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8-K - 8-K - Crocs, Inc.a16-10790_18k.htm

Exhibit 99.1

 

 

 

Investor Contact:

Brendon Frey, ICR

 

 

(203) 682-8200

 

 

Brendon.Frey@icrinc.com

 

Media Contact:

Katy Michael/Crocs Inc.

 

 

(303) 848-7000

 

 

kmichael@crocs.com

 

Crocs, Inc. Reports First Quarter 2016 Financial Results;

Revenue Increased 6.5% to $279.1 Million

 

NIWOT, COLORADO — May 10, 2016 — Crocs, Inc. (NASDAQ: CROX) today reported financial results for the three months ended March 31, 2016.

 

First Quarter Highlights:

 

·                  Revenue increased 6.5% to $279.1 million. On a constant currency basis, revenue increased 9.2% compared to the first quarter of 2015.

·                  Net income attributable to common stockholders on a GAAP basis was $6.4 million or $0.07 per diluted share.

 

Gregg Ribatt, Chief Executive Officer, said: “We are pleased with our start to the new year. First quarter revenue increased 6.5% driven by the positive response to our spring/summer 2016 line and operational improvements. While operational supply chain improvements resulted in some favorable timing of wholesale shipments in the quarter compared to our initial expectations, the strong growth in our e-commerce business and positive retail comps in all regions demonstrates the meaningful progress we have made in repositioning the Crocs brand and business over the past 21 months. There is still work to be done to position the company for sustained success; however, we remain confident that we are on track to deliver our full year and future sales and profit objectives.”

 

First Quarter Operating Results

 

In the first quarter of 2016, the company reported  GAAP net income attributable to common stockholders of $6.4 million or $0.07 per share, compared with a net loss attributable to common stockholders of $6.0 million or ($0.08) per 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 net charges of $0.1 million not related to our core business in the first quarter of 2016 compared with $10.7 million in the first quarter of 2015. Excluding these items, the company reported on a comparable basis, non-GAAP adjusted net income attributable to common shareholders of $6.4 million in the first quarter of 2016 versus non-GAAP adjusted net income attributable to common shareholders of $4.7 million in the first quarter of 2015.

 

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For the quarter ended March 31, 2016 we had 74.0 million diluted shares outstanding and 73.1 million weighted average common shares outstanding. The company did not repurchase any shares during the three months ended March 31, 2016.

 

Balance Sheet

 

Cash and cash equivalents as of March 31, 2016 were $89.1 million compared with $143.3 million at December 31, 2015. The decrease in cash and cash equivalents was primarily attributable to the seasonal increase in our net working capital as we build inventories and accounts receivable for our spring/summer 2016 selling season. Inventory was $186.1 million at March 31, 2016 compared to $168.2 million at December 31, 2015.

 

Financial Outlook

 

The company expects second quarter 2016 revenue in the $340 to $350 million range compared to $345.7 million in the second quarter of last year. This guidance reflects the timing impact from earlier shipments in the first quarter, as noted above. Additionally, revenue growth is anticipated to be in the mid-single digits, on a constant currency basis, in the first half of the year compared to the first half of 2015.

 

Conference Call Information

 

A teleconference call to discuss first quarter 2016 results is scheduled for today, Tuesday, May 10, 2016, at 8:30 am EDT. 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 42377507. 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 May 10, 2017.

 

About Crocs, Inc.

 

Crocs, Inc. 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 65 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,

 

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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 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 May 10, 2016.  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.

 

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CROCS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

($ thousands, except per share data)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2016

 

2015

 

 

 

 

 

 

 

Revenues

 

$

279,140

 

$

262,193

 

Cost of sales

 

149,774

 

134,823

 

Gross profit

 

129,366

 

127,370

 

Selling, general and administrative expenses

 

114,930

 

126,069

 

Asset impairment charges

 

193

 

 

Restructuring charges

 

 

3,663

 

Income (loss) from operations

 

14,243

 

(2,362

)

Foreign currency transaction gain (loss), net

 

(1,247

)

494

 

Interest income

 

216

 

288

 

Interest expense

 

(243

)

(219

)

Other income (expense), net

 

82

 

(331

)

Income (loss) before income taxes

 

13,051

 

(2,130

)

Income tax expense

 

(2,905

)

(295

)

Net income (loss)

 

$

10,146

 

$

(2,425

)

 

 

 

 

 

 

Dividends on Series A convertible preferred stock

 

$

(3,000

)

$

(2,833

)

Dividend equivalents on Series A convertible preferred shares related to redemption value accretion and beneficial conversion feature

 

(785

)

(721

)

Net income (loss) attributable to common stockholders

 

$

6,361

 

$

(5,979

)

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

Basic

 

$

0.07

 

$

(0.08

)

Diluted

 

$

0.07

 

$

(0.08

)

 

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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 “Non-GAAP selling, general, and administrative expenses”, “Non-GAAP cost of sales”, and “Non-GAAP adjusted net income (loss) attributable to common stockholders”, which are non-GAAP financial measures. Adjusted results exclude the impact of items that management believes affect the comparability or underlying business trends in our consolidated financial statements in 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 U.S. GAAP. Constant currency represents current period results that have been restated using prior year 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.

 

Management uses adjusted results to assist in comparing business trends from period to period on a consistent non-GAAP basis in communications with the Board, 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. We believe they also provide a useful baseline for analyzing trends in our operations. Investors should not consider these non-GAAP measures in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP.

 

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CROCS, INC. AND SUBSIDIARIES

RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES

(UNAUDITED)

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

2015

 

 

 

(in thousands)

 

Selling, general and administrative expenses reconciliation:

 

 

 

 

 

GAAP selling, general and administrative expenses

 

$

114,930

 

$

126,069

 

Reorganization charges (1)

 

(184

)

(1,399

)

Customs audit settlements (2)

 

(354

)

 

ERP implementation (3)

 

 

(5,648

)

Total selling, general and administrative adjustments

 

(538

)

(7,047

)

Non-GAAP selling, general and administrative expenses

 

$

114,392

 

$

119,022

 

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

2015

 

 

 

(in thousands)

 

Cost of sales reconciliation:

 

 

 

 

 

GAAP cost of sales:

 

$

149,774

 

$

134,823

 

Favorable settlement of customs audit (4)

 

650

 

 

Non-GAAP cost of sales

 

$

150,424

 

$

134,823

 

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

2015

 

 

 

(in thousands)

 

Net loss attributable to common stockholders reconciliation:

 

 

 

 

 

GAAP net income (loss) attributable to common stockholders reconciliation:

 

$

6,361

 

$

(5,979

)

Favorable settlement of customs audit (4)

 

(650

)

 

Reorganization charges (1)

 

377

 

1,399

 

Customs audit settlements (2)

 

354

 

 

ERP implementation (3)

 

 

5,648

 

Restructuring charges (5)

 

 

3,663

 

Total adjustments

 

81

 

10,710

 

Non-GAAP adjusted net income attributable to common stockholders

 

$

6,442

 

$

4,731

 

 


(1)         Relates to severance expenses, bonuses, store closure costs, consulting fees, and other expenses related to recent reorganization activities.

 

(2)         Represents penalties and fees related to the settlement of the customs audit.

 

(3)         Represents operating expenses related to the implementation of our new ERP system.

 

(4)   Represents the release of the reserve due to favorable settlement terms of the customs audit.

 

(5)  Represents severance, lease and other contract exit costs, and other expenses associated with the restructuring plan that concluded in December 2015.

 

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CROCS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ thousands, except number of shares)

 

 

 

March 31,

 

December 31,

 

 

 

2016

 

2015

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

89,080

 

$

143,341

 

Accounts receivable, net of allowances of $52,254 and $49,364, respectively

 

157,159

 

83,616

 

Inventories

 

186,113

 

168,192

 

Income tax receivable

 

10,001

 

10,233

 

Other receivables

 

16,925

 

14,233

 

Prepaid expenses and other assets

 

35,477

 

26,334

 

Total current assets

 

494,755

 

445,949

 

Property and equipment, net

 

50,047

 

49,490

 

Intangible assets, net

 

79,651

 

82,297

 

Goodwill

 

2,611

 

1,973

 

Deferred tax assets, net

 

6,746

 

6,608

 

Other assets

 

21,676

 

21,703

 

Total assets

 

$

655,486

 

$

608,020

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

83,331

 

$

63,336

 

Accrued expenses and other liabilities

 

96,265

 

92,573

 

Income taxes payable

 

7,682

 

6,416

 

Current portion of long-term borrowings and capital lease obligations

 

12,658

 

4,772

 

Total current liabilities

 

199,936

 

167,097

 

Long-term income tax payable

 

4,684

 

4,547

 

Long-term borrowings and capital lease obligations

 

901

 

1,627

 

Other liabilities

 

13,623

 

13,120

 

Total liabilities

 

219,144

 

186,391

 

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 $203,000 and $203,000 as of March 31, 2016 and December 31, 2015, respectively

 

176,442

 

175,657

 

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, 93,576,893 and 73,298,471 shares issued and outstanding, respectively, as of March 31, 2016 and 93,101,007 and 72,851,418 shares issued and outstanding, respectively, as of December 31, 2015

 

94

 

94

 

Treasury stock, at cost, 20,278,422 and 20,249,589 shares as of March 31, 2016 and December 31, 2015, respectively

 

(284,176

)

(283,913

)

Additional paid-in capital

 

356,271

 

353,241

 

Retained earnings

 

233,824

 

227,463

 

Accumulated other comprehensive loss

 

(46,113

)

(50,913

)

Total stockholders’ equity

 

259,900

 

245,972

 

Total liabilities, commitments and contingencies and stockholders’ equity

 

$

655,486

 

$

608,020

 

 

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The following tables summarize our total revenue by channel for the three months ended March 31, 2016 and 2015:

 

 

 

Three Months Ended March 31,

 

Change

 

Constant Currency Change (1)

 

 

 

2016

 

2015

 

$

 

%

 

$

 

%

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale:

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

74,155

 

$

61,176

 

$

12,979

 

21.2

%

$

15,104

 

24.7

%

Asia Pacific

 

77,154

 

72,497

 

4,657

 

6.4

%

6,659

 

9.2

%

Europe

 

39,062

 

44,653

 

(5,591

)

(12.5

)%

(4,611

)

(10.3

)%

Other businesses

 

172

 

225

 

(53

)

(23.6

)%

(52

)

(23.1

)%

Total wholesale

 

190,543

 

178,551

 

11,992

 

6.7

%

17,100

 

9.6

%

Retail:

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

35,749

 

34,617

 

1,132

 

3.3

%

1,238

 

3.6

%

Asia Pacific

 

22,519

 

23,345

 

(826

)

(3.5

)%

145

 

0.6

%

Europe

 

7,555

 

8,411

 

(856

)

(10.2

)%

(336

)

(4.0

)%

Total retail

 

65,823

 

66,373

 

(550

)

(0.8

)%

1,047

 

1.6

%

E-commerce:

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

14,226

 

9,976

 

4,250

 

42.6

%

4,335

 

43.5

%

Asia Pacific

 

4,829

 

3,933

 

896

 

22.8

%

1,074

 

27.3

%

Europe

 

3,719

 

3,360

 

359

 

10.7

%

507

 

15.1

%

Total e-commerce

 

22,774

 

17,269

 

5,505

 

31.9

%

5,916

 

34.3

%

Total revenues

 

$

279,140

 

$

262,193

 

$

16,947

 

6.5

%

$

24,063

 

9.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

$

124,130

 

$

105,769

 

$

18,361

 

17.4

%

$

20,677

 

19.5

%

Asia Pacific

 

104,502

 

99,775

 

4,727

 

4.7

%

7,878

 

7.9

%

Europe

 

50,336

 

56,424

 

(6,088

)

(10.8

)%

(4,440

)

(7.9

)%

Total segment revenues

 

278,968

 

261,968

 

17,000

 

6.5

%

24,115

 

9.2

%

Other businesses

 

172

 

225

 

(53

)

(23.6

)%

(52

)

(23.1

)%

Total consolidated revenues

 

$

279,140

 

$

262,193

 

$

16,947

 

6.5

%

$

24,063

 

9.2

%

 


(1)         Reflects year over year change as if the current period results were in “constant currency,” which is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” above for more information.

 

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CROCS, INC. SUBSIDIARIES

RETAIL STORE COUNTS

(UNAUDITED)

 

 

 

December 31, 
2015

 

Opened

 

Closed

 

March 31, 
2016

 

Company-operated retail locations

 

 

 

 

 

 

 

 

 

Type

 

 

 

 

 

 

 

 

 

Kiosk/store in store

 

98

 

2

 

3

 

97

 

Retail stores

 

275

 

1

 

11

 

265

 

Outlet stores

 

186

 

3

 

1

 

188

 

Total

 

559

 

6

 

15

 

550

 

Operating segment

 

 

 

 

 

 

 

 

 

Americas

 

196

 

1

 

1

 

196

 

Asia Pacific

 

261

 

5

 

12

 

254

 

Europe

 

102

 

 (1)

2

 

100

 

Total

 

559

 

6

 

15

 

550

 

 


(1)         Excludes eight retail locations acquired in Austria on March 31, 2016 as no revenue was recognized associated with those locations in the three months ended March 31, 2016.

 

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CROCS, INC. AND SUBSIDIARIES

COMPARABLE STORE SALES

RETAIL AND DIRECT TO CONSUMER

(UNAUDITED)

 

 

 

Constant Currency (2)

 

Constant Currency (2)

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

March 31, 2016

 

March 31, 2015

 

Comparable store sales (retail only) (1)

 

 

 

 

 

Americas

 

2.9

%

(5.8

)%

Asia Pacific

 

2.0

%

(9.4

)%

Europe

 

7.5

%

5.7

%

Global

 

3.1

%

(5.3

)%

 

 

 

Constant Currency (2)

 

Constant Currency (2)

 

 

 

Three Months Ended

 

Three Months Ended

 

 

 

March 31, 2016

 

March 31, 2015

 

Direct to Consumer comparable store sales (includes retail and e-commerce) (1)

 

 

 

 

 

Americas

 

12.2

%

(4.3

)%

Asia Pacific

 

5.8

%

(5.8

)%

Europe

 

9.7

%

2.1

%

Global

 

9.9

%

(3.7

)%

 


(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 e-commerce channel revenues and are calculated on a currency neutral basis using historical quarterly 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 prior year 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.

 

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