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Crocs, Inc. Reports Record Revenues for Fourth Quarter and Full Year 2019; Full Year Operating Income Increased 104.4%; Operating Margin Improved to 10.5%; Full Year EPS Increased to $1.66

February 27, 2020

 

NIWOT, Colo.--(BUSINESS WIRE)-- Crocs, Inc. (NASDAQ: CROX), a world leader in innovative casual footwear for men, women, and children, today announced its fourth quarter and full year 2019 financial results.

Andrew Rees, President and Chief Executive Officer, said, “Our record fourth quarter and full year top-line combined with our double-digit operating margin underscores the progress we have made executing our key strategic initiatives. Focusing on our core clog and sandal categories and further igniting brand heat through impactful marketing campaigns and collaborations are fueling strong revenue growth. Equally important, the work we’ve done reducing our expense structure is allowing us to translate our top-line success into even stronger earnings growth as we continue to make important investments in the business.”

“Although we begin the new year with great momentum and exciting plans in place to build on our recent growth, our immediate focus is with everyone affected by the coronavirus and ensuring that our employees in China, along with our partners, safely navigate the risks associated with this global health epidemic. Despite this difficult situation, we continue to be very optimistic about our long-term growth prospects in China and our Asia region.”

Fourth Quarter 2019 Operating Results:

  • Revenues were $263.0 million, growing 21.8% over the fourth quarter of 2018, or 22.7% on a constant currency basis. Currencies negatively impacted our revenues by approximately $2.0 million, while store closures reduced our revenues by $2.0 million. Wholesale revenues grew 22.4%, e-commerce revenues grew 34.3%, and retail comparable store sales on a constant currency basis grew 16.0%.
  • Gross margin was 48.0%, compared to 46.2% in last year’s fourth quarter. Adjusted gross margin, which excludes 130 basis points of expenses primarily related to the relocation of our distribution centers in the U.S. and the Netherlands, was 49.3%. Adjusted gross margin rose 310 basis points, driven by favorable product mix, price increases on certain products, lower levels of promotions and discounts, and greater volume helping to leverage our fixed costs. For a reconciliation of gross margin to adjusted gross margin, see the ‘Non-GAAP cost of sales and gross margin reconciliation’ schedule below.
  • Selling, general and administrative expenses (“SG&A”) were $117.9 million compared to $113.8 million in the fourth quarter of 2018. Non-recurring charges were $1.2 million compared to $4.6 million in the fourth quarter of 2018. SG&A improved 790 basis points and represented 44.8% of revenues compared to 52.7% in the fourth quarter of 2018, as we continued to drive leverage across the business. Our adjusted SG&A improved 620 basis points and represented 44.4% of revenues compared to 50.6% in the fourth quarter of 2018. For a reconciliation of SG&A to adjusted SG&A, see the ‘Non-GAAP selling, general and administrative expenses reconciliation’ schedule below.
  • Income from operations was $8.4 million compared to loss from operations of $13.9 million in the fourth quarter of 2018. Excluding expenses incurred in connection with the relocation of our distribution centers in the U.S. and the Netherlands and non-recurring SG&A charges, our adjusted income from operations was $12.9 million. For a reconciliation of income from operations to adjusted income from operations, see the ‘Non-GAAP income (loss) from operations and operating margin reconciliation’ schedule below.
  • Our diluted net income per common share was $0.29 for the fourth quarter of 2019, compared to a diluted net loss per common share of $1.72 in the fourth quarter of 2018. Excluding expenses primarily incurred in connection with the relocation of our distribution centers in the U.S. and the Netherlands and non-recurring SG&A charges, adjustments to income tax expense (benefit), and pro forma adjustments related to our previously outstanding Series A Preferred Stock, our adjusted diluted net income per common share was $0.12, compared to a non-GAAP diluted net loss per common share of $0.10 in the fourth quarter of 2018, as detailed on the ‘Non-GAAP earnings per share reconciliation’ schedule below.

2019 Operating Results:

  • Revenues were $1,230.6 million, growing 13.1% over 2018, or 15.6% on a constant currency basis. Store closures reduced our revenues by $17.2 million. Our wholesale revenues grew 13.5%, our e-commerce business grew 24.2%, and our retail comparable store sales grew 12.4%.
  • Gross margin was 50.1% compared to 51.5% in 2018, while gross profit increased $56.9 million. Adjusted gross margin, which excluded 90 basis points of expenses primarily related to the relocation of our distribution centers in the U.S. and the Netherlands, was 51.1%. Adjusted gross margin declined 40 basis points, driven by reduced purchasing power related to currency, offset in part by a higher margin product mix, price increases on certain products, and lower levels of promotions and discounts. For a reconciliation of gross margin to adjusted gross margin, see the ‘Non-GAAP cost of sales and gross margin reconciliation’ schedule below.
  • SG&A was $488.4 million compared to $497.2 million in 2018. Results for 2019 included $2.9 million of non-recurring charges compared to $21.1 million in 2018. As a percent of revenues, SG&A improved 600 basis points to 39.7%. Excluding non-recurring charges, adjusted SG&A as a percent of revenues was 39.5%, an improvement of 430 basis points over 2018. For a reconciliation of SG&A to adjusted SG&A, see the ‘Non-GAAP selling, general and administrative expenses reconciliation’ schedule below.
  • Income from operations of $128.6 million grew 104.4%, compared to $62.9 million in 2018, and operating margin was 10.5%, compared to 5.8% in 2018. Excluding expenses primarily incurred in connection with the relocation of our distribution centers in the U.S. and the Netherlands and non-recurring SG&A charges, adjusted income from operations grew 70.2% to $143.0 million. Adjusted operating margin for 2019 was 11.6% compared to 7.7% in 2018. For a reconciliation of income from operations to adjusted income from operations, see the ‘Non-GAAP income (loss) from operations and operating margin reconciliation’ schedule below.
  • Our diluted net income per common share was $1.66 in 2019 compared to diluted net loss per common share of $1.01 in 2018. Excluding expenses primarily incurred in connection with the relocation of our distribution centers in the U.S. and the Netherlands and non-recurring SG&A charges, adjustments to income tax expense (benefit), and pro forma adjustments related to our previously outstanding Series A Preferred Stock, our adjusted diluted net income per common share was $1.61 compared to $0.86 in 2018, as detailed on the ‘Non-GAAP earnings per share reconciliation’ schedule below.

Balance Sheet and Cash Flow Highlights:

  • Cash and cash equivalents were $108.3 million as of December 31, 2019, compared to $123.4 million as of December 31, 2018. The change in cash and cash equivalents was driven primarily by share repurchases and capital expenditures, partially offset by cash generated from operating activities.
  • Cash provided by operating activities decreased 21.2% to $90.0 million during 2019 compared to $114.2 million during 2018.
  • Inventory increased 38.2% to $172.0 million as of December 31, 2019 compared to $124.5 million as of December 31, 2018, while our inventory turnover ratio increased to 4.3 turns per year.
  • Capital expenditures, including accruals, during the year ended December 31, 2019 were $50.6 million compared to $10.9 million during 2018. The increase primarily reflects expenditures for the relocation of our U.S. distribution center from California to Ohio.
  • At December 31, 2019, there were $205.0 million of borrowings outstanding on our $450.0 million credit facility.

Share Repurchase Activity:

During the fourth quarter of 2019, we repurchased 0.4 million shares of our common stock for $13.7 million, at an average price of $34.73 per share. For the full year, we repurchased 6.1 million shares of our common stock for $147.2 million, at an average price of $24.20 per share. At year end, $508.6 million of our $1 billion share repurchase authorization remained available for future repurchases.

Distribution Center Investment:

The Company completed the relocation of its U.S. distribution center from California to Ohio during the fourth quarter of 2019. In 2019, we entered into a lease to relocate our distribution center in the Netherlands to a larger facility in 2021. We are evaluating similar investments this year and beyond designed to support our anticipated growth.

Financial Outlook:

First Quarter 2020:

With respect to the first quarter of 2020, we expect:

  • Revenues to be between $305 and $325 million compared to $295.9 million in the first quarter of 2019. We anticipate revenues for the first quarter of 2020 will be negatively impacted by approximately $20 to $30 million due to disruptions to our Asia business from COVID-19 (the “coronavirus”) and by approximately $3 million due to currency;
  • Many of our partner stores in China are closed temporarily. For those that remain open, they are operating on a reduced schedule and experiencing lower than usual traffic levels. We are also seeing the broader impact as we are experiencing traffic declines throughout many of our key countries in Asia.
  • Operating margin to be between 9% and 12%, including $3 million of non-recurring expenses for store closures and other provisions in Asia as a result of business disruptions from the coronavirus.

Full Year 2020:

With respect to 2020, we expect:

  • Revenues to be up 8% to 12% over 2019 revenues of $1,230.6 million. We anticipate 2020 revenues will be negatively impacted by $40 to $60 million as a result of disruptions to our Asia business from the coronavirus and approximately $10 million of currency;
  • An operating margin of between 11% and 13%, which includes expenses associated with our new distribution center in the Netherlands and charges for store closures and other provisions in Asia as a result of business disruptions from the coronavirus;
  • Interest expense of approximately $9 million; and
  • A tax rate of approximately 17%.

Conference Call Information:

A conference call to discuss fourth quarter and full year 2019 results is scheduled for today, Thursday, February 27, 2020, at 8:30 a.m. EST. The call participation number is (877) 790-7808. A replay of the conference call will be available approximately two hours after the completion of the call at (800) 585-8367. International participants can dial (647) 689-5638 to take part in the conference call and can access a replay of the call at (416) 621-4642. All of the above calls will require the input of the conference identification number 4936999. 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 February 27, 2021.

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. The vast majority of shoes within Crocs’ collection contains Croslite™ material, a proprietary, molded footwear technology, delivering extraordinary comfort with each step.

In 2020, Crocs declares that expressing yourself and being comfortable are not mutually exclusive. To learn more about Crocs or our global Come As You Are™ campaign, 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 full year and first quarter 2020 financial 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 February 27, 2020. We do not undertake any obligation to update publicly any forward-looking statements, including, without limitation, any estimate regarding revenues, margins, capital expenditures, or SG&A, whether as a result of the receipt of new information, future events, or otherwise.

Category:Investors

CROCS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

Revenues

$

262,979

 

 

$

215,989

 

 

$

1,230,593

 

 

$

1,088,205

 

Cost of sales

136,741

 

 

116,167

 

 

613,537

 

 

528,051

 

Gross profit

126,238

 

 

99,822

 

 

617,056

 

 

560,154

 

Selling, general and administrative expenses

117,882

 

 

113,759

 

 

488,407

 

 

497,210

 

Income (loss) from operations

8,356

 

 

(13,937

)

 

128,649

 

 

62,944

 

Foreign currency gains (losses), net

(430

)

 

(269

)

 

(1,323

)

 

1,318

 

Interest income

108

 

 

434

 

 

601

 

 

1,281

 

Interest expense

(1,893

)

 

(584

)

 

(8,636

)

 

(955

)

Other income, net

79

 

 

340

 

 

31

 

 

569

 

Income (loss) before income taxes

6,220

 

 

(14,016

)

 

119,322

 

 

65,157

 

Income tax expense (benefit)

(13,693

)

 

(3,130

)

 

(175

)

 

14,720

 

Net income (loss)

19,913

 

 

(10,886

)

 

119,497

 

 

50,437

 

Dividends on Series A convertible preferred stock (1)

 

 

(99,224

)

 

 

 

(108,224

)

Dividend equivalents on Series A convertible preferred stock related to redemption value accretion and beneficial conversion feature (1)

 

 

(8,575

)

 

 

 

(11,429

)

Net income (loss) attributable to common stockholders

$

19,913

 

 

$

(118,685

)

 

$

119,497

 

 

$

(69,216

)

Net income (loss) per common share:

 

 

 

 

 

 

 

Basic

$

0.29

 

 

$

(1.72

)

 

$

1.70

 

 

$

(1.01

)

Diluted

$

0.29

 

 

$

(1.72

)

 

$

1.66

 

 

$

(1.01

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

68,441

 

 

69,010

 

 

70,357

 

 

68,421

 

Diluted

69,843

 

 

69,010

 

 

71,771

 

 

68,421

 

 

 

 

 

 

 

 

 

Gross margin

48.0

%

 

46.2

%

 

50.1

%

 

51.5

%

Operating margin

3.2

%

 

(6.5

)%

 

10.5

%

 

5.8

%

Selling, general and administrative expenses as a percentage of revenues

44.8

%

 

52.7

%

 

39.7

%

 

45.7

%

(1)

On December 5, 2018, all issued and outstanding shares of Series A Convertible Preferred Stock were repurchased in exchange for cash or converted to common stock. As a result, amounts reported for the three months and year ended December 31, 2018, include amounts resulting from the repurchase and conversion, in addition to dividends, payments to induce conversion, and accretion of dividend equivalents prior to December 5, 2018.

 

CROCS, INC. AND SUBSIDIARIES

EARNINGS PER SHARE

(in thousands, except per share data)

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

Numerator:

 

 

 

 

 

 

 

Net income (loss) attributable to common stockholders (1)

$

19,913

 

 

$

(118,685

)

 

$

119,497

 

 

$

(69,216

)

Denominator:

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

68,441

 

 

69,010

 

 

70,357

 

 

68,421

 

Plus: dilutive effect of stock options and unvested restricted stock units

1,402

 

 

 

 

1,414

 

 

 

Weighted average common shares outstanding - diluted

69,843

 

 

69,010

 

 

71,771

 

 

68,421

 

 

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

 

 

Basic

$

0.29

 

 

$

(1.72

)

 

$

1.70

 

 

$

(1.01

)

Diluted

$

0.29

 

 

$

(1.72

)

 

$

1.66

 

 

$

(1.01

)

(1)

Net loss attributable to common stockholders for the three months and year ended December 31, 2018 reflects the repurchase and conversion of Series A Convertible Preferred Stock.

 

CROCS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and par value amounts)

 

 

 

December 31,

 

 

2019

 

2018

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

108,253

 

 

$

123,367

 

Accounts receivable, net of allowances of $18,797 and $20,477, respectively

108,199

 

 

97,627

 

Inventories

172,028

 

 

124,491

 

Income taxes receivable

1,341

 

 

3,041

 

Other receivables

8,711

 

 

7,703

 

Restricted cash — current

1,500

 

 

1,946

 

Prepaid expenses and other assets

25,350

 

 

22,123

 

Total current assets

425,382

 

 

380,298

 

Property and equipment, net

47,405

 

 

22,211

 

Intangible assets, net

47,095

 

 

45,690

 

Goodwill

1,578

 

 

1,614

 

Deferred tax assets, net

24,747

 

 

8,663

 

Restricted cash

2,292

 

 

2,217

 

Right-of-use assets

182,228

 

 

 

Other assets

8,075

 

 

8,208

 

Total assets

$

738,802

 

 

$

468,901

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

95,754

 

 

$

77,231

 

Accrued expenses and other liabilities

108,677

 

 

102,171

 

Income taxes payable

4,207

 

 

5,089

 

Current operating lease liabilities

48,585

 

 

 

Total current liabilities

257,223

 

 

184,491

 

Long-term income taxes payable

4,522

 

 

4,656

 

Long-term borrowings

205,000

 

 

120,000

 

Long-term operating lease liabilities

140,148

 

 

 

Other liabilities

4

 

 

9,446

 

Total liabilities

606,897

 

 

318,593

 

Commitments and contingencies:

 

 

 

Stockholders’ equity:

 

 

 

Common stock, par value $0.001 per share, 104.0 million and 103.0 million issued, 68.2 million and 73.3 million shares outstanding, respectively

104

 

 

103

 

Treasury stock, at cost, 35.8 million and 29.7 million shares, respectively

(546,208

)

 

(397,491

)

Additional paid-in capital

495,903

 

 

481,133

 

Retained earnings

240,485

 

 

121,215

 

Accumulated other comprehensive loss

(58,379

)

 

(54,652

)

Total stockholders’ equity

131,905

 

 

150,308

 

Total liabilities and stockholders’ equity

$

738,802

 

 

$

468,901

 

 

CROCS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Year Ended December 31,

 

 

2019

 

2018

Cash flows from operating activities:

 

 

 

Net income

$

119,497

 

 

$

50,437

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

24,213

 

 

29,250

 

Unrealized foreign currency gain, net

(1,140

)

 

(1,455

)

Loss (gain) on disposals of assets

(213

)

 

5,019

 

Share-based compensation

14,412

 

 

13,105

 

Asset impairments

 

 

2,182

 

Operating lease cost

60,142

 

 

 

Provision for doubtful accounts, net

1,566

 

 

711

 

Deferred taxes

(16,259

)

 

959

 

Other non-cash items

(963

)

 

1,994

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable, net of allowances

(15,015

)

 

(24,623

)

Inventories

(48,156

)

 

(1,987

)

Prepaid expenses and other assets

(4,012

)

 

9,703

 

Accounts payable

6,032

 

 

12,953

 

Accrued expenses and other liabilities

13,265

 

 

18,065

 

Operating lease liabilities

(64,313

)

 

 

Income taxes

902

 

 

(2,151

)

Cash provided by operating activities

89,958

 

 

114,162

 

Cash flows from investing activities:

 

 

 

Purchases of property, equipment, and software

(36,576

)

 

(11,979

)

Proceeds from disposal of property and equipment

616

 

 

1,856

 

Other

(276

)

 

13

 

Cash used in investing activities

(36,236

)

 

(10,110

)

Cash flows from financing activities:

 

 

 

Proceeds from borrowings

315,000

 

 

120,000

 

Repayments of borrowings

(230,000

)

 

(662

)

Series A preferred stock repurchase

 

 

(183,724

)

Dividends — Series A convertible preferred stock (1)

(2,985

)

 

(21,015

)

Repurchases of common stock

(147,190

)

 

(63,131

)

Other

(3,463

)

 

(270

)

Cash used in financing activities

(68,638

)

 

(148,802

)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

(569

)

 

(4,775

)

Net change in cash, cash equivalents, and restricted cash

(15,485

)

 

(49,525

)

Cash, cash equivalents, and restricted cash — beginning of year

127,530

 

 

177,055

 

Cash, cash equivalents, and restricted cash — end of year

$

112,045

 

 

$

127,530

 

 

 

 

 

Cash paid for interest

$

7,519

 

 

$

462

 

Cash paid for income taxes

16,050

 

 

18,633

 

(1)

Represents $3.0 million paid to induce conversion of the Series A Convertible Preferred Stock to common stock during the year ended December 31, 2019 and Series A Convertible Preferred Stock cash dividends paid of $9.0 million and $12.0 million paid to induce conversion for the year ended December 31, 2018.

 

CROCS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

In addition to financial measures presented on the basis of accounting principles generally accepted in the United States of America (“GAAP”), we present “Non-GAAP cost of sales,” “Non-GAAP gross margin,” “Non-GAAP selling, general, and administrative expenses,” “Non-GAAP income (loss) from operations and operating margin,” “Non-GAAP income tax expense (benefit) and effective tax rate,” “Non-GAAP net income (loss) attributable to common stockholders,” “Non-GAAP weighted average common shares outstanding - basic and diluted,” and “Non-GAAP basic and diluted net income (loss) per common share,” 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 consolidated financial statements for 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 GAAP. Constant currency represents current period results that have been retranslated using exchange rates used in the prior year comparative period. We believe the use of constant currency enhances the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.

We use 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 consolidated financial statements as an additional tool for evaluating operating performance and trends. For the three months and year ended December 31, 2019, we believe it is helpful to evaluate our results excluding the impacts of the Series A Preferred Stock transaction, expenses incurred in connection with relocating our distribution centers, and certain non-recurring charges. Investors should not consider these non-GAAP measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

CROCS, INC. AND SUBSIDIARIES
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

Non-GAAP cost of sales and gross margin reconciliation:

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands)

GAAP revenues

 

$

262,979

 

 

$

215,989

 

 

$

1,230,593

 

 

$

1,088,205

 

 

 

 

 

 

 

 

 

 

GAAP cost of sales

 

$

136,741

 

 

$

116,167

 

 

$

613,537

 

 

$

528,051

 

New distribution centers (1)

 

(3,413

)

 

 

 

(11,394

)

 

 

Other

 

84

 

 

 

 

(91

)

 

 

Total adjustments

 

(3,329

)

 

 

 

(11,485

)

 

 

Non-GAAP cost of sales

 

$

133,412

 

 

$

116,167

 

 

$

602,052

 

 

$

528,051

 

 

 

 

 

 

 

 

 

 

GAAP gross margin

 

$

126,238

 

 

$

99,822

 

 

$

617,056

 

 

$

560,154

 

GAAP gross margin as a percent of revenues

 

48.0

%

 

46.2

%

 

50.1

%

 

51.5

%

 

 

 

 

 

 

 

 

 

Non-GAAP gross margin

 

$

129,567

 

 

$

99,822

 

 

$

628,541

 

 

$

560,154

 

Non-GAAP gross margin as a percent of revenues

 

49.3

%

 

46.2

%

 

51.1

%

 

51.5

%

(1)

Primarily represents expenses related to our new distribution centers in Dayton, Ohio and Dordrecht, the Netherlands.

 

Non-GAAP selling, general and administrative expenses reconciliation:

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands)

GAAP revenues

 

$

262,979

 

 

$

215,989

 

 

$

1,230,593

 

 

$

1,088,205

 

 

 

 

 

 

 

 

 

 

GAAP selling, general and administrative expenses

 

$

117,882

 

 

$

113,759

 

 

$

488,407

 

 

$

497,210

 

Closure of manufacturing and distribution facilities (1)

 

 

 

(741

)

 

 

 

(13,712

)

Non-recurring expenses associated with cost reduction initiatives (2)

 

(584

)

 

(2,509

)

 

(2,282

)

 

(6,082

)

Accelerated depreciation of assets (3)

 

 

 

(1,306

)

 

 

 

(1,306

)

Offering fees (4)

 

(589

)

 

 

 

(589

)

 

 

Total adjustments

 

(1,173

)

 

(4,556

)

 

(2,871

)

 

(21,100

)

Non-GAAP selling, general and administrative expenses (5)

 

$

116,709

 

 

$

109,203

 

 

$

485,536

 

 

$

476,110

 

 

 

 

 

 

 

 

 

 

GAAP selling, general and administrative expenses as a percent of revenues

 

44.8

%

 

52.7

%

 

39.7

%

 

45.7

%

Non-GAAP selling, general and administrative expenses as a percent of revenues

 

44.4

%

 

50.6

%

 

39.5

%

 

43.8

%

(1)

Represents non-recurring expenses associated with the 2018 closures of Mexico and Italy manufacturing and distribution facilities.

(2)

Represents non-recurring expenses associated with cost reduction initiatives in 2019 and our SG&A reduction plan in 2018.

(3)

Represents non-recurring expenses related to the relocation of the Crocs corporate headquarters planned for March 2020.

(4)

Represents fees associated with the November 4, 2019 underwritten public offering, in which certain investment funds affiliated with The Blackstone Group Inc. sold 6.9 million shares of our stock to Morgan Stanley & Co. LLC. We did not receive any proceeds from this sale.

(5)

Non-GAAP selling, general and administrative expenses are presented gross of tax.

 

Non-GAAP income (loss) from operations and operating margin reconciliation:

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands)

GAAP revenues

 

$

262,979

 

 

$

215,989

 

 

$

1,230,593

 

 

$

1,088,205

 

 

 

 

 

 

 

 

 

 

GAAP income (loss) from operations

 

$

8,356

 

 

$

(13,937

)

 

$

128,649

 

 

$

62,944

 

Non-GAAP cost of sales adjustments (1)

 

3,329

 

 

 

 

11,485

 

 

 

Non-GAAP selling, general and administrative expenses adjustments (2)

 

1,173

 

 

4,556

 

 

2,871

 

 

21,100

 

Non-GAAP income (loss) from operations

 

$

12,858

 

 

$

(9,381

)

 

$

143,005

 

 

$

84,044

 

 

 

 

 

 

 

 

 

 

GAAP operating margin

 

3.2

%

 

(6.5

)%

 

10.5

%

 

5.8

%

Non-GAAP operating margin

 

4.9

%

 

(4.3

)%

 

11.6

%

 

7.7

%

(1)

See ‘Non-GAAP cost of sales and gross margin reconciliation’ above for more details.

(2)

See ‘Non-GAAP selling, general and administrative expenses reconciliation’ above for more details.

 

Non-GAAP income tax expense (benefit) and effective tax rate reconciliation:

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands)

GAAP income (loss) from operations

 

$

8,356

 

 

$

(13,937

)

 

$

128,649

 

 

$

62,944

 

GAAP income (loss) before income taxes

 

6,220

 

 

(14,016

)

 

119,322

 

 

65,157

 

 

 

 

 

 

 

 

 

 

Non-GAAP income (loss) from operations (1)

 

$

12,858

 

 

$

(9,381

)

 

$

143,005

 

 

$

84,044

 

GAAP non-operating income (expenses):

 

 

 

 

 

 

 

 

Foreign currency gains (losses), net

 

(430

)

 

(269

)

 

(1,323

)

 

1,318

 

Interest income

 

108

 

 

434

 

 

601

 

 

1,281

 

Interest expense

 

(1,893

)

 

(584

)

 

(8,636

)

 

(955

)

Other income, net

 

79

 

 

340

 

 

31

 

 

569

 

Non-GAAP income (loss) before income taxes

 

$

10,722

 

 

$

(9,460

)

 

$

133,678

 

 

$

86,257

 

 

 

 

 

 

 

 

 

 

GAAP income tax expense (benefit)

 

$

(13,693

)

 

$

(3,130

)

 

$

(175

)

 

$

14,720

 

Tax effect of non-GAAP operating adjustments and benefit of U.S. deferred tax assets previously subject to valuation allowance (2)

 

15,781

 

 

 

 

18,244

 

 

 

Non-GAAP income tax expense (benefit)

 

$

2,088

 

 

$

(3,130

)

 

$

18,069

 

 

$

14,720

 

 

 

 

 

 

 

 

 

 

GAAP effective income tax rate

 

(220.1

)%

 

22.3

%

 

(0.1

)%

 

22.6

%

Non-GAAP effective income tax rate

 

19.5

%

 

33.1

%

 

13.5

%

 

17.1

%

(1)

See ‘Non-GAAP income (loss) from operations and operating margin reconciliation’ above for more details.

(2)

Prior to the three months ended December 31, 2019, non-GAAP operating adjustments were in jurisdictions subject to a full valuation allowance, and thus had no material net tax impact.

 

Non-GAAP earnings per share reconciliation: (1)

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

(in thousands, except per share data)

Numerator:

 

 

 

 

 

 

 

 

GAAP net income (loss) attributable to common stockholders

 

$

19,913

 

 

$

(118,685

)

 

$

119,497

 

 

$

(69,216

)

Preferred share dividends and dividend equivalents (2)

 

 

 

107,799

 

 

 

 

119,653

 

Non-GAAP cost of sales adjustments (3)

 

3,329

 

 

 

 

11,485

 

 

 

Non-GAAP selling, general and administrative expenses adjustments (4)

 

1,173

 

 

4,556

 

 

2,871

 

 

21,100

 

Pro forma interest (5)

 

 

 

(1,407

)

 

 

 

(5,628

)

Non-GAAP income tax adjustment (6)

 

(15,781

)

 

 

 

(18,244

)

 

 

Non-GAAP net income (loss) attributable to common stockholders

 

$

8,634

 

 

$

(7,737

)

 

$

115,609

 

 

$

65,909

 

Denominator:

 

 

 

 

 

 

 

 

GAAP weighted average common shares outstanding - basic

 

68,441

 

 

69,010

 

 

70,357

 

 

68,421

 

Plus: GAAP dilutive effect of stock options and unvested restricted stock units in both periods and Series A Preferred in 2018

 

1,402

 

 

 

 

1,414

 

 

 

GAAP weighted average common shares outstanding - diluted

 

69,843

 

 

69,010

 

 

71,771

 

 

68,421

 

 

 

 

 

 

 

 

 

 

GAAP weighted average common shares outstanding - basic

 

 

 

69,010

 

 

 

 

68,421

 

Non-GAAP weighted average converted common shares outstanding adjustment (7)

 

 

 

4,723

 

 

 

 

6,349

 

Non-GAAP weighted average common shares outstanding - basic (8)

 

 

 

73,733

 

 

 

 

74,770

 

Plus: dilutive effect of stock options and unvested restricted stock units (9)

 

 

 

 

 

 

 

1,936

 

Non-GAAP weighted average common shares outstanding - diluted (10)

 

 

 

73,733

 

 

 

 

76,706

 

 

 

 

 

 

 

 

 

 

GAAP net income (loss) per common share:

 

 

 

 

 

 

 

 

Basic

 

$

0.29

 

 

$

(1.72

)

 

$

1.70

 

 

$

(1.01

)

Diluted

 

$

0.29

 

 

$

(1.72

)

 

$

1.66

 

 

$

(1.01

)

 

 

 

 

 

 

 

 

 

Non-GAAP net income (loss) per common share:

 

 

 

 

 

 

 

 

Basic (11)

 

$

0.13

 

 

$

(0.10

)

 

$

1.64

 

 

$

0.88

 

Diluted (12)

 

$

0.12

 

 

$

(0.10

)

 

$

1.61

 

 

$

0.86

 

(1)

Non-GAAP earnings per share calculation for the three months and year ended December 31, 2018 assumes the repurchase and conversion of the Series A Convertible Preferred Stock occurred on December 31, 2017 (“the Conversion”).

(2)

Adjustment adds back dividends and dividend equivalents for Series A Convertible Preferred Stock in calculating non-GAAP net income attributable to common stockholders for the three months and year ended December 31, 2018.

(3)

See ‘Non-GAAP cost of sales and gross margin reconciliation’ above for more information.

(4)

See ‘Non-GAAP selling, general and administrative expenses reconciliation’ above for more information.

(5)

Pro forma interest for the three months and year ended December 31, 2018 assumes borrowings of $120.0 million were outstanding for all of 2018 at a rate of 4.69% to partially finance the Conversion. Calculation assumes no repayments and no financing fees.

(6)

See ‘Non-GAAP income tax expense (benefit) and effective tax rate reconciliation’ above for more information.

(7)

Adjustment represents the incremental increase in weighted average common shares outstanding for the three months and year ended December 31, 2018 resulting from the Conversion.

(8)

Non-GAAP weighted average common shares outstanding - basic for the three months and year ended December 31, 2018 assumes the Conversion.

(9)

Adjustment reflects the dilutive impact of stock options and restricted stock units for the three months and year ended December 31, 2018.

(10)

Non-GAAP weighted average common shares outstanding - diluted for the three months and year ended December 31, 2018 assumes the Conversion.

(11)

Non-GAAP net income (loss) per common share - basic for the three months and years ended December 31, 2019 and 2018 uses the non-GAAP income (loss) attributable to common stockholders and for the year ended December 31, 2018 assumes the Conversion.

(12)

Non-GAAP net income (loss) per common share - diluted for the three months and years ended December 31, 2019 and 2018 uses the non-GAAP income (loss) attributable to common stockholders and for the year ended December 31, 2018 assumes the Conversion.

 

CROCS, INC. AND SUBSIDIARIES

REVENUES BY CHANNEL

 

 

 

Three Months Ended
December 31,

 

Year Ended
December 31,

 

% Change

 

Constant Currency
% Change (1)

 

 

2019

 

2018

 

2019

 

2018

 

Q4 ‘19-‘18

 

2019-2018

 

Q4 ‘19-‘18

 

2019-2018

 

 

($ in thousands)

Wholesale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

58,438

 

 

$

45,320

 

 

$

275,284

 

 

$

216,797

 

 

28.9

%

 

27.0

%

 

31.1

%

 

28.3

%

Asia Pacific

 

37,937

 

 

30,958

 

 

207,405

 

 

203,110

 

 

22.5

%

 

2.1

%

 

22.1

%

 

4.9

%

EMEA

 

28,795

 

 

24,842

 

 

173,480

 

 

154,992

 

 

15.9

%

 

11.9

%

 

18.5

%

 

18.6

%

Other businesses

 

(117

)

 

1,012

 

 

58

 

 

3,145

 

 

(111.6

)%

 

(98.2

)%

 

(111.7

)%

 

(98.2

)%

Total wholesale

 

125,053

 

 

102,132

 

 

656,227

 

 

578,044

 

 

22.4

%

 

13.5

%

 

23.9

%

 

16.8

%

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

59,578

 

 

48,249

 

 

241,694

 

 

204,806

 

 

23.5

%

 

18.0

%

 

23.5

%

 

18.1

%

Asia Pacific

 

13,892

 

 

15,905

 

 

74,793

 

 

87,264

 

 

(12.7

)%

 

(14.3

)%

 

(11.0

)%

 

(10.8

)%

EMEA

 

5,422

 

 

5,757

 

 

30,875

 

 

35,358

 

 

(5.8

)%

 

(12.7

)%

 

(5.7

)%

 

(8.8

)%

Total retail

 

78,892

 

 

69,911

 

 

347,362

 

 

327,428

 

 

12.8

%

 

6.1

%

 

13.2

%

 

7.5

%

E-commerce:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

37,741

 

 

28,074

 

 

123,537

 

 

98,589

 

 

34.4

%

 

25.3

%

 

34.4

%

 

25.5

%

Asia Pacific

 

12,521

 

 

9,090

 

 

65,874

 

 

54,224

 

 

37.7

%

 

21.5

%

 

38.9

%

 

25.6

%

EMEA

 

8,772

 

 

6,782

 

 

37,593

 

 

29,920

 

 

29.3

%

 

25.6

%

 

31.8

%

 

31.6

%

Total e-commerce

 

59,034

 

 

43,946

 

 

227,004

 

 

182,733

 

 

34.3

%

 

24.2

%

 

34.9

%

 

26.5

%

Total revenues

 

$

262,979

 

 

$

215,989

 

 

$

1,230,593

 

 

$

1,088,205

 

 

21.8

%

 

13.1

%

 

22.7

%

 

15.6

%

(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” for more information.

 

CROCS, INC. AND SUBSIDIARIES

RETAIL STORE COUNTS

 

 

 

September 30,
2019

 

Opened

 

Closed/
Transferred

 

December 31,
2019

Type:

 

 

 

 

 

 

 

Outlet stores

194

 

 

1

 

 

2

 

 

193

 

Retail stores

109

 

 

2

 

 

2

 

 

109

 

Kiosk/store-in-store

65

 

 

 

 

 

 

65

 

Total

368

 

 

3

 

 

4

 

 

367

 

Operating segment:

 

 

 

 

 

 

 

Americas

165

 

 

 

 

 

 

165

 

Asia Pacific

146

 

 

2

 

 

3

 

 

145

 

EMEA

57

 

 

1

 

 

1

 

 

57

 

Total

368

 

 

3

 

 

4

 

 

367

 

 
 

 

December 31,
2018

 

Opened

 

Closed/
Transferred

 

December 31,
2019

Type:

 

 

 

 

 

 

 

Outlet stores

195

 

 

10

 

 

12

 

 

193

 

Retail stores

120

 

 

4

 

 

15

 

 

109

 

Kiosk/store-in-store

68

 

 

1

 

 

4

 

 

65

 

Total

383

 

 

15

 

 

31

 

 

367

 

Operating segment:

 

 

 

 

 

 

 

Americas

168

 

 

1

 

 

4

 

 

165

 

Asia Pacific

153

 

 

12

 

 

20

 

 

145

 

EMEA

62

 

 

2

 

 

7

 

 

57

 

Total

383

 

 

15

 

 

31

 

 

367

 

 

CROCS, INC. AND SUBSIDIARIES

COMPARABLE RETAIL STORE SALES AND DIRECT TO CONSUMER COMPARABLE STORE SALES

 

 

Constant Currency (1)

 

Three Months Ended
December 31,

 

Year Ended

December 31,

 

2019

 

2018

 

2019

 

2018

Comparable retail store sales: (2)

 

 

 

 

 

 

 

Americas

24.2

%

 

17.3

%

 

18.8

%

 

14.0

%

Asia Pacific

(5.8

)%

 

6.2

%

 

(2.0

)%

 

4.0

%

EMEA

(1.4

)%

 

4.7

%

 

5.0

%

 

10.1

%

Global

16.0

%

 

13.4

%

 

12.4

%

 

10.8

%

 

 

Constant Currency (1)

 

Three Months Ended
December 31,

 

Year Ended

December 31,

 

2019

 

2018

 

2019

 

2018

Direct-to-consumer comparable store sales (includes retail and e-commerce): (2)

 

 

 

 

 

 

 

Americas

28.1

%

 

21.2

%

 

21.0

%

 

16.7

%

Asia Pacific

5.7

%

 

2.7

%

 

5.6

%

 

8.8

%

EMEA

11.5

%

 

16.1

%

 

13.3

%

 

15.6

%

Global

21.7

%

 

16.0

%

 

16.0

%

 

14.3

%

(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” 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 Contact:
Brendon Frey, ICR
(203) 682-8216
brendon.frey@icrinc.com

PR Contact:
Melissa Layton, Crocs, Inc.
(303) 848-7885
mlayton@crocs.com

Source: Crocs, Inc.

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