Delaware | 0-51754 | 20-2164234 | ||||
(State or other jurisdiction | (Commission File Number) | (I.R.S. Employer | ||||
of incorporation) | Identification No.) | |||||
7477 East Dry Creek Parkway Niwot, Colorado | 80503 | |||||
(Address of principal executive offices) | (Zip Code) |
Title of each class: | Trading symbol: | Name of each exchange on which registered: | ||
Common Stock, par value $0.001 per share | CROX | The Nasdaq Global Select Market |
Exhibit No. | Description | |
99.1 |
CROCS, INC. | ||
Date: May 7, 2019 | By: | /s/ Anne Mehlman |
Anne Mehlman | ||
Executive Vice President and Chief Financial Officer |
Investor Contacts: | Marisa Jacobs, Crocs, Inc. | |
(303) 848-7322 | ||
mjacobs@crocs.com |
• | Revenues were $295.9 million, growing 4.5% over the first quarter of 2018, or 9.0% on a constant currency basis. Store closures and business model changes reduced our revenues by approximately $6 million. Wholesale revenues grew 5.2%, e-commerce revenues grew 16.5%, and retail comparable store sales grew 8.7%. |
• | Gross margin was 46.5%, compared to our guidance of 45.5%, a decrease of 290 basis points from 49.4% in last year’s first quarter. Non-recurring expenditures related to the relocation of our Americas distribution center reduced gross margin by 40 basis points, resulting in an adjusted gross margin of 46.9%, 250 basis points below last year’s first quarter. Factors impacting our adjusted gross margin were currency, freight, and distribution center costs. Currency moves negatively impacted results by 140 basis points. 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 $105.0 million, down from $114.0 million in the first quarter of 2018, with improvements stemming from the Company’s SG&A reduction program and the movement of some marketing expenses into the second quarter. SG&A improved 470 basis points and represented 35.5% of revenues compared to our guidance of 37% to 38% and 40.2% in the first quarter of 2018. Excluding $0.7 million of non-recurring charges, adjusted SG&A improved by 410 basis points to 35.3% of revenues compared to 39.4% in last year’s first quarter, as detailed on the 'Non-GAAP selling, general and administrative expenses reconciliation' schedule below. |
• | Income from operations rose 25.7% to $32.6 million from $25.9 million in the first quarter of 2018. Excluding non-recurring gross margin and SG&A charges, adjusted income from operations rose 21.5% to $34.5 million. Our adjusted operating margin was 11.7%, up from 10.0% in the first quarter of 2018, as detailed on the 'Non-GAAP income from operations and operating margin reconciliation' schedule below. |
• | Net income was $24.7 million, up from $12.5 million in the first quarter of 2018. After adjusting for non-recurring gross margin and SG&A charges incurred in the first quarter of 2019 and 2018 respectively, and for the first quarter 2018 pro forma adjustments related to previously outstanding Series A Preferred Stock, adjusted net income was $26.7 million and $17.5 million in the first quarters of 2019 and 2018, respectively, as detailed on the 'Non-GAAP earnings per share reconciliation' schedule below. |
• | Diluted net income per common share was $0.33 for the first quarter of 2019, up from $0.15 in the first quarter of 2018. After adjusting for non-recurring charges relating to gross margin, SG&A, and the pro forma adjustments for Series A Preferred |
• | Cash and cash equivalents were $86.3 million as of March 31, 2019, compared to $102.0 million as of March 31, 2018. During the first quarter of 2019, the Company repurchased 2.1 million shares of its common stock, as detailed below. |
• | Inventory decreased 6.1% to $139.2 million as of March 31, 2019 compared to $148.2 million as of March 31, 2018. |
• | Capital expenditures during the first quarter of 2019 were $10.6 million compared to $1.7 million during the same period in 2018. The increase primarily reflects expenditures on the planned relocation of the Company’s Americas distribution center from California to Ohio. |
• | At March 31, 2019, there were $215.0 million in borrowings outstanding on the Company’s credit facility. During the first quarter of 2019, borrowing capacity on that facility was increased from $250 to $300 million. |
• | Revenues to be up 5% to 7% over 2018 revenues of $1,088.2 million. The Company now anticipates 2019 revenues will be negatively impacted by approximately $25 million of currency changes and approximately $20 million resulting from store closures. |
• | Gross margin of approximately 49.5% compared to 51.5% in 2018. The projected decline reflects our expectations relating to (i) non-recurring charges associated with the Company’s new distribution center, which we anticipate will reduce gross margin by approximately 100 basis points in 2019, (ii) reduced purchasing power associated with the strengthening of the U.S. Dollar, and (iii) higher freight and distribution costs. |
• | SG&A to be approximately 41% of revenues. This includes non-recurring charges of $3 to $5 million related to various cost reduction initiatives. In 2018, SG&A was 45.7% of revenues and included $21.1 million of non-recurring charges. |
• | An operating margin of approximately 8.5% including non-recurring charges associated with our new distribution center and SG&A cost reduction initiatives. Excluding those non-recurring charges, we expect to achieve our interim target of a low double digit operating margin. |
• | Capital expenditures to be approximately $65 million, compared to $12.0 million in 2018. The new distribution center will account for approximately $35 million of the total. The remainder relates to information technology and infrastructure projects, some of which were deferred from 2018, along with routine capital expenditures. |
• | Revenues to be between $350 and $360 million compared to $328.0 million in the second quarter of 2018. The Company anticipates revenues will be positively impacted by the Easter shift, but negatively impacted by approximately $6 million due to store closures and $10 million due to the stronger U.S. Dollar as compared to last year. This guidance reflects constrained levels of Classic clogs as a result of surging demand; however, inventories are expected to be restored to appropriate levels by the end of the quarter. |
• | Gross margin to be approximately 51% compared to 55.3% in the second quarter of 2018. This decline reflects (i) non-recurring charges relating to the new distribution center, which are expected to reduce gross margin by approximately 120 basis points, (ii) a negative impact from the stronger U.S. Dollar of approximately 150 basis points, which we expect to have a disproportionately negative impact on the first and second quarters of 2019, and (iii) a negative impact of approximately 160 basis points from higher freight and distribution costs in the Americas. |
• | SG&A to be approximately 40% of revenues. This includes non-recurring charges of approximately $2 million related to various cost reduction initiatives. In the second quarter of 2018, SG&A was 44.0% of revenues and included $8.4 million of non-recurring charges. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Revenues | $ | 295,949 | $ | 283,148 | |||
Cost of sales | 158,334 | 143,275 | |||||
Gross profit | 137,615 | 139,873 | |||||
Selling, general and administrative expenses | 105,037 | 113,951 | |||||
Income from operations | 32,578 | 25,922 | |||||
Foreign currency gains (losses), net | (1,217 | ) | 1,071 | ||||
Interest income | 195 | 279 | |||||
Interest expense | (1,817 | ) | (113 | ) | |||
Other income, net | 590 | 53 | |||||
Income before income taxes | 30,329 | 27,212 | |||||
Income tax expense | 5,619 | 10,758 | |||||
Net income | 24,710 | 16,454 | |||||
Dividends on Series A convertible preferred stock | — | (3,000 | ) | ||||
Dividend equivalents on Series A convertible preferred stock related to redemption value accretion and beneficial conversion feature | — | (931 | ) | ||||
Net income attributable to common stockholders | $ | 24,710 | $ | 12,523 | |||
Net income per common share: | |||||||
Basic | $ | 0.34 | $ | 0.15 | |||
Diluted | $ | 0.33 | $ | 0.15 | |||
Weighted average common shares outstanding: | |||||||
Basic | 73,009 | 68,705 | |||||
Diluted | 74,875 | 71,668 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
(in thousands, except per share data) | |||||||
Numerator: | |||||||
Net income attributable to common stockholders | $ | 24,710 | $ | 12,523 | |||
Less: Net income allocable to Series A Convertible Preferred stockholders (1) | — | (2,094 | ) | ||||
Remaining net income available to common stockholders - basic and diluted | $ | 24,710 | $ | 10,429 | |||
Denominator: | |||||||
Weighted average common shares outstanding - basic | 73,009 | 68,705 | |||||
Plus: dilutive effect of stock options and unvested restricted stock units for both periods and Series A Convertible Preferred in 2018 | 1,866 | 2,963 | |||||
Weighted average common shares outstanding - diluted | 74,875 | 71,668 | |||||
Net income per common share: | |||||||
Basic | $ | 0.34 | $ | 0.15 | |||
Diluted | $ | 0.33 | $ | 0.15 |
March 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 86,333 | $ | 123,367 | |||
Accounts receivable, net of allowances of $21,385 and $20,477, respectively | 176,288 | 97,627 | |||||
Inventories | 139,209 | 124,491 | |||||
Income taxes receivable | 3,755 | 3,041 | |||||
Other receivables | 9,073 | 7,703 | |||||
Restricted cash - current | 1,878 | 1,946 | |||||
Prepaid expenses and other assets | 14,980 | 22,123 | |||||
Total current assets | 431,516 | 380,298 | |||||
Property and equipment, net of accumulated depreciation and amortization of $81,899 and $80,956, respectively | 29,874 | 22,211 | |||||
Intangible assets, net | 44,724 | 45,690 | |||||
Goodwill | 1,579 | 1,614 | |||||
Deferred tax assets, net | 8,510 | 8,663 | |||||
Restricted cash | 2,129 | 2,217 | |||||
Right-of-use assets | 163,266 | — | |||||
Other assets | 7,608 | 8,208 | |||||
Total assets | $ | 689,206 | $ | 468,901 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 89,555 | $ | 77,231 | |||
Accrued expenses and other liabilities | 78,204 | 102,171 | |||||
Income taxes payable | 9,466 | 5,089 | |||||
Current operating lease liabilities | 44,618 | — | |||||
Total current liabilities | 221,843 | 184,491 | |||||
Long-term income taxes payable | 4,344 | 4,656 | |||||
Long-term borrowings | 215,000 | 120,000 | |||||
Long-term operating lease liabilities | 125,055 | — | |||||
Other liabilities | 19 | 9,446 | |||||
Total liabilities | 566,261 | 318,593 | |||||
Stockholders’ equity: | |||||||
Preferred stock, par value $0.001 per share, 4.0 million shares authorized, none outstanding | — | — | |||||
Common stock, par value $0.001 per share, 250.0 million shares authorized, 103.8 million and 103.0 million issued, 72.0 million and 73.3 million outstanding, respectively | 104 | 103 | |||||
Treasury stock, at cost, 31.8 million and 29.7 million shares, respectively | (452,196 | ) | (397,491 | ) | |||
Additional paid-in capital | 484,932 | 481,133 | |||||
Retained earnings | 145,698 | 121,215 | |||||
Accumulated other comprehensive loss | (55,593 | ) | (54,652 | ) | |||
Total stockholders’ equity | 122,945 | 150,308 | |||||
Total liabilities and stockholders’ equity | $ | 689,206 | $ | 468,901 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 24,710 | $ | 16,454 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 6,136 | 7,643 | |||||
Operating lease cost | 14,930 | — | |||||
Share-based compensation | 3,634 | 2,674 | |||||
Other non-cash items | (911 | ) | 154 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net of allowances | (80,722 | ) | (86,850 | ) | |||
Inventories | (15,099 | ) | (20,853 | ) | |||
Prepaid expenses and other assets | 6,875 | 5,112 | |||||
Accounts payable, accrued expenses and other liabilities | (3,658 | ) | 29,065 | ||||
Operating lease liabilities | (19,610 | ) | — | ||||
Cash used in operating activities | (63,715 | ) | (46,601 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property, equipment, and software | (10,553 | ) | (1,668 | ) | |||
Proceeds from disposal of property and equipment | 225 | 16 | |||||
Cash used in investing activities | (10,328 | ) | (1,652 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from bank borrowings | 95,000 | — | |||||
Repayments of bank borrowings | — | (400 | ) | ||||
Dividends—Series A convertible preferred stock (1) | (2,985 | ) | (3,000 | ) | |||
Repurchases of common stock | (53,478 | ) | (20,061 | ) | |||
Other | (1,662 | ) | (692 | ) | |||
Cash provided by (used in) financing activities | 36,875 | (24,153 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (22 | ) | 2,176 | ||||
Net change in cash, cash equivalents, and restricted cash | (37,190 | ) | (70,230 | ) | |||
Cash, cash equivalents, and restricted cash—beginning of period | 127,530 | 177,055 | |||||
Cash, cash equivalents, and restricted cash—end of period | $ | 90,340 | $ | 106,825 |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
GAAP revenues | $ | 295,949 | $ | 283,148 | ||||
GAAP cost of sales | $ | 158,334 | $ | 143,275 | ||||
New distribution center (1) | (1,165 | ) | — | |||||
Other | (110 | ) | — | |||||
Total adjustments | (1,275 | ) | — | |||||
Non-GAAP cost of sales | $ | 157,059 | $ | 143,275 | ||||
GAAP gross margin | $ | 137,615 | $ | 139,873 | ||||
GAAP gross margin as a percent of revenues | 46.5 | % | 49.4 | % | ||||
Non-GAAP gross margin | $ | 138,890 | $ | 139,873 | ||||
Non-GAAP gross margin as a percent of revenues | 46.9 | % | 49.4 | % |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
GAAP revenues | $ | 295,949 | $ | 283,148 | ||||
GAAP selling, general and administrative expenses (1) | $ | 105,037 | $ | 113,951 | ||||
Non-recurring expenses associated with cost reduction initiatives (2) | (685 | ) | (2,499 | ) | ||||
Total adjustments | (685 | ) | (2,499 | ) | ||||
Non-GAAP selling, general and administrative expenses | $ | 104,352 | $ | 111,452 | ||||
GAAP selling, general and administrative expenses as a percent of revenues | 35.5 | % | 40.2 | % | ||||
Non-GAAP selling, general and administrative expenses as a percent of revenues | 35.3 | % | 39.4 | % |
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
GAAP income from operations | $ | 32,578 | $ | 25,922 | ||||
Non-GAAP cost of sales adjustments (1) | 1,275 | — | ||||||
Non-GAAP selling, general and administrative expenses adjustments (2) | 685 | 2,499 | ||||||
Non-GAAP income from operations | $ | 34,538 | $ | 28,421 | ||||
GAAP operating margin | 11.0 | % | 9.2 | % | ||||
Non-GAAP operating margin | 11.7 | % | 10.0 | % |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
(in thousands, except per share data) | |||||||
Numerator: | |||||||
GAAP net income attributable to common stockholders | $ | 24,710 | $ | 12,523 | |||
Less: GAAP adjustment for net income allocable to Series A Preferred stockholders | — | (2,094 | ) | ||||
GAAP remaining net income available to common stockholders- basic and diluted | $ | 24,710 | $ | 10,429 | |||
GAAP net income attributable to common stockholders | $ | 24,710 | $ | 12,523 | |||
Preferred share dividends and dividend equivalents (2) | — | 3,931 | |||||
Non-GAAP cost of sales adjustments (3) | 1,275 | — | |||||
Non-GAAP selling, general and administrative expenses adjustments (4) | 685 | 2,499 | |||||
Pro forma interest (5) | — | (1,407 | ) | ||||
Non-GAAP net income attributable to common stockholders | $ | 26,670 | $ | 17,546 | |||
Denominator: | |||||||
GAAP weighted average common shares outstanding - basic | 73,009 | 68,705 | |||||
Plus: GAAP dilutive effect of stock options and unvested restricted stock units in both periods and Series A Preferred in 2018 | 1,866 | 2,963 | |||||
GAAP weighted average common shares outstanding - diluted | 74,875 | 71,668 | |||||
GAAP weighted average common shares outstanding - basic | 68,705 | ||||||
Plus: Non-GAAP weighted average converted common shares outstanding adjustment (6) | 6,897 | ||||||
Non-GAAP weighted average common shares outstanding - basic (7) | 75,602 | ||||||
Plus: Non-GAAP dilutive effect of stock options and unvested restricted stock units (8) | 1,719 | ||||||
Non-GAAP weighted average common shares outstanding - diluted (9) | 77,321 | ||||||
GAAP net income per common share: | |||||||
Basic | $ | 0.34 | $ | 0.15 | |||
Diluted | $ | 0.33 | $ | 0.15 | |||
Non-GAAP net income per common share: | |||||||
Basic (10) | $ | 0.37 | $ | 0.23 | |||
Diluted (11) | $ | 0.36 | $ | 0.23 |
Three Months Ended March 31, | ||||||||||||||
2019 | 2018 | % Change | Constant Currency % Change (1) | |||||||||||
(in thousands) | ||||||||||||||
Americas: | ||||||||||||||
Wholesale | $ | 71,229 | $ | 72,674 | (2.0 | )% | (0.3 | )% | ||||||
Retail | 38,076 | 34,716 | 9.7 | % | 9.8 | % | ||||||||
E-commerce | 19,821 | 16,440 | 20.6 | % | 21.0 | % | ||||||||
Total Americas | 129,126 | 123,830 | 4.3 | % | 5.3 | % | ||||||||
Asia Pacific: | ||||||||||||||
Wholesale | 68,950 | 65,750 | 4.9 | % | 10.0 | % | ||||||||
Retail | 13,903 | 17,614 | (21.1 | )% | (17.7 | )% | ||||||||
E-commerce | 8,194 | 7,815 | 4.8 | % | 9.9 | % | ||||||||
Total Asia Pacific | 91,047 | 91,179 | (0.1 | )% | 4.6 | % | ||||||||
EMEA | ||||||||||||||
Wholesale | 64,491 | 55,860 | 15.5 | % | 26.2 | % | ||||||||
Retail | 5,417 | 7,176 | (24.5 | )% | (16.1 | )% | ||||||||
E-commerce | 5,816 | 4,790 | 21.4 | % | 32.5 | % | ||||||||
Total EMEA | 75,724 | 67,826 | 11.6 | % | 22.1 | % | ||||||||
Total segment revenues | 295,897 | 282,835 | 4.6 | % | 9.1 | % | ||||||||
Other businesses | 52 | 313 | (83.4 | )% | (83.1 | )% | ||||||||
Total consolidated revenues | $ | 295,949 | $ | 283,148 | 4.5 | % | 9.0 | % | ||||||
Total wholesale | $ | 204,722 | $ | 194,597 | 5.2 | % | 10.6 | % | ||||||
Total retail | 57,396 | 59,506 | (3.5 | )% | (1.4 | )% | ||||||||
Total e-commerce | 33,831 | 29,045 | 16.5 | % | 19.9 | % | ||||||||
Total consolidated revenues | $ | 295,949 | $ | 283,148 | 4.5 | % | 9.0 | % |
Three Months Ended March 31, 2018 | ||||
Increase (Decrease) | ||||
(in thousands) | ||||
Asia Pacific: | ||||
Wholesale | $ | (5,983 | ) | |
EMEA: | ||||
Wholesale | 5,983 |
December 31, 2018 | Opened | Closed/Transferred | March 31, 2019 | ||||||||
Type: | |||||||||||
Outlet stores | 195 | — | 3 | 192 | |||||||
Retail stores | 120 | — | 6 | 114 | |||||||
Kiosk/store-in-store | 68 | — | 2 | 66 | |||||||
Total | 383 | — | 11 | 372 | |||||||
Operating segment: | |||||||||||
Americas | 168 | — | 2 | 166 | |||||||
Asia Pacific | 153 | — | 6 | 147 | |||||||
EMEA | 62 | — | 3 | 59 | |||||||
Total | 383 | — | 11 | 372 |
Constant Currency (1) | |||||
Three Months Ended March 31, | |||||
2019 | 2018 | ||||
Comparable retail store sales: (2) | |||||
Americas | 12.4 | % | 10.9 | % | |
Asia Pacific | (0.4 | )% | 4.7 | % | |
EMEA | 9.3 | % | (2.6 | )% | |
Global | 8.7 | % | 7.6 | % |
Constant Currency (1) | |||||
Three Months Ended March 31, | |||||
2019 | 2018 | ||||
Direct-to-consumer comparable store sales (includes retail and e-commerce): (2) | |||||
Americas | 15.3 | % | 13.1 | % | |
Asia Pacific | 1.9 | % | 10.4 | % | |
EMEA | 19.2 | % | 4.2 | % | |
Global | 12.2 | % | 11.2 | % |
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