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Crocs Inc. Reports 2012 Third Quarter Financial Results

October 24, 2012

Company Reports Earnings Per Diluted Share of $0.49 and Record Third Quarter Revenue of $295.6 million

NIWOT, Colo.--(BUSINESS WIRE)--Oct. 24, 2012-- Crocs Inc. (NASDAQ: CROX) reported today financial results for the third quarter ended September 30, 2012. Revenue for the third quarter of 2012 increased 7.5% to $295.6 million compared with revenue of $274.9 million reported in the third quarter of 2011. Net income for the third quarter of 2012 was $45.1 million, or $0.49 per diluted share, compared with net income of $30.2 million, or $0.33 per diluted share, in the third quarter of 2011.

From a channel perspective, wholesale sales increased 1.5% to $156.2 million compared with sales of $154.0 million in the third quarter of 2011. Internet sales increased 6.0% to $27.1 million compared with sales of $25.6 million in the third quarter of 2011. Retail sales increased 17.7% to $112.2 million compared with sales of $95.3 million in the third quarter of 2011. The company ended the quarter with 499 retail store locations compared with 410 locations a year ago. Global same store sales for the third quarter of 2012 increased 1.0% on a currency neutral basis, as the Americas increased 5.5%, Europe increased 0.9%, and Asia declined 6.3%.

Sales growth during the quarter was driven by strength in the Americas and Asia. Geographically, revenue increased 7.4% for the Americas, 11.3% for Asia and decreased 2.9% for Europe. On a constant currency basis, revenue increased 8.6% for the Americas, 13.0% for Asia, 7.3% for Europe, and 10.3% globally.

“Our revenue growth during the third quarter reflects the benefit of balanced distribution channels globally. Our direct to consumer channel in the Americas increased 12% on year-over-year basis, highlighted by a mid single digit same store sales gain, and our expanded presence in Asia resulted in a direct to consumer sales increase of 17% in that region,” said John McCarvel, President and Chief Executive Officer. “Our Americas and Asia performance helped to more than offset weakness in the European market, where challenging macroeconomic conditions and foreign currency exchange rate fluctuations continue to pressure our results. At the same time, we haven’t been fully immune to some of the recent choppiness in Asia, particularly in Japan, where consumer demand slowed as the third quarter progressed. Despite the economic headwinds we faced during quarter, we continued to grow the business and make strategic progress toward our long-term goal of evolving Crocs into a four-season brand. For the spring summer 2013 season our wholesale pre-books have been strong. We are excited about the prospects for 2013 as enthusiasm for our products continues to grow and our opportunities globally expand.”

Margins

Gross profit for the third quarter of 2012 increased 9.2% to $160.7 million, or 54.4% as a percentage of sales, from $147.2 million, or 53.5% as a percentage of sales in the same period last year. Selling, General, & Administrative expenses (SG&A) increased 8.1% to $120.7 million versus $111.7 million a year ago. As a percentage of sales, SG&A was 40.8% compared with 40.6% in the third quarter of 2011.

Balance Sheet

Cash and cash equivalents at September 30, 2012 increased 41.8% to $312.6 million compared to $220.4 million at September 30, 2011. Inventories at September 30, 2012 were $187.5 million, up 24.1% compared to inventories at September 30, 2011 of $151.1 million. Inventory levels during the third quarter of 2012 were partially driven by the 22% increase in retail store locations in the quarter and the need for additional inventory for the 35 to 40 new store openings planned for the fourth quarter of 2012.

Backlog

Backlog at September 30, 2012 increased 33.2% to $395.4 million compared with backlog of $296.8 million at September 30, 2011. John McCarvel continued “We saw exceptional growth in third quarter of 2012 pre-books as our wholesale customers accelerated their order books to secure sourcing for spring summer deliveries of our hottest new products for 2013, which include the huarache, molded boat shoes, and our women’s wedge line.”

Income Taxes

For the quarter, the company recorded a non-recurring tax benefit of $11.4 million due to a reversal of certain tax provisions and the release of certain valuation allowances associated with deferred tax assets.

Guidance

For the fourth quarter of 2012, the Company expects break-even diluted earnings per share on revenue of $220 million.

Conference Call Information

A conference call to discuss Crocs’ 2012 third quarter financial results is scheduled for today (October 24, 2012) 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 or at www.earnings.com. To listen to the broadcast, your computer must have Windows Media Player installed. If you do not have Windows Media Player, go to www.earnings.com prior to the call, where you can download the software for free.

About Crocs, Inc.

Celebrating its 10th anniversary in 2012, 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. The brand celebrated reaching $1 billion in annual sales in 2011.

Visit www.crocs.com for additional information.

Forward-looking statements

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. 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)
           
 
Three Months Ended Nine Months Ended
September 30, September 30,
($ thousands, except per share data) 2012 2011 2012 2011
Revenues $ 295,569 $ 274,897 $ 898,309 $ 797,189
Cost of sales   134,826     127,722     396,682     360,591  
Gross profit 160,743 147,175 501,627 436,598
Selling, general and administrative expenses 120,729 111,672 349,737 309,769
Asset impairment -   495   819   527  
Income from operations 40,014 35,008 151,071 126,302
Foreign currency transaction (gains) losses, net 21 (2,358 ) 2,670 (4,560 )
Other (income) expense, net (80 ) 335 (1,747 ) 636
Interest expense   377     204     556     632  
Income before income taxes 39,696 36,827 149,592 129,594
Income tax expense (benefit)   (5,384 )   6,620     14,642     22,377  
Net income $ 45,080   $ 30,207   $ 134,950   $ 107,217  
Net income per common share:
Basic $ 0.50   $ 0.34   $ 1.50   $ 1.21  
Diluted $ 0.49   $ 0.33   $ 1.48   $ 1.18  
 
CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
       
 
September 30, December 31, September 30,
($ thousands) 2012 2011 2011
ASSETS
Current assets:
Cash and cash equivalents $ 312,580 $ 257,587 $ 220,388
Accounts receivable, net of allowances of $17,557 and $15,508, respectively 121,396 84,760 95,305
Inventories 187,527 129,627 151,109
Deferred tax assets, net 8,042 7,047 14,134
Income tax receivable 5,829 5,828 16,460
Other receivables 26,105 20,295 18,488
Prepaid expenses and other current assets   26,813     20,199     18,654  
Total current assets 688,292 525,343 534,538
Property and equipment, net 76,577 67,684 66,115
Intangible assets, net 61,049 48,641 47,372
Deferred tax assets, net 32,882 30,375 31,423
Other assets   32,804     23,410     24,806  
Total assets $ 891,604   $ 695,453   $ 704,254  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 78,103 $ 66,517 $ 57,354
Accrued expenses and other current liabilities 94,389 76,506 75,563
Deferred tax liabilities, net 3,497 2,889 15,237
Income taxes payable 25,260 8,273 22,373
Bank borrowings and current portion of capital lease obligations   28     1,118     1,232  
Total current liabilities 201,277 155,303 171,759
Long term income tax payable 30,449 41,665 35,427
Long term deferred tax liabilities, net - - 1,070
Other liabilities   18,894     6,705     5,749  
Total liabilities   250,620     203,673     214,005  
 
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,
90,972,999 and 90,465,878 shares issued and outstanding, respectively, at
Sept 30, 2012 and 90,306,432 and 89,807,146 shares issued and outstanding,
respectively, at December 31, 2011 91 90 90
Treasury stock, at cost, 522,186 and 499,286 shares, respectively (19,211 ) (19,759 ) (20,103 )
Additional paid-in capital 305,204 293,959 291,609
Retained earnings 337,620 202,669 197,098
Accumulated other comprehensive income   17,280     14,821     21,555  
Total stockholders’ equity   640,984     491,780     490,249  
Total liabilities and stockholders’ equity $ 891,604   $ 695,453   $ 704,254  
 
        Constant         Constant
Three Months Ended Currency Nine Months Ended Currency
September 30, % Change % Change (1) September 30, % Change % Change (1)
($ thousands) 2012 2011     2012 2011    
Channel revenues:
Wholesale:
Americas $ 56,445 $ 55,430 1.8 % 3.9 % $ 187,870 $ 172,853 8.7 % 10.5 %
Asia 76,976 71,286 8.0 % 9.4 % 249,491 211,734 17.8 % 17.6 %
Europe 22,667 27,343 (17.1 %) (7.4 %) 97,773 109,606 (10.8 %) (3.1 %)
Other businesses   161     (80 ) (301.3 %) (313.8 %)   333     103   223.3 % 201.0 %
Total Wholesale 156,249 153,979 1.5 % 4.6 % 535,467 494,296 8.3 % 10.6 %
Consumer-direct:
Retail
Americas 58,798 52,407 12.2 % 12.7 % 149,296 131,404 13.6 % 14.1 %
Asia 41,826 36,245 15.4 % 17.6 % 110,766 85,301 29.9 % 31.6 %
Europe   11,550     6,649   73.7 % 85.5 %   25,158     15,832   58.9 % 69.7 %
Total Retail 112,174 95,301 17.7 % 19.7 % 285,220 232,537 22.7 % 24.3 %
Internet
Americas 16,705 15,010 11.3 % 11.8 % 46,700 40,196 16.2 % 16.4 %
Asia 4,893 3,654 33.9 % 36.1 % 12,319 8,672 42.1 % 42.5 %
Europe   5,548     6,953   (20.2 %) (9.9 %)   18,603     21,488   (13.4 %) (4.5 %)
Total Internet   27,146     25,617   6.0 % 9.4 %   77,622     70,356   10.3 % 13.2 %
Total Revenues $ 295,569   $ 274,897   7.5 % 10.3 % $ 898,309   $ 797,189   12.7 % 14.8 %
 
 
 
Three Months Ended Constant Nine Months Ended Constant
September 30, Currency September 30, Currency
($ thousands) 2012 2011 % Change % Change (1) 2012 2011 % Change % Change (1)
Regional Revenue:
Americas $ 131,948 $ 122,847 7.4 % 8.6 % $ 383,866 $ 344,453 11.4 % 12.6 %
Asia 123,695 111,185 11.3 % 13.0 % 372,576 305,707 21.9 % 22.2 %
Europe 39,765 40,945 (2.9 %) 7.3 % 141,534 146,926 (3.7 %) 4.6 %
Other businesses   161     (80 ) (301.3 %) (313.8 %)   333     103   223.3 % 201.0 %
Total Revenues $ 295,569   $ 274,897   7.5 % 10.3 % $ 898,309   $ 797,189   12.7 % 14.8 %
(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.
 
Company-operated retail locations:  

September 30, 2011

December 31, 2011   Opened

    Closed    

  September 30, 2012
Geography:
Americas 195 197 21 (29) 189
Asia 182 198 74 (39) 233
Europe 33 35 43 (1) 77
Total company-operated retail locations 410 430 138 (69) 499
Type:
Kiosk 67 57 3 (26) 34
Store in Store 92 101 30 (32) 99
Retail stores 167 180 74 (9) 245
Outlet stores 84 92 31 (2) 121
Total company-operated retail locations 410 430 138 (69) 499
 
 
Constant Currency Constant Currency
Three Months Ended

Nine Months Ended

Comparable store sales growth (1) September 30, 2012 (2)

September 30, 2012 (2)
Americas 5.5 % 3.7 %
Asia (6.3) 1.2
Europe 0.9 7.5
Total 1.0 % 3.1 %
 

(1) 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.

 

(2) 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.

 

Source: Crocs Inc.

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

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