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Crocs Inc. Reports Fourth Quarter and Full Year 2014 Financial Results
Revenues in Line With Expectations

NIWOT, Colo., Feb. 26, 2015 (GLOBE NEWSWIRE) -- Crocs Inc. (Nasdaq:CROX) today reported financial results for the fourth quarter and full year ended December 31, 2014.

Full Year and Fourth Quarter Financial Highlights:

  • GAAP revenue increased 0.5% year over year to $1.2 billion. On a constant currency basis, revenue increased 1.8% as compared to the prior year. For the fourth quarter, revenue was $206.5 million a decline of 9.7% as compared to the fourth quarter of 2013. On a constant currency basis, fourth quarter revenue declined 5%.
  • Net loss attributable to common stockholders on a GAAP basis was $0.22 per diluted share for the year and $0.70 per diluted share for the fourth quarter. Excluding certain non-recurring and special charges, the company reported non-GAAP adjusted net income attributable to common stockholders of $50.0 million for the year and a non-GAAP adjusted net loss of $30.0 million for the fourth quarter.

Gregg Ribatt, Chief Executive Officer, said: "We delivered fourth quarter sales in line with expectations. Our business was essentially flat to last year, on a constant currency basis across all regions including the Americas, Europe, Japan and Asia with the exception of Latin America and China. We believe the strategy the company outlined last July will position Crocs for sustained success in the future. We are making meaningful progress on implementing the strategy including: strengthening our brand; elevating our product stories while eliminating non-core categories; evolving our international business to focus on our six core markets while building best in class partnerships in the rest of the world; strengthening our relationships with key wholesale partners; improving our direct to consumer capabilities; simplifying our business model; and, building a best in class team. More specifically, in the second half of 2014 the company eliminated non-core product categories, closed more than 100 stores, reduced headcount, and simplified our international operations. We are confident these moves will enable us to streamline our business model, focus on our biggest and most meaningful opportunities, and position the company for growth in the future."

Financial Review

Fourth quarter operating results

In the fourth quarter of 2014, the company incurred a GAAP net loss attributable to common stockholders of $56.9 million or $0.70 per diluted share, compared with a net loss of $66.9 million or $0.76 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 $26.8 million in non-recurring and special charges (of which $15.3 million were non-cash charges) in the fourth quarter of 2014; compared with $49.2 million in non-recurring and special charges (of which $46.5 million were non-cash charges) in the fourth quarter of 2013.

Excluding these items, the company reported a non-GAAP adjusted net loss attributable to common stockholders of $30.0 million in the quarter or compared with a non-GAAP adjusted net loss of $17.7 million in the fourth quarter of 2013.

Full year 2014 operating results

The company generated net loss attributable to common stockholders of $19.0 million or $0.22 per diluted share for the full year ended 2014, compared with net income of $10.4 million or $0.12 per diluted share in 2013.

As outlined in detail in the non-GAAP reconciliations set forth later in this press release, the company recorded $69 million in non-recurring and special charges (of which $27.7 million were non-cash charges) for the year ended 2014; compared with $62.4 million in non-recurring and special charges (of which $49.3 million were non-cash charges) for the full year 2013.

Excluding these items, the company generated non-GAAP adjusted net income attributable to common stockholders of $50.0 million for the year ended 2014 compared with non-GAAP adjusted net income of $72.8 million during 2013.

Balance Sheet

Cash and cash equivalents at December 31, 2014, amounted to $267.5 million. Inventory was $171.0 million at the end of 2014 compared with $162.3 million on December 31, 2013.

Financial Outlook

Mr. Ribatt continued, "As we look forward, 2015 will be a transition period for the company. Our business continues to stabilize across all of our regions while we address the continuing challenges of the stronger US dollar and our China business. We expect Q1 revenues to be down on a constant currency basis by 10% to 12%, to a range of $260 to $265 million, driven primarily by declines in our China business. We expect the declines to moderate substantially in Q2 and growth to return in the second half of 2015 as many of the strategic changes we implemented in late 2014 positively impact the business."

Stock Repurchase

The company repurchased 10.6 million shares of common stock in 2014 of which 4.5 million shares were repurchased in the fourth quarter of 2014 at an average price of $12.38. The company ended the year at 78.5 million common shares outstanding and fourth quarter weighted average shares outstanding was 80.9 million.

Conference Call Information

A teleconference call to discuss fourth quarter and full year 2014 results is scheduled for today, Thursday, February 26, 2015, at 5:00 p.m. 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 39040660. 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 March 28, 2015

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, 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, expectations, 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 26, 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
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
         
  Three Months Ended Year Ended
  December 31, December 31,
($ thousands, except per share data) 2014 2013 2014 2013
Revenues  $ 206,473  $ 228,673  $ 1,198,223  $ 1,192,680
Cost of sales  128,570  125,772  603,893  569,482
Restructuring charges  1,373  --  3,985  --
Gross profit  76,530  102,901  590,345  623,198
Selling, general and administrative expenses  131,468  135,035  565,712  549,154
Restructuring charges  6,637  --  20,532  --
Asset impairment charges  2,997  10,747  8,827  10,949
Income (loss) from operations  (64,572)  (42,881)  (4,726)  63,095
Foreign currency transaction losses, net  607  221  4,885  4,678
Interest income  (360)  (756)  (1,664)  (2,432)
Interest expense  121  497  806  1,016
Other income, net  184  (306)  (204)  (126)
Income (loss) before income taxes  (65,124)  (42,537)  (8,549)  59,959
Income tax (benefit) expense  (12,030)  24,396  (3,623)  49,539
Net income (loss)  $ (53,094)  $ (66,933)  $ (4,926)  $ 10,420
Dividends on Series A convertible preferred stock  3,068  --  11,301  --
         
Dividend equivalents on Series A convertible preferred stock related to redemption value accretion and beneficial conversion feature  705  --  2,735  --
Net income (loss) attributable to common stockholders  $ (56,867)  $ (66,933)  $ (18,962)  $ 10,420
Net income (loss) per common share:        
Basic  $ (0.70)  $ (0.76)  $ (0.22)  $ 0.12
Diluted  $ (0.70)  $ (0.76)  $ (0.22)  $ 0.12
         
         
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 basis without regard to the impact of non-GAAP adjustments 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 in evaluating operating performance by providing better comparability between reporting periods because they provide an additional tool to evaluate our performance without regard to non-GAAP adjustments that may not be indicative of overall business trends. They also provide a better 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 Year Ended
  December 31, 2014 December 31, 2013 December 31, 2014 December 31, 2013
Cost of sales and restructuring charges reconciliation:        
GAAP cost of sales and restructuring charges  $ 129,943  $ 125,772  $ 607,878  $ 569,482
Inventory write-down (1)  (6,168)  (3,419)  (7,064)  (3,419)
Reorganization charges (2)  (3,891)  --  (3,806)  --
Restructuring charges (2)  (1,373)  --  (3,985)  --
Non-GAAP cost of sales and restructuring charges  $ 118,511  $ 122,353  $ 593,023  $ 566,063
         
Gross margin reconciliation:        
GAAP gross margin 37.1% 45.0% 49.3% 52.3%
Inventory write-down (1) 3.0 1.5 0.6 0.2
Reorganization charges (2) 1.9  -- 0.3  --
Restructuring charges (2) 0.7  -- 0.3  --
Non-GAAP gross margin 42.6% 46.5% 50.5% 52.5%
         
Selling, general and administrative expenses ("SG&A"), restructuring charges and asset impairment charges reconciliation:        
GAAP SG&A, restructuring charges and asset impairment charges  $ 141,102  $ 145,782  $ 595,071  $ 560,103
Restructuring charges (2)  (6,637)  --  (20,532)  --
New ERP implementation (3)  (2,160)  (2,060)  (13,268)  (8,893)
Retail asset impairment charges (4)  (2,997)  (10,408)  (8,827)  (16,704)
Goodwill impairment charges (5)  --  (339)  --  (339)
Reorganization charges (2)  (3,175)  (466)  (8,872)  (466)
Legal settlement (6)  (446)  (5,714)  (2,646)  (5,714)
Non-GAAP SG&A, restructuring charges and asset impairment charges  $ 125,687  $ 126,795  $ 540,926  $ 527,987
         
Net income attributable to common stockholders reconciliation:        
GAAP net income attributable to common stockholders reconciliation:  $ (56,867)  $ (66,933)  $ (18,962)  $ 10,420
Restructuring charges (2)  8,010  --  24,517  --
New ERP implementation (3)  2,160  2,060  13,268  8,893
Retail asset impairment charges (4)  2,997  10,408  8,827  16,704
Goodwill impairment charges (5)  --  339  --  339
Reorganization charges (2)  7,066  466  12,678  466
Inventory write-down (1)  6,168  3,419  7,064  3,419
Legal settlement (6)  446  5,714  2,646  5,714
Income tax expense (7)  --  26,831  --  26,831
Non-GAAP net income (loss) attributable to common stockholders  $ (30,020)  $ (17,696)  $ 50,038  $ 72,786
         
(1) This relates to a write-off of obsolete inventory.
(2) This relates to severance expenses, bonuses, store closure costs, consulting fees and other expenses related to recent restructuring and reorganization activities and our investment agreement with Blackstone. Reorganization activities also includes the net expenses related to the resolution of a statutory tax audit in Brazil.
(3) This represents operating expenses related to the implementation of our new ERP system and 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 a new ERP is complete.
(4) This represents retail asset impairment charges for certain underperforming locations in our Americas, Asia Pacific and Europe segments.
(5) This is related to a portion of our Crocs Benelux B.V. business purchased by our Crocs Stores B.V. subsidiary in July 2012.
(6) This represents legal settlement expenses.
(7) This represents the add-back of certain income tax expenses (benefits). The three month and year-ended December 31, 2013 includes a non-recurring tax expense related to our cash repatriation strategy as well as a valuation allowance adjustment.
         
 
CROCS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
     
  As of December 31,
($ thousands, except number of shares) 2014 2013
ASSETS    
Current assets:    
Cash and cash equivalents  $ 267,512  $ 317,144
Accounts receivable, net of allowances of $32,392 and $10,513, respectively   101,217  104,405
Inventories  171,012  162,341
Deferred tax assets, net  4,190  4,440
Income tax receivable  9,332  10,630
Other receivables  11,989  11,942
Prepaid expenses and other current assets  30,156  29,175
Total current assets  595,408  640,077
Property and equipment, net  68,288  86,971
Intangible assets, net  97,337  72,315
Goodwill  2,044  2,507
Deferred tax assets, net  17,886  19,628
Other assets  25,968  53,661
Total assets  $ 806,931  $ 875,159
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Accounts payable  $ 42,923  $ 57,450
Accrued expenses and other current liabilities  80,216  97,111
Deferred tax liabilities, net  11,869  11,199
Accrued restructuring  4,511  --
Income taxes payable  9,078  15,992
Current portion of long-term borrowings and capital lease obligations  5,288  5,176
Total current liabilities  153,885  186,928
Long-term income tax payable  8,843  36,616
Long-term borrowings and capital lease obligations  6,381  11,670
Long-term accrued restructuring  348  --
Other liabilities  12,277  15,201
Total liabilities  181,734  250,415
     
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 $203,067 and $0 at December 31, 2014 and 2013, respectively  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, 92,325,201 and 78,516,566 shares issued and outstanding, respectively, as of December 31, 2014 and 91,662,656 and 88,450,203 shares issued and outstanding, respectively, as of December 31, 2013   92  92
Treasury stock, at cost, 13,808,635 and 3,212,453 shares as of December 31, 2014 and 2013, respectively   (200,424)  (55,964)
Additional paid-in capital  345,732  321,532
Retained earnings  325,470  344,432
Accumulated other comprehensive income (loss)  (18,352)  14,652
Total stockholders' equity  452,518  624,744
Total liabilities, commitments and contingencies and stockholders' equity  $ 806,931  $ 875,159
     
 
CROCS, INC. AND SUBSIDIARIES
CHANNEL REVENUES (UNAUDITED)
             
  Three Months Ended December 31, Change Constant Currency Change (1)
($ thousands) 2014 2013 $ % $ %
Channel revenues:            
Wholesale:            
Americas  $ 39,628  $ 43,277  $ (3,649) (8.4)%  $ (2,445) (5.6)%
Asia Pacific  18,816  32,556  (13,740) (42.2)  (12,995) (39.9)
Japan  10,333  12,310  (1,977) (16.1)  (559) (4.5)
Europe  21,514  23,526  (2,012) (8.6)  576 2.4
             
Other businesses  187  54  133 246.3  141 261.1
             
Total Wholesale  90,478  111,723  (21,245) (19.0)  (15,282) (13.7)
Consumer-direct:            
Retail:            
Americas  47,129  46,141  988 2.1  1,357 2.9
Asia Pacific  24,097  26,083  (1,986) (7.6)  (1,179) (4.5)
Japan  5,755  5,941  (186) (3.1)  607 10.2
Europe  10,465  11,773  (1,308) (11.1)  331 2.8
Total Retail  87,446  89,938  (2,492) (2.8)  1,116 1.2
Internet:            
Americas  16,995  17,256  (261) (1.5)  (142) (0.8)
Asia Pacific  5,858  2,418  3,440 142.3  3,582 148.1
Japan  1,609  1,797  (188) (10.5)  34 1.9
Europe  4,087  5,541  (1,454) (26.2)  (1,002) (18.1)
             
Total Internet  28,549  27,012  1,537 5.7  2,472 9.2
Total revenues:  $ 206,473  $ 228,673  $ (22,200) (9.7)%  $ (11,694) (5.1)%
             
             
             
  Three Months Ended December 31, Change Constant Currency Change(1)
($ thousands) 2014 2013 $ % $ %
Regional Revenue:            
Americas  $ 103,752  $ 106,674  $ (2,922) (2.7)%  $ (1,230) (1.2)%
Asia Pacific  48,771  61,057  (12,286) (20.1)  (10,592) (17.3)
Japan  17,697  20,048  (2,351) (11.7)  82 0.4
Europe  36,066  40,840  (4,774) (11.7)  (95) (0.2)
Other businesses  187  54  133 246.3  141 261.1
Total revenues:  $ 206,473  $ 228,673  $ (22,200)  (9.7)%  $ (11,694) (5.1)%
             
             
  Year Ended December 31, Change Constant Currency Change(1)
($ thousands) 2014 2013 $ % $ %
Channel revenues:            
Wholesale:            
Americas  $ 228,615  $ 239,104  $ (10,489) (4.4)%  $ (7,286) (3.0)%
Asia Pacific  210,924  212,761  (1,837) (0.9)  (449) (0.2)
Japan  79,686  90,426  (10,740) (11.9)  (5,176) (5.7)
Europe  147,561  131,215  16,346 12.5  16,189 12.3
             
Other businesses  794  254  540 212.6  533 209.8
             
Total Wholesale  667,580  673,760  (6,180) (0.9)  3,811 0.6
Consumer-direct:            
Retail:            
Americas  206,053  202,925  3,128 1.5  4,552 2.2
Asia Pacific  123,597  120,020  3,577 3.0  2,768 2.3
Japan  35,867  36,566  (699) (1.9)  1,745 4.8
Europe  60,309  58,507  1,802 3.1  3,240 5.5
Total Retail  425,826  418,018  7,808 1.9  12,305 2.9
Internet:            
Americas  55,247  56,523  (1,276) (2.3)  (960) (1.7)
Asia Pacific  15,928  9,971  5,957 59.7  6,208 62.3
Japan  7,908  7,871  37 0.5  659 8.4
Europe  25,734  26,537  (803) (3.0)  (868) (3.3)
             
Total Internet  104,817  100,902  3,915 3.9  5,039 5.0
Total revenues:  $ 1,198,223  $ 1,192,680  $ 5,543 0.5%  $ 21,155 1.8%
             
             
             
  Year Ended December 31, Change Constant Currency Change(1)
($ thousands) 2014 2013 $ % $ %
Regional Revenue:            
Americas  $ 489,915  $ 498,552  $ (8,637) (1.7)%  $ (3,694) (0.7)%
Asia Pacific  350,449  342,752  7,697 2.2  8,527 2.5
Japan  123,461  134,863  (11,402) (8.5)  (2,772) (2.1)
Europe  233,604  216,259  17,345 8.0  18,561 8.6
Other businesses  794  254  540 212.6  533 209.8
Total revenues:  $ 1,198,223  $ 1,192,680  $ 5,543 0.5%  $ 21,155 1.8%
             
(1) 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 average foreign exchange rates 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.
 
CROCS, INC. AND SUBSIDIARIES
RETAIL STORE COUNTS (UNAUDITED)
         
  September 30,     December 31,
Company-operated retail locations: 2014  Opened   Closed  2014
Type:        
Kiosk/Store in Store  100  3  (3)  100
Retail Stores  329  1  (19)  311
Outlet Stores  176  1  (3)  174
Total  605  5  (25)  585
Operating segment:        
Americas  211  --  (1)  210
Asia Pacific  222  4  (22)  204
Japan  53  1  --  54
Europe  119  --  (2)  117
Total  605  5  (25)  585
         
  December 31,     December 31,
Company-operated retail locations: 2013  Opened   Closed  2014
Type:        
Kiosk/Store in Store  122  8  (30)  100
Retail Stores  327  40  (56)  311
Outlet Stores  170  22  (18)  174
Total  619  70  (104)  585
Operating segment:        
Americas  216  16  (22)  210
Asia Pacific  236  38  (70)  204
Japan  49  6  (1)  54
Europe  118  10  (11)  117
Total  619  70  (104)  585
         
CROCS, INC. AND SUBSIDIARIES
COMPARABLE STORE SALES (UNAUDITED)
     
  Constant Currency Constant Currency
  Three Months Ended Three Months Ended
Comparable store sales (1) December 31, 2014 (2) December 31, 2013 (2)
Americas  (3.3)%  (7.9)%
Asia Pacific  (3.4)  5.4
Japan  0.8  (9.7)
Europe  1.1  0.7
Global  (2.4)%  (4.0)%
     
  Constant Currency Constant Currency
  Year Ended Year Ended
Comparable store sales (1) December 31, 2014 (2) December 31, 2013 (2)
Americas  (4.4)%  (5.8)%
Asia Pacific  (4.6)  6.9
Japan  (4.8)  (15.0)
Europe  0.7  2.4
Global  (3.7)%  (2.7)%
     
(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 annual 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:
         Katy Michael/Crocs Inc.
         (303) 848-7000
         kmichael@crocs.com

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