Document




 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (date of earliest event reported): May 8, 2018
 
 
CROCS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
 
 
0-51754
 
 
 
20-2164234
 
(State or other jurisdiction
 
 
 
(Commission File Number)
 
 
 
(I.R.S. Employer
 
of incorporation)
 
 
 
 
 
 
 
Identification No.)
 
 
 
 
 
 
 
7477 East Dry Creek Parkway 
Niwot, Colorado
 
 
 
80503
 
(Address of principal executive offices)
 
 
 
(Zip Code)
 
 
 Registrant’s telephone number, including area code: (303) 848-7000
 
Not Applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.45) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o




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Item 2.02. Results of Operations and Financial Condition.
 
On May 8, 2018, Crocs, Inc. issued a press release reporting its results of operations for the three months ended March 31, 2018. A copy of the press release is furnished as Exhibit 99.1 to this report.

Item 9.01. Financial Statements and Exhibits.
 
(d) Exhibits.
 
Exhibit
No.
 
 
 
Description
 
99.1
 
 
 


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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
CROCS, INC.
 
 
 
 
 
 
 
Date: May 8, 2018
By:
 
/s/ Carrie W. Teffner
 
 
 
 
Carrie W. Teffner 
 
 
 
 
Executive Vice President and Chief Financial Officer
 
 



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Exhibit


Exhibit 99.1
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12236579&doc=3
 
 
Investor Contacts:
Marisa Jacobs, Crocs, Inc.
 
 
(303) 848-7322
 
 
mjacobs@crocs.com
 
 
 
 
Media Contact:
Ryan Roccaforte, Crocs, Inc.
 
 
(303) 848-7116
 
 
rroccaforte@crocs.com

Crocs, Inc. Reports First Quarter 2018 Results
Exceeded All Guidance Metrics; Increased Full-Year Guidance
___________________________________________________________________________
 
NIWOT, COLORADO May 8, 2018 — Crocs, Inc. (NASDAQ: CROX) a world leader in innovative casual footwear for men, women, and children, today announced its first quarter 2018 financial results.

Andrew Rees, President and Chief Executive Officer, said, “The year is off to a strong start, with first quarter results exceeding guidance on all metrics. Our Spring/Summer 2018 collection is being well-received, and our LiteRide launch surpassed our expectations. We continue to successfully execute against our strategic priorities and are increasing our guidance. We now expect full year revenues to be up low single digits, as double-digit e-commerce growth and moderate wholesale growth more than offset the decline in retail revenues associated with our store closure plan.”

First Quarter 2018 Operating Results:

Revenues were $283.1 million, growing 5.7% over the first quarter of 2017, or 0.7% on a constant currency basis. Top line growth was achieved despite the loss of approximately $12 million due to operating fewer stores and business model changes. E-commerce grew 24.1%, wholesale grew 6.5%, and the retail channel delivered positive comparable store sales of 7.6%.
Gross margin was 49.4%, declining 50 basis points from last year’s first quarter. At the beginning of the first quarter, the Company changed its inventory costing methodology from average cost to first-in-first-out, or FIFO. This change resulted in a timing-related charge to cost of sales in the first quarter, but will have no impact on the full year. Absent this charge, first quarter gross margin would have been up modestly to prior year.
Selling, general and administrative expenses (“SG&A”) were $114.0 million compared to $118.0 million in the first quarter of 2017. As a percent of revenues, SG&A improved 380 basis points and represented 40.2% of revenues. First quarter 2018 results included $2.5 million of non-recurring charges associated with our SG&A reduction plan compared to $2.2 million in last year’s first quarter.
Income from operations of $25.9 million increased 66.4% compared to $15.6 million in last year’s first quarter. Net income attributable to common stockholders was $12.5 million, or $0.15 per diluted share, compared to $7.2 million, or $0.08 per diluted share, in last year’s first quarter. We had 71.7 million and 74.6 million weighted average diluted common shares outstanding on March 31, 2018 and 2017, respectively.

Balance Sheet and Cash Flow Highlights:

Cash used in operating activities decreased 6.6% to $46.6 million during the first quarter of 2018 compared to $49.9 million during the first quarter of 2017.
Cash and cash equivalents as of March 31, 2018 increased 14.7% to $102.0 million compared to $88.9 million as of March 31, 2017. This growth reflects the successful execution of the Company’s strategic objectives along with improved working capital management.

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Inventory declined 17.0% to $148.2 million as of March 31, 2018 compared to $178.5 million as of March 31, 2017, reflecting the Company’s continued focus on inventory management.
Capital expenditures during the first quarter of 2018 were $1.7 million compared to $5.4 million during the same quarter in 2017, as the Company opened fewer stores, completed fewer store remodels, and incurred lower technology-related expenditures.
At March 31, 2018, no borrowings were outstanding against the Company’s $100 million credit facility. This compares to $3.5 million of borrowings at March 31, 2017.

Share Repurchase Activity:

During the first quarter of 2018, the Company repurchased 1.4 million shares of its common stock for $20.1 million, at an average price of $14.32 per share. At March 31, 2018, $198.8 million of the Company’s $500 million share repurchase authorization remained available for future share repurchases.

Closure of Company-Operated Mexico Manufacturing and Distribution Facilities:

In connection with ongoing efforts to simplify the business and improve profitability, the Company has made the decision to close its manufacturing and distribution facilities in Mexico. Manufacturing has ceased, and the distribution center will be closed by the end of the third quarter. Related one-time charges are identified in the Company’s second quarter and full year SG&A guidance.

Financial Outlook:

Second Quarter 2018:

With respect to the second quarter of 2018, the Company expects:
Revenues of $315 to $325 million compared to $313.2 million in the second quarter of 2017.
Gross margin to be slightly above last year’s 54.2% rate.
SG&A to be approximately flat with $140.4 million last year. Non-recurring charges incurred in connection with our SG&A reduction plan are estimated at $1 million, compared to $1.8 million in last year’s second quarter. In addition, the Company will incur approximately $5.0 million of non-recurring charges in connection with the closure of its Mexico manufacturing and distribution facilities.

Full Year 2018:

With respect to 2018, the Company now expects:
Revenues to increase low single digits over 2017 revenues of $1,023.5 million, as we expect double digit e-commerce growth and moderate wholesale growth to more than offset lower retail revenues due to operating fewer stores and business model changes.
Gross margin to be up approximately 70 to 100 basis points over 2017 gross margin of 50.5%.
SG&A to be approximately $485 million. This includes approximately $15 million of non-recurring charges. Approximately $5 million of the non-recurring charges relate to the SG&A reduction plan. Approximately $10 million relate to the closure of the Mexico manufacturing and distribution facilities, with approximately half being non-cash. 2017 SG&A was $499.9 million, including $17.0 million of non-recurring charges.
Income from operations to be approximately $50 million compared to $17.3 million in 2017.
Depreciation and amortization to be approximately $30 million compared to $33.1 million in 2017.
Income tax expense of approximately $17 million compared to $7.9 million in 2017.


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Conference Call Information:
 
A conference call to discuss first quarter 2018 results is scheduled for today, Tuesday, May 8, 2018 at 8:30 a.m. EST. 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 46719244. 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 May 8, 2019.

About Crocs, Inc.:
 
Crocs, Inc. (Nasdaq: CROX) is a world leader in innovative casual footwear for women, men, and children, combining comfort and style with a value that consumers know and love. Every pair of shoes within Crocs’ collection contains Croslite™ material, a proprietary, molded footwear technology, delivering extraordinary comfort with each step.

In 2018, Crocs reinforces its mission of “everyone comfortable in their own shoes” with the second year of its global Come As You Are™ campaign. To learn more about Crocs or Come As You Are, please visit www.crocs.com or follow @Crocs on Facebook, Instagram and Twitter.

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 revenue, gross margin, SG&A, income from operations, depreciation and amortization, and tax expense 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 May 8, 2018. We do not undertake any obligation to update publicly any forward-looking statements, including, without limitation, any estimates provided in the “Financial Outlook” section above, whether as a result of the receipt of new information, future events, or otherwise.



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CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
 
Three Months Ended
March 31,
 
2018
 
2017
Revenues
$
283,148

 
$
267,907

Cost of sales
143,275

 
134,323

Gross profit
139,873

 
133,584

Selling, general and administrative expenses
113,951

 
118,002

Income from operations
25,922

 
15,582

Foreign currency gains, net
1,071

 
276

Interest income
279

 
150

Interest expense
(113
)
 
(184
)
Other income, net
53

 
124

Income before income taxes
27,212

 
15,948

Income tax expense
10,758

 
4,938

Net income
16,454

 
11,010

Dividends on Series A convertible preferred stock
(3,000
)
 
(3,000
)
Dividend equivalents on Series A convertible preferred shares related to redemption value accretion and beneficial conversion feature
(931
)
 
(855
)
Net income attributable to common stockholders
$
12,523

 
$
7,155

Net income per common share:
 
 
 
Basic
$
0.15

 
$
0.08

Diluted
$
0.15

 
$
0.08

Weighted average common shares outstanding:
 
 
 
Basic
68,705

 
73,810

Diluted
71,668

 
74,561


EARNINGS PER SHARE
(UNAUDITED)
(in thousands, except per share data)
 
Three Months Ended
March 31,
 
2018
 
2017
Numerator:
 

 
 

Net income attributable to common stockholders
$
12,523

 
$
7,155

Less: Net income allocable to Series A convertible preferred stockholders (1)
(2,094
)
 
(1,127
)
Adjusted net income available to common stockholders - basic and diluted
$
10,429

 
$
6,028

Denominator:
 

 
 

Weighted average common shares outstanding - basic
68,705

 
73,810

Plus: dilutive effect of stock options and unvested restricted stock units
2,963

 
751

Weighted average common shares outstanding - diluted
71,668

 
74,561

 
 
 
 
Net income per common share:
 

 
 

Basic
$
0.15

 
$
0.08

Diluted
$
0.15

 
$
0.08

(1) Represents the amount which would have been paid to preferred stockholders in the event the Company had declared a dividend on its common stock.

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CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and par value amounts)
 
 
March 31,
2018
 
December 31,
2017
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
101,953

 
$
172,128

Accounts receivable, net of allowances of $30,380 and $31,389, respectively
169,954

 
83,518

Inventories
148,187

 
130,347

Income taxes receivable
7,781

 
3,652

Other receivables
11,554

 
10,664

Restricted cash - current
2,359

 
2,144

Prepaid expenses and other assets
21,981

 
22,596

Total current assets
463,769

 
425,049

Property and equipment, net of accumulated depreciation and amortization of $90,554 and $91,806, respectively
30,746

 
35,032

Intangible assets, net
53,023

 
56,427

Goodwill
1,734

 
1,688

Deferred tax assets, net
10,097

 
10,174

Restricted cash
2,513

 
2,783

Other assets
11,001

 
12,542

Total assets
$
572,883

 
$
543,695

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
87,751

 
$
66,381

Accrued expenses and other liabilities
85,448

 
84,446

Income taxes payable
15,142

 
5,515

Current portion of borrowings and capital lease obligations
281

 
676

Total current liabilities
188,622

 
157,018

Long-term income taxes payable
6,195

 
6,081

Other liabilities
11,218

 
12,298

Total liabilities
206,035

 
175,397

Commitments and contingencies:
 
 
 
Series A convertible preferred stock, 1.0 million shares authorized, 0.2 million outstanding, liquidation preference $203 million
183,364

 
182,433

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, 250 million shares authorized, 95.7 million and 94.8 million issued, 68.3 million and 68.8 million outstanding, respectively
96

 
95

Treasury stock, at cost, 27.4 million and 26.0 million shares, respectively
(355,209
)
 
(334,312
)
Additional paid-in capital
376,808

 
373,045

Retained earnings
202,954

 
190,431

Accumulated other comprehensive loss
(41,165
)
 
(43,394
)
Total stockholders’ equity
183,484

 
185,865

Total liabilities and stockholders’ equity
$
572,883

 
$
543,695

 

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CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)

 
Three Months Ended
March 31,
 
2018
 
2017
Cash flows from operating activities:
 

 
 

Net income
$
16,454

 
$
11,010

Adjustments to reconcile net income to net cash used in operating activities:
 

 
 

Depreciation and amortization
7,643

 
8,446

Unrealized foreign currency (gain) loss, net
(787
)
 
856

Share-based compensation
2,674

 
2,611

Other non-cash items
941

 
(689
)
Changes in operating assets and liabilities:
 
 
 

Accounts receivable, net of allowances
(86,850
)
 
(66,917
)
Inventories
(20,853
)
 
(28,591
)
Prepaid expenses and other assets
5,112

 
9,618

Accounts payable, accrued expenses and other liabilities
29,065

 
13,766

Cash used in operating activities
(46,601
)
 
(49,890
)
Cash flows from investing activities:
 

 
 

Purchases of property, equipment, and software
(1,668
)
 
(5,410
)
Proceeds from disposal of property and equipment
16

 
12

Cash used in investing activities
(1,652
)
 
(5,398
)
Cash flows from financing activities:
 

 
 

Proceeds from bank borrowings

 
5,500

Repayments of bank borrowings and capital lease obligations
(400
)
 
(3,376
)
Dividends—Series A preferred stock
(3,000
)
 
(3,000
)
Repurchases of common stock
(20,061
)
 

Other
(692
)
 
(240
)
Cash used in financing activities
(24,153
)
 
(1,116
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
2,176

 
(1,389
)
Net change in cash, cash equivalents, and restricted cash
(70,230
)
 
(57,793
)
Cash, cash equivalents, and restricted cash—beginning of period
177,055

 
152,646

Cash, cash equivalents, and restricted cash—end of period
$
106,825

 
$
94,853
















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CROCS, INC. AND SUBSIDIARIES
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 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.
 






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CROCS, INC. AND SUBSIDIARIES
REVENUES BY CHANNEL
(UNAUDITED)

 
 
Three Months Ended
March 31,
 
% Change
 
Constant Currency % Change (1)
 
 
2018
 
2017
 
 
 
 
(in thousands)
 
 
 
 
Wholesale:
 
 

 
 

 
 

 
 
Americas
 
$
72,674

 
$
71,023

 
2.3
 %
 
2.5
 %
Asia Pacific
 
71,733

 
70,935

 
1.1
 %
 
(5.2
)%
Europe
 
49,877

 
40,583

 
22.9
 %
 
7.6
 %
Other businesses
 
313

 
190

 
64.7
 %
 
46.3
 %
Total wholesale
 
194,597

 
182,731

 
6.5
 %
 
0.7
 %
Retail:
 
 

 
 

 
 

 
 

Americas
 
34,716

 
32,829

 
5.7
 %
 
5.6
 %
Asia Pacific
 
17,614

 
21,532

 
(18.2
)%
 
(22.4
)%
Europe
 
7,176

 
7,419

 
(3.3
)%
 
(12.7
)%
Total retail
 
59,506

 
61,780

 
(3.7
)%
 
(6.4
)%
E-commerce:
 
 
 
 
 
 
 
 

Americas
 
16,440

 
13,869

 
18.5
 %
 
18.0
 %
Asia Pacific
 
7,815

 
5,877

 
33.0
 %
 
24.3
 %
Europe
 
4,790

 
3,650

 
31.2
 %
 
15.0
 %
Total e-commerce
 
29,045

 
23,396

 
24.1
 %
 
19.1
 %
Total revenues
 
$
283,148

 
$
267,907

 
5.7
 %
 
0.7
 %
(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Non-GAAP Measures” on page 7 for more information.
 


8



CROCS, INC. AND SUBSIDIARIES
RETAIL STORE COUNTS
(UNAUDITED)  
 
December 31, 2017
 
Opened
 
Closed
 
March 31, 2018
Company-operated retail locations:
 
 
 
 
 
 
 
Type:
 
 
 
 
 
 
 
Kiosk/store-in-store
71

 

 

 
71

Retail stores
161

 

 
16

 
145

Outlet stores
215

 

 
6

 
209

Total
447

 

 
22

 
425

Operating segment:
 
 
 
 
 
 
 
Americas
175

 

 
1

 
174

Asia Pacific
186

 

 
9

 
177

Europe
86

 

 
12

 
74

Total
447

 

 
22

 
425


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CROCS, INC. AND SUBSIDIARIES
COMPARABLE RETAIL STORE SALES AND DIRECT TO CONSUMER COMPARABLE STORE SALES
(UNAUDITED)  

Comparable retail sales and direct to consumer sales by operating segment were:
 
Constant Currency (1)
 
Three Months Ended March 31,
 
2018
 
2017
Comparable retail store sales: (2)
 
 
 
  Americas
10.9
 %
 
(6.0
)%
  Asia Pacific
4.7
 %
 
(1.4
)%
  Europe
(2.6
)%
 
(7.7
)%
  Global
7.6
 %
 
(4.8
)%

 
Constant Currency (1)
 
Three Months Ended March 31,
 
2018
 
2017
Direct to consumer comparable store sales (includes retail and e-commerce): (2)
 
 
 
  Americas
13.1
%
 
(5.0
)%
  Asia Pacific
10.4
%
 
5.5
 %
  Europe
4.2
%
 
(5.2
)%
  Global
11.2
%
 
(2.2
)%
(1) Reflects period over period change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “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.


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