$(5,352) $(27,776) $12,744  $(24,065)
Customs audit settlements (2, 6)3,344    3,048   
Reorganization charges (1)  573  458  4,126 
Asset impairment charges (8)  5,460    7,535 
Restructuring charges (9)  981    7,454 
ERP implementation (3)  712    9,099 
Improper disbursements and related legal fees (4)  631    5,653 
Legal settlements (5)  234    2,035 
Statutory audits (7)      1,000 
Total adjustments3,344  8,591  3,506  36,902 
Non-GAAP adjusted net income (loss) attributable to common stockholders  $(2,008) $(19,185) $16,250  $12,837 

__________________
(1) Relates to severance expense, bonuses, store closure costs, consulting fees, and other expenses related to reorganization activities and our investment agreement with Blackstone.  

(2) Represents penalties and fees related to customs audit settlements.

(3) Represents operating expenses incurred in 2015 related to the implementation of the new ERP system.

(4) Represents invalid disbursements and related legal expenses that occurred in 2015.

(5) Relates primarily to legal expenses for matters surrounding California wage settlements that occurred in 2015. 

(6) Represents the increase or release of tariff reserves related to customs audit settlements.

(7) Represents expenses incurred related to statutory audits.

(8) Represents retail asset impairment charges for certain underperforming locations in our Americas, Asia Pacific, and Europe operating segments.

(9) Relates to bonuses, consulting fees, and other expenses related to restructuring activities that concluded in December 2015.

CROCS, INC. SUBSIDIARIES
REVENUES BY SEGMENT AND CHANNEL
(UNAUDITED)
 
 Three Months Ended
 September 30,
 Change Constant Currency Change (1)
 2016 2015 $ % $ %
 (in thousands)
Wholesale:              
Americas$41,389  $48,880  $(7,491) (15.3)% $(6,913) (14.1)%
Asia Pacific 45,565  53,411   (7,846) (14.7)%  (10,822) (20.3)%
Europe 21,909  30,260   (8,351) (27.6)%  (8,288) (27.4)%
Other businesses 271  418   (147) (35.2)%  (150) (35.9)%
Total wholesale 109,134  132,969   (23,835) (17.9)%  (26,173) (19.7)%
Retail:              
Americas 56,607  59,468   (2,861) (4.8)%  (2,818) (4.7)%
Asia Pacific 37,259  38,374   (1,115) (2.9)%  (2,626) (6.8)%
Europe 13,194  13,813   (619) (4.5)%  (150) (1.1)%
Total retail 107,060  111,655   (4,595) (4.1)%  (5,594) (5.0)%
E-commerce:              
Americas 16,662  16,321   341  2.1%  351  2.2%
Asia Pacific 8,096  7,094   1,002  14.1%  801  11.3%
Europe 4,936  6,049   (1,113) (18.4)%  (1,105) (18.3)%
Total e-commerce 29,694  29,464   230  0.8%  47  0.2%
Total revenues$245,888  $274,088  $(28,200) (10.3)% $(31,720) (11.6)%
               
Revenues:              
Americas$114,658  $124,669  $(10,011) (8.0)% $(9,380) (7.5)%
Asia Pacific 90,920  98,879   (7,959) (8.0)%  (12,647) (12.8)%
Europe 40,039  50,122   (10,083) (20.1)%  (9,543) (19.0)%
Total segment revenues 245,617  273,670   (28,053) (10.3)%  (31,570) (11.5)%
Other businesses 271  418   (147) (35.2)%  (150) (35.9)%
Total consolidated revenues  $245,888  $274,088  $(28,200) (10.3)% $(31,720) (11.6)%

____________________
(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
REVENUES BY SEGMENT AND CHANNEL
(UNAUDITED)
 
 Nine Months Ended
September 30,
 Change Constant Currency Change (1)
 2016 2015 $ % $ %
 (in thousands)
Wholesale:              
Americas$170,165  $175,306  $(5,141) (2.9)% $(1,654) (0.9)%
Asia Pacific 197,359  218,730   (21,371) (9.8)%  (23,853) (10.9)%
Europe 97,163  105,719   (8,556) (8.1)%  (7,591) (7.2)%
Other businesses 667  970   (303) (31.2)%  (306) (31.5)%
Total wholesale 465,354  500,725   (35,371) (7.1)%  (33,404) (6.7)%
Retail:              
Americas 150,142  152,394   (2,252) (1.5)%  (1,976) (1.3)%
Asia Pacific 101,097  107,619   (6,522) (6.1)%  (6,981) (6.5)%
Europe 34,699  36,747   (2,048) (5.6)%  (264) (0.7)%
Total retail 285,938  296,760   (10,822) (3.6)%  (9,221) (3.1)%
E-commerce:              
Americas 53,579  45,857   7,722  16.8%  7,882  17.2%
Asia Pacific 27,812  21,862   5,950  27.2%  6,298  28.8%
Europe 16,173  16,748   (575) (3.4)%  (616) (3.7)%
Total e-commerce 97,564  84,467   13,097  15.5%  13,564  16.1%
Total revenues$848,856  $881,952  $(33,096) (3.8)% $(29,061) (3.3)%
               
Revenues:              
Americas$373,886  $373,557  $329  0.1% $4,252  1.1%
Asia Pacific 326,268  348,211   (21,943) (6.3)%  (24,536) (7.0)%
Europe 148,035  159,214   (11,179) (7.0)%  (8,471) (5.3)%
Total segment revenues 848,189  880,982   (32,793) (3.7)%  (28,755) (3.3)%
Other businesses 667  970   (303) (31.2)%  (306) (31.5)%
Total consolidated revenues  $848,856  $881,952  $(33,096) (3.8)% $(29,061) (3.3)%

____________________
(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)
 
  June 30, 
2016
  Opened   Closed  September 30,
2016
Company-operated retail locations         
Type       
Kiosk/store in store103  3  7  99 
Retail stores253  4  20  237 
Outlet stores202  16    218 
Total558  23  27  554 
Operating segment       
Americas195    4  191 
Asia Pacific258  22  16  264 
Europe105  1  7  99 
Total558  23  27  554 


 December 31,
2015
 Opened Closed September 30,
2016
Company-operated retail locations         
Type       
Kiosk/store in store98  12  11  99 
Retail stores275  14  52  237 
Outlet stores186  34  2  218 
Total559  60  65  554 
Operating segment       
Americas196  3  8  191 
Asia Pacific261  49  46  264 
Europe (1)102  8  11  99 
Total559  60  65  554 

___________________
(1)  Includes retail locations acquired in Austria on March 31, 2016 as revenues associated with those locations began to be recognized in the three months ended June 30, 2016.

CROCS, INC. AND SUBSIDIARIES
COMPARABLE STORE SALES
RETAIL AND DIRECT TO CONSUMER
(UNAUDITED)
 
 Constant Currency (2)
  Three Months Ended 
September 30, 2016
  Three Months Ended 
September 30, 2015
Comparable store sales (retail only) (1)     
Americas(2.8)% (1.6)%
Asia Pacific(5.8)% (1.5)%
Europe(0.9)% 2.9%
Global(3.5)% (0.9)%


 Constant Currency (2)
  Three Months Ended 
September 30, 2016
  Three Months Ended 
September 30, 2015
Direct to Consumer comparable store sales (includes retail and e-commerce) (1)     
Americas(1.7)% 4.3%
Asia Pacific(2.4)% 4.1%
Europe(6.7)% 7.1%
Global(2.6)% 4.7%


 Constant Currency (2)
 Nine Months Ended
 September 30, 2016 
  Nine Months Ended 
September 30, 2015
Comparable store sales (retail only) (1)       
Americas(1.4)% (3.2)%
Asia Pacific(4.4)% (6.7)%
Europe2.1% 2.5%
Global(2.0)% (3.6)%


 Constant Currency (2)
 Nine Months Ended
 September 30, 2016 
 Nine Months Ended
 September 30, 2015 
Direct to Consumer comparable store sales (includes retail and e-commerce) (1)     
Americas3.0% 2.2%
Asia Pacific2.3% (4.9)%
Europe0.3% 6.6%
Global2.4% 0.7%

_________________
(1) Comparable store status is determined on a monthly basis. Comparable store sales includes the revenues of stores that have been in operation for more than twelve months. 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. E-commerce revenues are based on same site sales period over period.

(2)  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.

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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