Crocs, Inc. Reports 2009 Third Quarter Financial Results Announces Profitable Third Quarter

NIWOT, Colo., Nov 05, 2009 (BUSINESS WIRE) -- --Third Quarter Revenue Improved to $177.1 Million, Exceeding Guidance and Prior Year Revenue --Cash Increases 50% to $76 Million in First Nine Months of 2009 Crocs, Inc. (NASDAQ: CROX) today reported financial results for the third quarter ended September 30, 2009.

Third quarter 2009 revenues increased 1.7% to $177.1 million compared to revenues of $174.2 million in the year ago period, ahead of the Company's guidance for revenues between $150 and $160 million. The Company's third quarter 2009 revenue included $11.5 million in planned sales of previously impaired footwear.

The Company reported net income of $22.1 million in the third quarter of 2009 with diluted earnings per share of $0.25, compared to a third quarter 2008 net loss of $148.0 million, or ($1.79) per diluted share. Third quarter 2009 net income includes the effects of the following: -- $9.6 million gross margin impact related to sales of product that had been previously impaired, -- $1.0 million gain from foreign currency exchange rate fluctuations during the 2009 third quarter, and -- $14.4 million one-time tax benefit related to a change in the Company's corporate tax structure.

These positive effects on net income were partially offset by the unfavorable impacts of $3.6 million in impairment and restructuring charges and net charitable donations.

On a non-GAAP basis, the Company's third quarter 2009 net income after taxes and excluding certain other one-time items was $0.6 million, or $0.01 per diluted share.

Year-over-year third quarter changes in the Company's channel revenue streams were as follows: -- Retail sales increased 39.6% to $53.9 million; -- Internet sales increased 61.0% to $16.1 million; and -- Wholesale sales decreased 14.7% to $107.1 million.

Changes in the Company's regional revenue streams during the same periods were as follows: -- Asia increased 7.4% to $68.0 million; -- Europe increased 1.7% to $29.9 million; and -- Americas decreased 2.8% to $79.3 million.

Balance Sheet The Company's cash and cash equivalents as of September 30, 2009 increased nearly 50% since December 31, 2008 to $76.0 million, despite fully repaying previously-outstanding debt of $17.3 million during the quarter. During the quarter, the Company also secured a new asset-backed credit facility with up to $30.0 million in borrowings available, which is intended to provide additional liquidity and flexibility in the future.

Inventory of $113.7 million at September 30, 2009 was 20.6% lower than at December 31, 2008 resulting in a trailing twelve month inventory turnover of 3 times.

The Company ended the third quarter of 2009 with accounts receivable of $65.8 million compared to $35.3 million at December 31, 2008 as a result of higher sales in the quarter. Days sales outstanding decreased from 37.5 days for the three months ended September 30, 2008 to 34.2 days for the three months ended September 30, 2009.

Net capital expenditures in the third quarter of 2009 were $6.1 million compared to $18.3 million the third quarter of 2008.

"Our third quarter results were driven by the continuing strength of our consumer-direct businesses and the favorable effects of our cost reduction programs," said John Duerden, President and Chief Executive Officer. "While we are encouraged by our top-line growth and return to profitability in the quarter, the normal seasonality of our business will make it difficult to maintain profitability in the fourth quarter. However, future wholesale bookings for the spring 2010 line are strong in all regions. When coupled with the launch of our new, targeted marketing programs, this provides us with increased confidence that we will return to profitability during 2010. In the meantime, we will continue to invest in the products, systems, processes and customer relationships necessary to deliver the best long-term results." Guidance The Company expects to generate between $110 million and $115 million in revenue during its fiscal fourth quarter, with a loss per diluted share between ($0.20) and ($0.15). This guidance excludes the effect of fluctuations in foreign currency, charitable contributions and one-time and non-recurring charges.

Guidance includes the effect of impaired inventory sales and will on a go-forward basis.

Conference Call Information A conference call to discuss Crocs' third quarter 2009 financial results is scheduled for today (November 5, 2009) 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.

Crocs, Inc. is a designer, manufacturer and retailer of footwear for men, women and children under the Crocs(TM) brand.

All Crocs(TM) brand shoes feature Crocs' proprietary closed-cell resin, Croslite(TM), which represents a substantial innovation in footwear. The Croslite(TM) material enables Crocs to produce soft, comfortable, lightweight, superior-gripping, non-marking and odor-resistant shoes. These unique elements make Crocs(TM) footwear ideal for casual wear, as well as for professional and recreational uses such as boating, hiking, hospitality and gardening. The versatile use of the material has enabled Crocs to successfully market its products to a broad range of consumers.

Crocs(TM) shoes are sold in 125 countries and come in a wide array of colors and styles. Please 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 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 crisis; our ability to obtain adequate financing; our significant expansion in recent years; our ability to manage our future growth or decline effectively; changing fashion trends; our defense and the ultimate outcome of a pending class action lawsuit; our ability to accurately anticipate and respond to seasonal or quarterly fluctuations in our operating results; our management and information systems infrastructure; our ability to obtain and protect intellectual property rights; our reliance on third party manufacturing and logistics providers for the production and distribution of products; our limited manufacturing capacity and distribution channels; our reliance on a single source supply for certain raw materials; inherent risks associated with the manufacture, distribution and sale of our products overseas; our reliance on market acceptance of the small number of products we sell; our ability to develop and sell new products; our limited operating history; our ability to accurately forecast consumer demand for our products; our ability to maintain effective internal controls; our ability to attract, assimilate and retain management talent; retail environment; our ability to effectively market and maintain a positive brand image; the effect of competition in our industry; the effect of potential adverse currency exchange rate fluctuations; and other factors described in our 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 OPERATIONS (In thousands, except share and per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Revenues $ 177,141 $ 174,187 $ 509,756 $ 595,497 Cost of sales 87,291 171,788 269,115 417,575 Gross profit 89,850 2,399 240,641 177,922 Selling, general and administrative expenses 76,963 104,391 239,407 270,959 Restructuring charges 17 2,450 5,916 6,769 Impairment charges 1,722 31,584 25,447 45,301 Charitable contributions expense 2,178 - 7,296 265 Income (loss) from operations 8,970 (136,026 ) (37,425 ) (145,372 ) Interest expense 155 413 1,412 1,385 Gain on charitable contributions (810 ) - (2,833 ) - Other (income) expense (125 ) (734 ) (833 ) (782 ) Income (loss) before income taxes 9,750 (135,705 ) (35,171 ) (145,975 ) Income tax (benefit) expense (12,318 ) 12,275 (4,541 ) 4,399 Net income (loss) $ 22,068 $ (147,980 ) $ (30,630 ) $ (150,374 ) Net income (loss) per common share: Basic $ 0.26 ($1.79 ) ($0.36 ) ($1.82 ) Diluted $ 0.25 ($1.79 ) ($0.36 ) ($1.82 ) Weighted average common shares outstanding: Basic 85,514,385 82,854,419 84,933,858 82,687,861 Diluted 87,479,318 82,854,419 84,933,858 82,687,861 CROCS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) September 30, 2009 December 31, 2008 ASSETS Current assets: Cash and cash equivalents $ 76,021 $ 51,665 Restricted cash 245 - Accounts receivable, net 65,794 35,305 Inventories 113,703 143,205 Deferred tax assets, net 12,088 11,364 Income tax receivable 8,248 24,417 Prepaid expenses and other current assets 21,147 13,415 Total current assets 297,246 279,371 Property and equipment, net 70,738 95,892 Restricted cash 2,358 2,922 Intangible assets, net 34,501 40,892 Deferred tax assets, net 22,507 21,231 Other assets 15,623 15,691 Total assets $ 442,973 $ 455,999 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 37,432 $ 35,137 Accrued expenses and other current liabilities 55,345 50,076 Accrued restructuring charges 3,149 1,439 Deferred tax liabilities, net 98 30 Income taxes payable 16,308 24,420 Note payable, current portion of long-term debt and capital lease obligations 628 22,431 Total current liabilities 112,960 133,533 Long-term debt and capital lease obligations 1,391 - Deferred tax liabilities, net 5,355 2,917 Long-term restructuring 580 959 Other liabilities 30,043 31,427 Total liabilities 150,329 168,836 Commitments and contingencies (note 12) Stockholders' equity: Common shares, par value $0.001 per share; 250,000,000 shares 85 84 authorized, 86,167,242 and 85,643,242 shares issued and outstanding, respectively at September 30, 2009 and 83,543,501 and 83,019,501 shares issued and outstanding, respectively at December 31, 2008 Treasury Stock, 524,000 shares, at cost (25,022 ) (25,022 ) Additional paid-in capital 259,205 232,037 Deferred compensation - (246 ) Retained earnings 33,603 64,233 Accumulated other comprehensive income 24,773 16,077 Total stockholders' equity 292,644 287,163 Total liabilities and stockholders' equity $ 442,973 $ 455,999 Crocs, Inc. Reconciliation of GAAP Measures to Non-GAAP Measures (In thousands, except share and per share data) (Unaudited) 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 non-GAAP metrics similar to those below. These non-GAAP measures exclude the effects of foreign exchange rate loss, restructuring activities, inventory write-down, asset impairment charges and unusual gross profit on impaired inventory sales. In management's opinion, these non-GAAP measures are important indicators of the continuing operations of our business and provide better comparability between reporting periods because they exclude items that may not be indicative of current period results 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.

Non-GAAP Reconciliations 3 months ended 9 months ended September 30, 2009 September 30, 2009 GAAP gross profit 89,850 240,641 Net gross profit effect of sales of previously impaired units (9,644 ) (1) (41,585 ) (1) Restructuring charges reflected in cost of sales 459 (2) 5,779 (2) Additional stock-based compensation expense related to tender offer - 3,056 (3) reflected in cost of sales Non-GAAP gross profit 80,665 207,891 3 months ended 9 months ended September 30, 2009 September 30, 2009 GAAP selling, general and administrative expense 76,963 239,407 Additional stock-based compensation expense related to tender offer - 13,261 (3 ) reflected in selling, general and administrative expense Foreign currency (gain)/loss (1,032 ) (4 ) (1,246 ) (4 ) Non-GAAP selling, general and administrative expense 77,995 227,392 3 months ended 9 months ended September 30, 2009 September 30, 2009 GAAP Income/(loss) before income taxes 9,750 (35,171 ) Net gross profit effect of sales of previously impaired units (9,644 ) (1 ) (41,585 ) (1 ) Additional stock-based compensation expense related to tender offer - 16,317 (3 ) Foreign currency (gain)/loss, net of tax (1,032 ) (4 ) (1,246 ) (4 ) Restructuring charges 476 (2 ) 11,695 Asset impairment 1,722 (5 ) 25,447 (5 ) Charitable contributions expense 2,178 (5 ) 7,296 (5 ) Gain on charitable contributions (810 ) (5 ) (2,833 ) (5 ) Non-GAAP net income (loss) before income taxes 2,640 (20,080 ) Tax expense 2,082 (6 ) 9,859 (6 ) One-time tax benefit (14,400 ) (7 ) (14,400 ) (7 ) Non-GAAP net (loss) income 558 (29,939 ) Non-GAAP net (loss) income per diluted share $ 0.01 $ (0.36 ) (1) This pro forma adjustment in the GAAP to Non-GAAP reconciliations above represents the gross profit realized on sales of impaired units at selling prices much higher than our previously estimated net realizable value for those units. Because the amount presented is accretive to our gross profit percentage during the three and nine months ended September 30, 2009 and represents a substantial change to our previous estimate of realizable value, management believes that exclusion of the gross profit on these sales in evaluating our results of operations provides important information for the reader of our financial statements as such changes in estimates are not anticipated to be recurring to the extent or magnitude they occurred during the quarter. (2) This proforma adjustment in the GAAP to Non-GAAP reconciliations above represents non-recurring restructuring charges. Of the $0.5 million in total Q3 2009 restructuring charges, $459 thousand was reflected in cost of sales and the remaining amount was reflected in its own line item in the calculation of Q3 2009 operating loss. For the nine months ended September 30, 2009, $5.8 million was reflected in cost of sales with the remaining amount reflected in its own line item in the calculation of operating loss for the nine months ended September 30, 2009. (3) This proforma adjustment in the GAAP to Non-GAAP reconciliations above represents additional stock-based compensation expense incurred as a result of the acceleration of tendered options from the Q2 2009 tender offer. The total Q2 2009 additional expense incurred as a result of the tender offer was $16.3 million, of which $3.0 million was reflected in cost of sales and $13.3 million was reflected in selling, general and administrative expense. These amounts are reflected in our reconciliations for the nine month period ended September 30, 2009 only. (4) The proforma adjustments in this GAAP to Non-GAAP reconciliation represent the add-back of GAAP charges taken in connection with our quarter foreign currency exchange rate loss reflected in selling, general and administrative expense. (5) The proforma adjustments in this GAAP to Non-GAAP reconciliation represent the add-back of GAAP charges taken in connection with our quarter asset impairment charges as well as the expense and related gain on charitable contributions during the quarter. (6) Represents tax expense, net of the $14.4 million one-time tax benefit in the quarter (See Note 7). Because total tax expense in the quarter related only to those jurisdictions where the Company made money as well as taxes on royalty payments, the assumed tax rate on the pro-forma adjustments above is zero. (7) Represents a one-time tax benefit resulting from the restructuring of our international operations and cost sharing arrangements, resulting in a one-time benefit of $11.8 million from a reduction in certain taxes previously accrued with an associated accrual for uncertain tax benefits of $2.6 million. SOURCE: Crocs, Inc.

CONTACT: Crocs, Inc. Investor Relations: Jennifer Almquist, 303-848-7000 or Media Relations: Tia Mattson, 303-848-7199 or Investor Contact: ICR, Inc. Chad Jacobs/Brendon Frey, 203-682-8200 Copyright Business Wire 2009 -0- KEYWORD: United States

North America

Colorado INDUSTRY KEYWORD: Women

Professional Services

Banking

Finance

Children

Retail

Fashion

Specialty

Consumer

Family

Men SUBJECT CODE: Earnings

Conference Call

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