NIWOT, CO, Nov. 07, 2017 (GLOBE NEWSWIRE) -- Crocs, Inc. (NASDAQ:CROX) a world leader in innovative casual footwear for men, women and children, today announced its financial results for the third quarter of 2017. These results cover the three months ended September 30, 2017, and are compared to the three months ended September 30, 2016.

Andrew Rees, President and Chief Executive Officer, said, “The third quarter was another strong quarter for us, both in terms of our financial performance and the progress made against our strategic initiatives. Consistent with the first half of this year, we again met or exceeded our guidance metrics. Furthermore, the perception of the brand continued to rise, with results from our latest annual brand survey showing double digit increases in brand desirability, relevance and consideration compared to last year. Looking ahead, we are confident that further operational improvements and a disciplined approach to expense management will facilitate a return to double digit EBIT margins.”

Third Quarter 2017 Operating Results:

  • Revenues were $243.3 million, above the top end of our revenue guidance, and decreased 1.1% compared to the third quarter of 2016. On a constant currency basis, revenues decreased 1.6% compared to the third quarter of 2016.

  • Third quarter gross margin was 50.8%, an increase of 100 basis points over last year’s third quarter. Our focus on core molded product and our continued focus on inventory management resulted in higher quality revenue that delivered stronger gross margins.

  • Selling, general and administrative expenses (“SG&A”) were $120.8 million compared to $123.6 million in the third quarter of 2016, a decrease of 2.3%. As a percent of revenues, SG&A improved 70 basis points. Our third quarter 2017 SG&A includes $3.6 million of charges relating to our SG&A reduction plan.
                 
  • Income from operations improved by $3.9 million, coming in at $2.7 million compared to last year’s third quarter loss of $1.2 million.

  • Net loss attributable to common stockholders was $2.3 million, or $0.03 per diluted share. This amount includes $3.6 million related to our SG&A reduction plan. For the quarter ended September 30, 2017, we had 71.9 million weighted average diluted common shares outstanding.

Balance Sheet and Cash Flow Highlights:

  • Cash and cash equivalents as of September 30, 2017 were $178.2 million, compared to $150.2 million as of September 30, 2016.

  • Inventory was $140.3 million as of September 30, 2017, compared to $169.4 million as of September 30, 2016. This 17.2% decline reflects our ongoing efforts to carefully manage inventory levels and improve the quality of goods on hand.

  • Cash provided by operating activities was $80.4 million during the first nine months of 2017, compared to $29.4 million during the first nine months of 2016.

  • Capital expenditures totaled $2.0 million during the third quarter of 2017, compared to $5.4 million during the third quarter of 2016.

  • Cash flows from financing activities during the third quarter of 2017 include $15.6 million used to repurchase 1.9 million shares of our common stock.

  • At September 30, 2017, there were no borrowings outstanding on our credit facility, and in October 2017, we increased the borrowing capacity of the facility to $100 million from $80 million.

Financial Outlook:

Fourth Quarter 2017:

  • The Company expects fourth quarter 2017 revenues to be between $180 and $190 million.

  • The Company expects the gross margin for the fourth quarter to be approximately 43%, or 100 basis points above last year’s 42% gross margin.

  • The Company expects SG&A of approximately $115 million, including approximately $2 million of charges associated with our SG&A reduction plan. This represents a $3 million reduction to last year’s $118.5 million of SG&A in the fourth quarter.

Full Year 2017:

  • The Company continues to expect 2017 revenues to be down low single digits compared to 2016.

  • The Company continues to expect gross margin for 2017 to be approximately 50%.

  • The Company continues to expect SG&A for 2017 to be between $490 and $495 million. Included in the range is approximately $10 million of charges associated with our SG&A reduction plan. 

Conference Call Information:

A conference call to discuss third quarter 2017 results is scheduled for today, Tuesday, November 7, 2017, at 8:30 a.m. EDT. The call participation number is (888) 771-4371. A replay 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 45783019. The call will also be streamed live on the Crocs website, www.crocs.com, and that audio recording will be available at www.crocs.com through November 7, 2018.

About Crocs, Inc.:

Crocs, Inc. (NASDAQ:CROX) 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 and non-marking qualities that Crocs fans know and love.

 Visit www.crocs.com for additional information.

Forward Looking Statements:

This news release includes “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, expectations and our EBIT margin, revenues, gross margin, and SG&A 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: current global financial conditions; the effect of competition in our industry; our ability to effectively manage our future growth or declines in revenues; changing consumer preferences; 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 7, 2017. We do not undertake any obligation to update publicly any forward-looking statements, including, without limitation, any estimate regarding revenues, margins, or SG&A, whether as a result of the receipt of new information, future events, or otherwise.

CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
    
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Revenues$243,273  $245,888  $824,401  $848,856 
Cost of sales119,810  123,454  397,547  427,416 
Gross profit123,463  122,434  426,854  421,440 
Selling, general and administrative expenses120,778  123,649  379,141  387,807 
Income (loss) from operations2,685  (1,215) 47,713  33,633 
Foreign currency gain (loss), net(257) 1,379  181  (1,568)
Interest income269  178  576  558 
Interest expense(167) (184) (539) (661)
Other income (expense)54  (1) 187  (108)
Income before income taxes2,584  157  48,118  31,854 
Income tax expense955  1,690  13,519  7,704 
Net income (loss)1,629  (1,533) 34,599  24,150 
Dividends on Series A convertible preferred stock(3,000) (3,000) (9,000) (9,000)
Dividend equivalents on Series A convertible preferred shares related to redemption value accretion and beneficial conversion feature(892) (819) (2,621) (2,406)
Net income (loss) attributable to common stockholders$(2,263) $(5,352) $22,978  $12,744 
Net income (loss) per common share:       
Basic$(0.03) $(0.07) $0.26  $0.15 
Diluted$(0.03) $(0.07) $0.26  $0.14 
        
Weighted average common shares outstanding - basic71,895  73,493  73,212  73,323 
Weighted average common shares outstanding - diluted71,895  73,493  74,160  74,730 
            


CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and par value amounts)
 
 September 30,
 2017		 December 31,
 2016
ASSETS   
Current assets:   
Cash and cash equivalents$178,189  $147,565 
Accounts receivable, net of allowances of $49,360 and $48,138, respectively92,708  78,297 
Inventories140,282  147,029 
Income tax receivable7,421  2,995 
Other receivables14,547  14,642 
Restricted cash - current2,175  2,534 
Prepaid expenses and other assets24,416  32,413 
Total current assets459,738  425,475 
Property and equipment, net of accumulated depreciation and amortization of $95,512 and $88,603, respectively38,412  44,090 
Intangible assets, net66,505  72,700 
Goodwill1,663  1,480 
Deferred tax assets, net7,098  6,825 
Restricted cash2,895  2,547 
Other assets13,342  13,273 
Total assets$589,653  $566,390 
    
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$55,181  $61,927 
Accrued expenses and other liabilities84,836  78,282 
Income taxes payable14,096  6,593 
Current portion of borrowings and capital lease obligations1,070  2,338 
Total current liabilities155,183  149,140 
Long-term income tax payable4,926  4,464 
Long-term capital lease obligations35  40 
Other liabilities13,931  13,462 
Total liabilities174,075  167,106 
Commitments and contingencies   
Series A convertible preferred stock, 1.0 million authorized, 0.2 million shares outstanding, liquidation preference $203 million181,522  178,901 
Stockholders’ equity:   
Preferred stock, par value $0.001 per share, 4.0 million shares authorized, none outstanding—  — 
Common stock, par value $0.001 per share, 94.7 million and 93.9 million issued, 71.0 million and 73.6 million shares outstanding, respectively95  94 
Treasury stock, at cost, 23.7 million and 20.3 million shares, respectively(311,302) (284,237)
Additional paid-in capital370,567  364,397 
Retained earnings218,703  195,725 
Accumulated other comprehensive loss(44,007) (55,596)
Total stockholders’ equity234,056  220,383 
     Total liabilities and stockholders’ equity$589,653  $566,390 


CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 
 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income$34,599  $24,150 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization24,701  25,473 
Unrealized foreign currency gain (loss), net1,017  (7,863)
Share-based compensation6,851  8,006 
Other non-cash items(1,208) 3,669 
Changes in operating assets and liabilities:   
Accounts receivable, net of allowances(9,068) (15,762)
Inventories12,435  3,750 
Prepaid expenses and other assets12,997  (7,559)
Accounts payable, accrued expenses and other liabilities(1,909) (4,510)
Cash provided by operating activities80,415  29,354 
Cash flows from investing activities:   
Cash paid for purchases of property and equipment(6,553) (12,651)
Proceeds from disposal of property and equipment1,562  2,425 
Cash paid for intangible assets(7,710) (5,598)
Change in restricted cash383  953 
Cash used in investing activities(12,318) (14,871)
Cash flows from financing activities:   
Proceeds from bank borrowings5,500  29,582 
Repayments of bank borrowings and capital lease obligations(8,222) (32,378)
Dividends—Series A preferred stock(9,000) (9,000)
Repurchases of common stock(25,645) — 
Other(233) (338)
Cash used in financing activities(37,600) (12,134)
Effect of exchange rate changes on cash127  4,526 
Net change in cash and cash equivalents30,624  6,875 
Cash and cash equivalents—beginning of period147,565  143,341 
Cash and cash equivalents—end of period$178,189  $150,216 
        

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 “Non-GAAP selling, general, and administrative expenses” and “Non-GAAP net income attributable to common stockholders”, which are non-GAAP financial measures. Non-GAAP results 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.

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 U.S. GAAP. Constant currency represents current period results that have been retranslated using exchange rates used in the prior year comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.

Management uses non-GAAP results to assist in comparing business trends from period to period on a consistent 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 condensed 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 U.S. GAAP. 

CROCS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(UNAUDITED)
     
  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands)
SG&A expenses reconciliation:        
U.S. GAAP SG&A expenses $120,778  $123,649  $379,141  $387,807 
Reorganization charges (1) (2,022) —  (3,649) (458)
Strategic consulting services (2) (1,481) —  (3,071) — 
Other (86) —  (863) (354)
Total adjustments (3,589) —  (7,583) (812)
Non-GAAP SG&A expenses $117,189  $123,649  $371,558  $386,995 
                 


  Three Months Ended September 30, Nine Months Ended September 30,
  2017 2016 2017 2016
  (in thousands)
Net income (loss) attributable to common stockholders reconciliation:        
GAAP net income (loss) attributable to common stockholders $(2,263) $(5,352) $22,978  $12,744 
Reorganization charges (1) 2,022  —  3,649  458 
Strategic consulting services (2) 1,481  —  3,071  — 
Other 86  3,344  863  354 
 Total adjustments 3,589  3,344  7,583  812 
Non-GAAP net income (loss) attributable to common stockholders $1,326  $(2,008) $30,561  $13,556 
                 


(1)   Represents severance and other expenses related to reorganization activities.
(2) Represents operating expenses incurred in 2017 related to strategic consulting.
   



CROCS, INC. AND SUBSIDIARIES
REVENUES BY CHANNEL
(UNAUDITED)
       
  Three Months Ended September 30, Change Constant Currency
Change (1)
  2017 2016 $ % $ %
  ($ in thousands)
Wholesale:            
Americas $41,642  $41,389  $253  0.6% $153  0.4%
Asia Pacific 41,005  45,565  (4,560) (10.0)% (4,034) (8.9)%
Europe 23,857  21,909  1,948  8.9% 604  2.8%
Other businesses 254  271  (17) (6.3)% (28) (10.3)%
Total wholesale 106,758  109,134  (2,376) (2.2)% (3,305) (3.0)%
Retail:            
Americas 57,404  56,607  797  1.4% 689  1.2%
Asia Pacific 29,497  37,259  (7,762) (20.8)% (7,213) (19.4)%
Europe 12,434  13,194  (760) (5.8)% (1,457) (11.0)%
Total retail 99,335  107,060  (7,725) (7.2)% (7,981) (7.5)%
E-commerce:            
Americas 21,413  16,662  4,751  28.5% 4,668  28.0%
Asia Pacific 9,537  8,096  1,441  17.8% 1,708  21.1%
Europe 6,230  4,936  1,294  26.2% 974  19.7%
Total e-commerce 37,180  29,694  7,486  25.2% 7,350  24.8%
Total revenues $243,273  $245,888  $(2,615) (1.1)% $(3,936) (1.6)%
                       


(1)   Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Reconciliation of GAAP Measures to Non-GAAP Measures” on page 7 for more information.
   


CROCS, INC. AND SUBSIDIARIES
REVENUES BY CHANNEL
(UNAUDITED)
       
  Nine Months Ended September 30, Change Constant Currency
Change (1)
  2017 2016 $ % $ %
  ($ in thousands)
Wholesale:            
Americas $169,975  $170,165  $(190) (0.1)% $(1,611) (0.9)%
Asia Pacific 177,086  197,359  (20,273) (10.3)% (18,796) (9.5)%
Europe 95,387  97,163  (1,776) (1.8)% (2,493) (2.6)%
Other businesses 545  667  (122) (18.3)% (127) (19.0)%
Total wholesale 442,993  465,354  (22,361) (4.8)% (23,027) (4.9)%
Retail:            
Americas 145,809  150,142  (4,333) (2.9)% (4,377) (2.9)%
Asia Pacific 90,458  101,097  (10,639) (10.5)% (9,943) (9.8)%
Europe 32,924  34,699  (1,775) (5.1)% (3,006) (8.7)%
Total retail 269,191  285,938  (16,747) (5.9)% (17,326) (6.1)%
E-commerce:            
Americas 58,552  53,579  4,973  9.3% 4,935  9.2%
Asia Pacific 35,483  27,812  7,671  27.6% 8,819  31.7%
Europe 18,182  16,173  2,009  12.4% 1,845  11.4%
Total e-commerce 112,217  97,564  14,653  15.0% 15,599  16.0%
Total revenues $824,401  $848,856  $(24,455) (2.9)% $(24,754) (2.9)%
                       


(1)   Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Reconciliation of GAAP Measures to Non-GAAP Measures” on page 7 for more information.
   


CROCS, INC. AND SUBSIDIARIES
RETAIL STORE COUNTS
(UNAUDITED)
 
 June 30,  2017 Opened Closed (1) September 30, 2017
Company-operated retail locations:       
Type:       
Kiosk/store-in-store84  —  9  75 
Retail stores191  1  17  175 
Outlet stores228  3  7  224 
Total503  4  33  474 
Operating segment:       
Americas184  1  6  179 
Asia Pacific228  3  25  206 
Europe91  —  2  89 
Total503  4  33  474 
            


(1)   We completed the transfer of one company-operated store in China to a distributor during the period.
   


 December 31, 2016 Opened Closed (1) September 30, 2017
Company-operated retail locations:       
Type:       
Kiosk/store-in-store98  —  23  75 
Retail stores228  5  58  175 
Outlet stores232  13  21  224 
Total558  18  102  474 
Operating segment:       
Americas190  2  13  179 
Asia Pacific270  15  79  206 
Europe98  1  10  89 
Total558  18  102  474 
            


(1)   We completed the transfer of thirty-one company-operated stores in the Middle East and China to distributors during the period.
   

Comparable retail sales and direct to consumer sales by operating segment are as follows:

 Constant Currency (1) Constant Currency (1)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Comparable store sales (retail only): (2)       
  Americas2.8% (2.8)% (0.3)% (1.4)%
  Asia Pacific(2.9)% (5.8)% (1.7)% (4.4)%
  Europe(2.1)% (0.9)% (2.3)% 2.1%
  Global0.4% (3.5)% (1.0)% (2.0)%
            


 Constant Currency (1) Constant Currency (1)
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Direct to consumer comparable store sales (includes retail and e-commerce): (2)       
  Americas9.2% (1.7)% 2.4% 3.0%
  Asia Pacific3.7% (2.4)% 8.4% 2.3%
  Europe4.8% (6.7)% 2.6% 0.3%
  Global7.0% (2.6)% 4.3% 2.4%
            


(1)   Reflects period over period change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Reconciliation of GAAP to Non-GAAP Measures” on page 7 for more information.
(2) Comparable store status is determined on a monthly basis. Comparable store sales include 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.
   

 

Investor Contacts:   Marisa Jacobs, Crocs, Inc.
(303) 848-7322
mjacobs@crocs.com
          and
Brendon Frey, ICR
(203) 682-8200
brendon.frey@icrinc.com
   
Media Contact: Ryan Roccaforte, Crocs, Inc.
(303) 848-7116
rroccaforte@crocs.com