News Release

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Crocs Inc. Reports 2012 Fourth Quarter & Full Year Financial Results
  • Record Full Year 2012 Revenue of $1.12 Billion
  • Full Year 2012 Diluted EPS of $1.44
  • Excluding Non-Operating Items the Company Generated $0.04 of Diluted EPS in the Fourth Quarter of 2012

NIWOT, Colo.--(BUSINESS WIRE)--Feb. 20, 2013-- Crocs Inc. (NASDAQ: CROX) reported today financial results for the fourth quarter and full year ended December 31, 2012.

Full Year 2012 Highlights

  • Revenue increased 12 percent to $1.12 billion or 14 percent on a constant currency basis compared with the prior year period
  • Gross Margin increased to 54.1 percent, an increase of 50 basis points compared with the prior year period
  • Net income, excluding non-operating items and one-time tax benefits, increased 17 percent compared with the prior year period

“Our strong performance in 2012 reflects our ongoing investment in our multi channel strategy. We saw revenue growth during 2012 of 14% on a constant currency basis, while also approaching a record 50 million units and increasing average selling prices,” said John McCarvel, President and Chief Executive Officer. “Looking forward into 2013, our customers are eagerly anticipating delivery of our spring summer line in the next few weeks, including the Huarache collection, which we expect to be the thirtieth member of our million pair seller club, our molded boat shoes, and our women’s wedge line. We believe our focus on bringing innovative, colorful, comfortable and fun products to the marketplace allows us to grow our business thoughtfully and provide long-term value to our stockholders.”

Full Year 2012 Results

Net income for the year ended December 31, 2012 was $131.3 million, or $1.44 per diluted share, compared with net income of $112.8 million, or $1.24 per diluted share, in 2011. Non-GAAP net income1, adjusted for a tax benefit in the third quarter of 2012, contingency accruals of $5.9 million in the fourth quarter of 2012 and $1.8 million of expense related to the implementation of a new enterprise resource planning (ERP) system, for the full year 2012 was $127.7 million or $1.40 per diluted share compared with Non-GAAP net income of $109.2 million or $1.20 per diluted share in the same period last year.

Revenue for 2012 was $1.12 billion, up 12.2% over 2011. On a constant currency basis, revenue increased 14.0% for the full year 2012.

Gross profit for 2012 was $608.0 million, or 54.1% as a percentage of sales, compared with $536.4 million, or 53.6% as a percentage of sales in the same period last year. SG&A increased 13.7% to $460.4 million compared with $404.8 million a year ago. As a percentage of sales, SG&A was 41.0% compared with 40.4% for the full year 2011.

Operating income for the full year 2012 was $146.2 million compared with $131.1 million in the prior year.

Full Year Revenue Results

The following tables detail the company’s full year 2012 and 2011 revenues:

                 
Twelve Months Ended
December 31, Change Constant Currency Change(1)
($ thousands) 2012     2011 $     % $ %
Channel revenues:
Wholesale:
Americas $ 235,988 $ 214,062 $ 21,926 10.2 % $ 25,920 12.1 %
Asia 298,350 259,104 39,246 15.1 38,984 15.0
Europe 110,947 124,995 (14,048 ) (11.2 ) (5,168 ) (4.1 )
Other businesses   574   191   383   200.5     406   212.4  
Total Wholesale 645,859 598,352 47,507 7.9 60,142 10.1
Consumer-direct:
Retail
Americas 196,711 174,840 21,871 12.5 22,691 13.0
Asia 143,062 111,650 31,412 28.1 32,543 29.1
Europe   35,052   20,167   14,885   73.8     16,093   79.8  
Total Retail 374,825 306,657 68,168 22.2 71,327 23.3
Internet
Americas 63,153 59,175 3,978 6.7 4,069 6.9
Asia 15,999 11,012 4,987 45.3 5,049 45.8
Europe   23,465   25,707   (2,242 ) (8.7 )   (163 ) (0.6 )
Total Internet   102,617   95,894   6,723   7.0     8,955   9.3  
Total Revenues $ 1,123,301 $ 1,000,903 $ 122,398   12.2 % $ 140,424   14.0 %
 
 
Twelve Months Ended
December 31, Change Constant Currency Change(1)
($ thousands) 2012 2011 $ % $ %
Regional Revenue:
Americas $ 495,852 $ 448,077 $ 47,775 10.7 % $ 52,680 11.8 %
Asia 457,411

381,766

75,644 19.8 76,576 20.1
Europe 169,464

170,869

(1,404 ) (0.8 )

10,762

6.3
Other businesses   574   191   383   200.5     406   212.4  
Total Revenues $ 1,123,301 $ 1,000,903 $ 122,398   12.2 % $ 140,424   14.0 %
 

(1) Current period results have been restated using 2011 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.

 

Fourth Quarter Results

For fourth quarter 2012, the company had a net loss of $3.6 million or $0.04 per diluted share, compared with net income of $5.6 million or $0.06 per diluted share in the prior year period. Fourth quarter 2012 results included non-cash expenses of $5.9 million for contingency accruals, which adversely impacted selling, general and administrative (SG&A) expenses by $2.2 million and cost of goods sold by $3.7 million. In addition, in the 2012 period, the company had total expenses of $1.5 million relating to its implementation of a new ERP system including non-cash accelerated depreciation and cash expenses for program management, training and other non-capitalized costs. Adjusting for these non-operating items, the company had Non-GAAP net income of $3.8 million in the quarter or $0.04 per diluted share.

“For the fourth quarter we are pleased with our 11 percent constant currency revenue growth which was ahead of our prior guidance, and our $3.8 million net income, after adjustments,” said John McCarvel. “We saw good reception of our fall holiday products during the season and we continued to position the brand for greater success in the back half of the year. For the quarter we saw gross margins after adjustments for special items in line with the prior year.”

Revenue for the fourth quarter of 2012 increased 10.4% to $225.0 million compared with revenue of $203.7 million reported in the fourth quarter of 2011. On a constant currency basis revenue increased 10.9% for the fourth quarter of 2012.

Gross profit for the fourth quarter of 2012 was $106.4 million, or 47.3% as a percentage of sales, compared with $99.8 million, or 49.0% as a percentage of sales in the same period last year. Gross Margins in the fourth quarter of 2012 were negatively impacted by the aforementioned $3.7 million contingency accrual.

Fourth Quarter Revenue Results

The following tables detail the company’s fourth quarter 2012 and 2011 revenues:

                     
Three Months Ended
December 31, Change Constant Currency Change(1)
($ thousands) 2012     2011 $ % $ %
Channel revenues:
Wholesale:
Americas $ 48,118 $ 41,209 $ 6,909 16.8 % $ 7,725 18.7 %
Asia 48,859 47,370 1,489 3.1 1,693 3.6
Europe 13,174 15,389 (2,215 ) (14.4 ) (1,800 ) (11.7 )
Other businesses   241   88   153   173.9     156   177.4  
Total Wholesale 110,392 104,056 6,336 6.1 7,774 7.4
Consumer-direct:
Retail
Americas 47,415 43,436 3,979 9.2 4,122 9.5
Asia 32,296 26,349 5,947 22.6 5,623 21.3
Europe   9,894   4,334   5,560   128.3     5,054   116.6  
Total Retail 89,605 74,119 15,486 20.9 14,799 20.0
Internet
Americas 16,453 18,979 (2,526 ) (13.3 ) (2,514 ) (13.2 )
Asia 3,680 2,340 1,340 57.3 1,366 58.4
Europe   4,862   4,219   643   15.2     812   19.2  
Total Internet   24,995   25,538   (543 ) (2.1 )   (336 ) (1.3 )
Total Revenues $ 224,992 $ 203,713 $ 21,279   10.4 % $ 22,237   10.9 %
 
 
Three Months Ended
December 31, Change Constant Currency Change(1)
($ thousands) 2012 2011 $ % $ %
Regional Revenue:
Americas $ 111,986 $ 103,624 $ 8,362 8.1 % $ 9,333 9.0 %
Asia 84,835 76,059 8,776 11.5 8,682 11.4
Europe 27,930 23,942 3,988 16.7 4,066 17.0
Other businesses   241   88   153   173.9     156   177.4  
Total Revenues $ 224,992 $ 203,713 $ 21,279   10.4 % $ 22,237   10.9 %
 

(1) Current period results have been restated using 2011 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 Results2

Comparable store sales on a constant currency basis for the fourth quarter of 2012 compared to the fourth quarter 2011 were as follows: Global decreased 3.5%, Americas decreased 0.9%, Asia decreased 8.5% and Europe decreased 2.3%.

Comparable store sales on a constant currency basis for the full year 2012 compared with the full year 2011 were as follows: Global increased 1.5%, Americas increased 2.6%, Asia decreased 1.0% and Europe increased 5.4%.

Balance Sheet

Cash and cash equivalents at December 31, 2012 increased 14.2% to $294.3 million compared with $257.6 million at December 31, 2011. During the fourth quarter of 2012 we repurchased 1.9 million shares of common stock for an aggregate of approximately $25.0 million in cash. Inventories at December 31, 2012 were $164.8 million, up 27.1% compared with inventories at December 31, 2011 of $129.6 million. The year over year increase in inventory levels was partially driven by a terms and conditions change with our factories, which added $12.5 million of additional inventory commitments that were not owned as of December 31, 2011. Inventory levels also reflect the 24.9% increase in retail store locations in the full year 2012 compared with the prior year and the need for additional inventory for the 35 to 40 new store openings planned for the first quarter of 2013.

Backlog

Spring/summer backlog at December 31, 2012 increased 15.3% to $354.3 million compared with backlog of $307.4 million at December 31, 2011.

ERP System Implementation

In October 2012, we began the implementation of a new ERP system that is expected to launch in the first half of 2014. The introduction of this new ERP system to our current environment will allow for seamless, high-quality, and compliant data across the Company. We expect that the ERP system implementation will reduce earnings per diluted share by $0.08 - $0.10 in the full year 2013.

Financial Outlook

“As we look out into 2013, the strength of our backlog and our increased retail presence around the globe gives us confidence that our first half revenue growth will be approximately 13 to 15 percent and our initial expectations are for slightly better growth in the second half of 2013 compared with the second half of 2012,” said John McCarvel.

For the first quarter of 2013, the company expects revenue between $305 million and $310 million and diluted earnings per share between $0.32 and $0.34. This outlook includes $0.02 per diluted share of ERP implementation expense.

Conference Call Information

A conference call to discuss Crocs’ 2012 fourth quarter and full year financial results is scheduled for today (February 20, 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 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 February 20, 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)
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2012 AND 2011
(In thousands, except share and per share amounts)
 
      Three Months Ended     Twelve Months Ended
December 31, December 31,
($ thousands, except per share data) 2012     2011 2012     2011
Revenues $ 224,992 $ 203,713

$

1,123,301

$

1,000,903

Cost of sales   118,642     103,902     515,324     464,493  
Gross profit 106,350 99,811 607,977 536,410
Selling, general and administrative expenses 110,656 95,034 460,393 404,803
Asset impairment   591     1     1,410     528  
Income (loss) from operations (4,897 ) 4,776 146,174 131,079
Foreign currency transaction (gains) losses, net (170 ) (1,639 ) 2,500 (4,886 )
Other income, net (964 ) (901 ) (2,711 ) (1,578 )
Interest expense   281     220     837     853  
Income (loss) before income taxes (4,044 ) 7,096 145,548 136,690
Income tax expense (benefit)   (437 )   1,525     14,205     23,902  
Net income (loss) $ (3,607 ) $ 5,571   $ 131,343   $ 112,788  
Net income (loss) per common share:
Basic $ (0.04 ) $ 0.06   $ 1.46   $ 1.27  
Diluted $ (0.04 ) $ 0.06   $ 1.44   $ 1.24  
 
 
CROCS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
AS OF DECEMBER 31, 2012 AND DECEMBER 31, 2011
(In thousands, except share and per share amounts)
 
      December 31,
($ thousands, except number of shares) 2012     2011
ASSETS
Current assets:
Cash and cash equivalents $ 294,348 $ 257,587
Accounts receivable, net of allowances of $13,315 and $15,508, respectively 92,278 84,760
Inventories 164,804 129,627
Deferred tax assets, net 6,284 7,047
Income tax receivable 5,613 5,828
Other receivables 24,821 20,295
Prepaid expenses and other current assets   24,967     20,199  
Total current assets 613,115 525,343
Property and equipment, net 82,241 67,684
Intangible assets, net 59,931 48,641
Deferred tax assets, net 34,112 30,375
Other assets   40,239     23,410  
Total assets $ 829,638   $ 695,453  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 63,976 $ 66,517
Accrued expenses and other current liabilities 81,371 76,506
Deferred tax liabilities, net 2,405 2,889
Income taxes payable

8,205

8,273
Current portion of bank borrowings and capital lease obligations   2,039     1,118  
Total current liabilities

157,996

155,303
Long term income tax payable 36,343 41,665
Long-term debt 4,596 -
Other liabilities   13,361     6,705  
Total liabilities   212,238     203,673  
 
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, 91,047,297 and 88,662,845 shares issued and outstanding, respectively, at December 31, 2012 and 90,306,432 and 89,807,146 shares issued and outstanding, respectively, at December 31, 2011

91

90
Treasury stock, at cost, 2,384,452 and 499,286 shares, respectively (44,214 ) (19,759 )
Additional paid-in capital 307,823 293,959
Retained earnings 334,012 202,669
Accumulated other comprehensive income   19,688     14,821  
Total stockholders’ equity   617,400     491,780  
Total liabilities and stockholders’ equity $ 829,638   $ 695,453  
 
 
CROCS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2012 AND 2011
(In thousands)
 
      Three Months Ended December 31,     Twelve Months Ended December 31,
($ thousands) 2012     2011 2012     2011
Cash flows from operating activities:
Net income $ (3,607 ) $ 5,571 $ 131,343 $ 112,788
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 9,879 8,474 36,694 37,263
Unrealized (gain) loss on foreign exchange, net 8,398 (951 ) 13,928 (11,892 )
Deferred income taxes (2,981 ) (819 ) (2,981 ) (819 )
Charitable contributions 252 123 1,743 2,034
Provision for (recovery of) doubtful accounts, net 547 (129 ) 2,166 (383 )
Share-based compensation 2,350 2,112 11,321 8,550
Other non-cash items 725 268 1,392 339
Changes in operating assets and liabilities:
Accounts receivable 25,093 8,991 (9,475 ) (23,278 )
Inventories 21,687 20,543 (35,493 ) (13,328 )
Prepaid expenses and other assets (5,778 ) (1,908 ) (25,715 ) (17,598 )
Accounts payable (6,520 ) 5,763 99 30,314
Accrued expenses and other liabilities (18,833 ) 2,871 8,016 19,922
Accrued restructuring - (439 ) - (439 )
Income taxes   (10,201 )   (1,455 )   (4,907 )   (1,097 )
Cash provided by operating activities 21,011 49,015 128,131 142,376
Cash flows from investing activities:
Cash paid for purchases of property and equipment (13,896 ) (6,555 ) (39,762 ) (27,718 )
Proceeds from disposal of property and equipment 1,361 102 2,216 319
Cash paid for intangible assets (6,820 ) (2,488 ) (21,074 ) (13,922 )
Business acquisitions, net of cash (17 ) - (5,169 ) -
Restricted cash   (296 )   168     (2,154 )   (343 )
Cash (used in) investing activities (19,668 ) (8,773 ) (65,943 ) (41,664 )
Cash flows from financing activities:
Proceeds from bank borrowings 6,581 49,072 96,086 316,595
Repayment of bank borrowings and capital lease obligations 516 (48,794 ) (90,101 ) (317,704 )
Deferred debt issuance costs (524 ) (398 ) (524 ) (398 )
Issuances of common stock 348 1,104 3,706 10,914
Purchase of treasury stock (25,074 ) - (25,074 ) -
Repurchase of common stock for tax withholding   -     (490 )   (493 )   (490 )
Cash provided by financing activities (18,153 ) 494 (16,400 ) 8,917
Effect of exchange rate changes on cash   (3,906 )   (3,537 )   (9,027 )   2,375  
Net increase in cash and cash equivalents (20,716 ) 37,199 36,761 112,004
Cash and cash equivalents—beginning of quarter/year  

315,064

    220,388     257,587     145,583  
Cash and cash equivalents—end of quarter/year

$

294,348

  $ 257,587   $ 294,348   $ 257,587  
Supplemental disclosure of cash flow information—cash paid during the year for:
Interest $ 77 $ 156 $ 619 $ 843
Income taxes $ 12,448 $ 5,218 $ 29,385 $ 26,632
Supplemental disclosure of non-cash, investing, and financing activities:
Assets acquired under capitalized leases $ - $ - $ 34 $ -
Accrued purchases of property and equipment $ 2,368 $ 4,022 $ 2,368 $ 4,022
Accrued purchases of intangibles $ 768 $ 223 $ 768 $ 223
 
 

CROCS, INC. AND SUBSIDIARIES

UNAUDITED NON-GAAP NET INCOME RECONCILIATIONS

FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2012 AND 2011

(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 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 net income excludes the impact of new enterprise resource planning system ("ERP") implementation expenses, non-recurring tax benefits, the accelerated depreciation and amortization of our current ERP system and certain legal and other contingency accruals. 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 net income:

         
Three Months Ended Twelve Months Ended
December 31, December 31,
2012     2011 2012     2011
GAAP Net income (loss) $ (3,607 ) $ 5,571 $ 131,343 $ 112,788
New ERP implementation (1) 870 -

870

-
Contingency accruals (2) 5,904 - 5,904 -
Depreciation and amortization (3)   648     -   903     -  
Non-GAAP net income before income taxes $ 3,815 $ 5,571 $ 139,020 $ 112,788
Income tax (benefit) (4)   -     -   (11,368 )   (3,634 )
Non-GAAP net income $ 3,815   $ 5,571 $ 127,652   $ 109,154  
       
Non-GAAP net income per diluted share $ 0.04   $ 0.06 $ 1.40   $ 1.20  
 
(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 contingency accruals of which $2.2 million was recorded in selling, general and administrative expenses and $3.7 million was recorded in cost of sales.

 

(3) The proforma adjustments in this GAAP to Non-GAAP reconciliation represent 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 the SAP ERP is complete.

 

(4) The proforma adjustments in this GAAP to Non-GAAP reconciliation represent the add-back of certain one-time income tax benefits. The year-ended 2012 includes a one-time tax benefit of $11.4 million related to the reversal of certain tax positions and the release of certain valuation allowances associated with deferred tax assets. The year-ended 2011 includes a one-time tax benefit of $3.6 million related to a change in the international tax structure.

 
 
CROCS, INC. AND SUBSIDIARIES
RETAIL STORE COUNTS
                 
December 31, December 31,
Company-operated retail locations: 2012 Opened Closed 2011

Geography:

Americas 199 44 (42) 197
Asia 241 94 (51) 198
Europe 97 63 (1) 35
Total company-operated retail locations 537 201 (94) 430
Type:
Kiosk / Store in Store 121 39 (76) 158
Retail stores 287 120 (13) 180
Outlet stores 129 42 (5) 92
Total company-operated retail locations 537 201 (94) 430
 

1 Non-GAAP 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.

2 Comparable store status is determined on a monthly basis. Comparable store sales begin in the thirteen 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. Locations closures in excess of three months are excluded until the thirteen month post re-opening.

Source: Crocs Inc.

Crocs Inc.
Investors:
William I. Kent, 303-848-7000
wkent@crocs.com
or
Media:
Katy Lachky, 303-848-7000
klachky@crocs.com