8-K
Crocs, Inc. (CROX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 30, 2020
CROCS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 0-51754 | 20-2164234 | |
|---|---|---|---|
| (State or other jurisdiction | (Commission File Number) | (I.R.S. Employer | |
| of incorporation) | Identification No.) | ||
| 13601 Via Varra | 80020 | ||
| Broomfield, | Colorado | ||
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (303) 848-7000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| 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 |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.45) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On July 30, 2020, Crocs, Inc. (the “Company”) issued a press release reporting its results of operations for the three and six months ended June 30, 2020. A copy of the press release is furnished as Exhibit 99.1 to this report.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit<br><br>No. | Description |
|---|---|
| 99.1 | Crocs, Inc. press release dated July 30, 2020. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CROCS, INC. | ||
|---|---|---|
| Date: July 30, 2020 | By: | /s/ Anne Mehlman |
| Anne Mehlman | ||
| Executive Vice President and Chief Financial Officer |
2
Document
Exhibit 99.1
| Investor Contact: | Cori Lin, Crocs, Inc. |
|---|---|
| (303) 848-5053 | |
| clin@crocs.com | |
| PR Contact: | Melissa Layton, Crocs, Inc. |
| (303) 848-7885 | |
| mlayton@crocs.com |
Crocs, Inc. Reports Fiscal 2020 Second Quarter Results
Diluted EPS Increased 51% to $0.83
Operating Income Grew 18%
Record E-Commerce Revenue Growth of 68%
___________________________________________________________________________
BROOMFIELD, COLORADO — July 30, 2020 — Crocs, Inc. (NASDAQ: CROX), a world leader in innovative casual footwear for men, women, and children, today announced its second quarter 2020 financial results.
Andrew Rees, President and Chief Executive Officer, said, “Amidst unprecedented market conditions globally, we delivered exceptional performance in our Americas and e-commerce businesses and increased profit despite a very challenging environment. Our performance demonstrates the strength of the Crocs brand and underscores the work we’ve done expanding the desirability, relevance, and consideration of our brand and product offering globally.”
Q2 Highlights
•Global revenues were $331.5 million, declining 7.6% from the second quarter of 2019, or 6.0% on a constant currency basis. Four out of five of our key geographies delivered revenue growth - United States, Korea, China, and Germany.
•Global e-commerce revenue increased by 67.7% with strong growth in all regions.
•Operating margin rose approximately 380 basis points to 17.1% and adjusted operating margin increased approximately 800 basis points to 22.3%.
•Diluted earnings per share grew 50.9% to $0.83, or 71.2% to $1.01 on an adjusted basis.
•Cash flow from operations nearly doubled.
COVID-19 Update on Operations
As described during our first quarter earnings conference call and subsequent updates, COVID-19 has impacted the Crocs business globally, including through store closures or reduced operating hours and decreased retail traffic. Most of our 360 company-operated stores were closed for some period during the second quarter, as well as many partner stores and wholesale customers’ doors. As of June 30, 2020, 98% of our company-operated stores were open. Additional detail by region on company-operated stores is below.
•Americas. Our company-operated stores closed in mid-March and started to reopen in mid-May. Currently, the majority of our stores in the United States are open.
•Asia. Outside of China and Korea, most of our company-operated stores were closed for the majority of the quarter.
•EMEA. Our company-operated stores in Western Europe closed in mid-April and reopened in mid-May, while stores in Russia closed in early April and reopened in early June.
While many brick-and-mortar stores were closed, Crocs.com and other digital commerce platforms remained open. We saw record quarterly sales in e-commerce as well as strong sell-through in e-tail and wholesale partner e-commerce sites, as consumers migrated to online shopping. These strong growth rates have recently started to temper as brick-and-mortar has started to reopen.
As outlined during our first quarter earnings call, we focused on positioning the business for both short- and long-term success. Our leadership quickly established both a defensive and offensive playbook that we began to implement in early March. The defensive measures are now complete and our offensive playbook has started to show results, as evidenced by our second quarter performance.
Second Quarter 2020 Operating Results:
•Revenues were $331.5 million, a decline of 7.6% from the second quarter of 2019, or 6.0% on a constant currency basis. E-commerce revenue grew 67.7%, while wholesale revenue declined 19.5% and retail revenue declined 41.8% due to COVID-19 related store closures. Retail comparable store sales on a constant currency basis grew 10.5% upon re-opening.
•Gross margin was 54.3%, an increase of 150 basis points from last year’s second quarter. Adjusted gross margin was 55.2%, which excludes $3.2 million or 100 basis points of non-recurring expenditures for COVID-19-related inventory charges in Asia and costs related to our U.S. distribution center. Adjusted gross margin rose 160 basis points compared to last year’s second quarter, benefiting from product mix, higher prices on certain product, and lower levels of promotions and discounts. For a reconciliation of gross margin to adjusted gross margin, see the ‘Non-GAAP cost of sales, gross profit, and gross margin reconciliation’ schedule below.
•Selling, general and administrative expenses (“SG&A”) were $123.3 million, down from $141.5 million in the second quarter of 2019, as we reduced expenses during the pandemic. SG&A included non-GAAP adjustments of $14.0 million compared to $0.2 million in last year’s second quarter. Most charges were a result of $8.2 million of frontline healthcare product donations. Our adjusted SG&A was or 33.0% of revenues versus 39.4%, in last year’s second quarter. 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 increased 18.3% to $56.6 million from $47.8 million in the second quarter of 2019, and operating margin rose 380 basis points to 17.1%. Excluding non-GAAP gross margin and SG&A charges, adjusted income from operations rose 44.2% to $73.8 million and adjusted operating margin was 22.3% compared to 14.3% in the second quarter of 2019, as detailed on the 'Non-GAAP income from operations and operating margin reconciliation' schedule below.
•Diluted earnings per share increased 50.9% to $0.83, as compared with $0.55 in the second quarter of 2019. Excluding non-GAAP charges, adjusted diluted earnings per share was $1.01, or 71.2%, above the $0.59 in the second quarter of 2019, as detailed on the 'Non-GAAP earnings per share reconciliation' schedule below.
Balance Sheet and Cash Flow Highlights:
•Cash and cash equivalents were $151.4 million as of June 30, 2020, compared to $108.3 million as of December 31, 2019.
•Inventory decreased to $146.8 million as of June 30, 2020, compared to $172.0 million as of December 31, 2019.
•Capital expenditures during the six months ended June 30, 2020, were $24.3 million, compared to $18.7 million during the same period in 2019.
•At June 30, 2020, there were $275.0 million of borrowings outstanding on our credit facility after reducing borrowings by $75.0 million during the second quarter. We have ample liquidity, including $151.4 million in cash and cash equivalents and up to $224.4 million of available borrowings under our facility.
Share Repurchase Activity
As previously announced, we temporarily suspended share repurchases to preserve maximum liquidity and flexibility. During the second quarter of 2020, we did not repurchase any shares. As of June 30, 2020, approximately $469 million remained on our share repurchase authorization.
Investments to Support Long-Term Growth
During the second quarter of 2020, we opened our new global headquarters in Broomfield, Colorado, less than 20 miles outside of downtown Denver. The state-of-the-art facility will allow us to significantly expand our ability to attract talent. We also entered into a lease for a new distribution center adjacent to our existing facility in Dayton, Ohio. The new facility will be dedicated to e-commerce fulfillment and will significantly increase our distribution capacity in the Americas. Finally, we anticipate completing the relocation of our distribution center in the Netherlands in 2021.
Financial Outlook:
Given the continued disruption and global uncertainty related to COVID-19, we previously withdrew the guidance provided on February 27, 2020. We are not providing third quarter guidance. However, excluding the impact of any future shutdowns in major markets for full year 2020, we expect:
•Revenue: Revenue for the remainder of 2020 to be approximately flat compared to the back-half of 2019
•Tax: A tax rate of 11% for 2020
•Inventory: Inventory to be constrained throughout the remainder of 2020 reflecting our decision to significantly reduce inventory purchases as a result of the pandemic
•Capital Expenditures: Approximately $50 million, which reflects investment to support future growth that we had previously deferred
Conference Call Information:
A conference call to discuss second quarter 2020 results is scheduled for today, Thursday, July 30, 2020 at 8:30 am ET. 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 these calls will require the input of the conference identification number 4756429. The call will also be streamed live on the Crocs website, www.crocs.com. This audio webcast will remain available at www.crocs.com through July 30, 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 press release includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements regarding potential impacts to our business related to the COVID-19 pandemic, our financial condition, brand and liquidity outlook and expectations regarding our 2020 revenue, tax rate, inventory, and capital expenditures. 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: the COVID-19 outbreak and related government, private sector, and individual consumer responsive actions; current global financial conditions, including economic impacts resulting from the COVID-19 outbreak; 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 speak only as of the date of this press release. We do not undertake any obligation to update publicly any forward-looking statements.
Category:Investors
CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Revenues | $ | 331,549 | $ | 358,899 | $ | 612,709 | $ | 654,848 |
| Cost of sales | 151,616 | 169,520 | 298,614 | 327,854 | ||||
| Gross profit | 179,933 | 189,379 | 314,095 | 326,994 | ||||
| Selling, general and administrative expenses | 123,338 | 141,548 | 236,688 | 246,585 | ||||
| Income from operations | 56,595 | 47,831 | 77,407 | 80,409 | ||||
| Foreign currency losses, net | (687) | (261) | (918) | (1,478) | ||||
| Interest income | 49 | 131 | 146 | 326 | ||||
| Interest expense | (2,170) | (2,421) | (4,091) | (4,238) | ||||
| Other income (expense), net | 907 | (604) | 928 | (14) | ||||
| Income before income taxes | 54,694 | 44,676 | 73,472 | 75,005 | ||||
| Income tax expense (benefit) | (1,857) | 5,478 | 5,830 | 11,097 | ||||
| Net income | $ | 56,551 | $ | 39,198 | $ | 67,642 | $ | 63,908 |
| Net income per common share: | ||||||||
| Basic | $ | 0.84 | $ | 0.55 | $ | 1.00 | $ | 0.89 |
| Diluted | $ | 0.83 | $ | 0.55 | $ | 0.99 | $ | 0.87 |
| Weighted average common shares outstanding: | ||||||||
| Basic | 67,416 | 70,936 | 67,674 | 71,967 | ||||
| Diluted | 68,038 | 71,915 | 68,664 | 73,369 |
CROCS, INC. AND SUBSIDIARIES
EARNINGS PER SHARE
(UNAUDITED)
(in thousands, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Numerator: | ||||||||
| Net income | $ | 56,551 | $ | 39,198 | $ | 67,642 | $ | 63,908 |
| Denominator: | ||||||||
| Weighted average common shares outstanding - basic | 67,416 | 70,936 | 67,674 | 71,967 | ||||
| Plus: Dilutive effect of stock options and unvested restricted stock units | 622 | 979 | 990 | 1,402 | ||||
| Weighted average common shares outstanding - diluted | 68,038 | 71,915 | 68,664 | 73,369 | ||||
| Net income per common share: | ||||||||
| Basic | $ | 0.84 | $ | 0.55 | $ | 1.00 | $ | 0.89 |
| Diluted | $ | 0.83 | $ | 0.55 | $ | 0.99 | $ | 0.87 |
CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and par value amounts)
| June 30,<br>2020 | December 31,<br>2019 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $ | 151,370 | $ | 108,253 |
| Accounts receivable, net of allowances of $24,997 and $18,797, respectively | 160,279 | 108,199 | ||
| Inventories | 146,804 | 172,028 | ||
| Income taxes receivable | 3,809 | 1,341 | ||
| Other receivables | 10,433 | 8,711 | ||
| Restricted cash - current | 1,690 | 1,500 | ||
| Prepaid expenses and other assets | 19,545 | 25,350 | ||
| Total current assets | 493,930 | 425,382 | ||
| Property and equipment, net of accumulated depreciation and amortization of $83,306 and $79,604, respectively | 52,136 | 47,405 | ||
| Intangible assets, net of accumulated amortization of $90,677 and $82,760, respectively | 43,773 | 47,095 | ||
| Goodwill | 1,581 | 1,578 | ||
| Deferred tax assets, net | 24,218 | 24,747 | ||
| Restricted cash | 1,759 | 2,292 | ||
| Right-of-use assets | 183,490 | 182,228 | ||
| Other assets | 9,997 | 8,075 | ||
| Total assets | $ | 810,884 | $ | 738,802 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable | $ | 83,221 | $ | 95,754 |
| Accrued expenses and other liabilities | 94,233 | 108,677 | ||
| Income taxes payable | 6,357 | 4,207 | ||
| Current operating lease liabilities | 49,168 | 48,585 | ||
| Total current liabilities | 232,979 | 257,223 | ||
| Long-term income taxes payable | 4,133 | 4,522 | ||
| Long-term borrowings | 275,000 | 205,000 | ||
| Long-term operating lease liabilities | 141,887 | 140,148 | ||
| Other liabilities | 1 | 4 | ||
| Total liabilities | 654,000 | 606,897 | ||
| Commitments and contingencies | ||||
| Stockholders’ equity: | ||||
| Preferred stock, par value $0.001 per share, 5.0 million shares authorized including 1.0 million authorized as Series A Convertible Preferred Stock, none outstanding | — | — | ||
| Common stock, par value $0.001 per share, 250.0 million shares authorized, 104.9 million and 104.0 million issued, 67.5 million and 68.2 million outstanding, respectively | 105 | 104 | ||
| Treasury stock, at cost, 37.5 million and 35.8 million shares, respectively | (587,940) | (546,208) | ||
| Additional paid-in capital | 502,958 | 495,903 | ||
| Retained earnings | 308,127 | 240,485 | ||
| Accumulated other comprehensive loss | (66,366) | (58,379) | ||
| Total stockholders’ equity | 156,884 | 131,905 | ||
| Total liabilities and stockholders’ equity | $ | 810,884 | $ | 738,802 |
CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
| Six Months Ended June 30, | ||||
|---|---|---|---|---|
| 2020 | 2019 | |||
| Cash flows from operating activities: | ||||
| Net income | $ | 67,642 | $ | 63,908 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 13,499 | 11,865 | ||
| Operating lease cost | 30,213 | 29,679 | ||
| Inventory donations | 8,821 | 5 | ||
| Provision for doubtful accounts, net | 6,507 | 988 | ||
| Share-based compensation | 5,942 | 7,401 | ||
| Other non-cash items | 2,029 | (1,627) | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | (62,146) | (73,000) | ||
| Inventories | 11,240 | (9,955) | ||
| Prepaid expenses and other assets | 1,002 | (912) | ||
| Accounts payable, accrued expenses and other liabilities | (15,316) | 26,548 | ||
| Operating lease liabilities | (29,166) | (34,732) | ||
| Cash provided by operating activities | 40,267 | 20,168 | ||
| Cash flows from investing activities: | ||||
| Purchases of property, equipment, and software | (24,328) | (18,722) | ||
| Proceeds from disposal of property and equipment | 434 | 260 | ||
| Other | (116) | — | ||
| Cash used in investing activities | (24,010) | (18,462) | ||
| Cash flows from financing activities: | ||||
| Proceeds from bank borrowings | 150,000 | 95,000 | ||
| Repayments of bank borrowings | (80,000) | — | ||
| Dividends—Series A convertible preferred stock ^(1)^ | — | (2,985) | ||
| Repurchases of common stock | (39,159) | (108,475) | ||
| Other | (1,964) | (1,635) | ||
| Cash provided by (used in) financing activities | 28,877 | (18,095) | ||
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (2,360) | 410 | ||
| Net change in cash, cash equivalents, and restricted cash | 42,774 | (15,979) | ||
| Cash, cash equivalents, and restricted cash—beginning of period | 112,045 | 127,530 | ||
| Cash, cash equivalents, and restricted cash—end of period | $ | 154,819 | $ | 111,551 |
^(1)^ For the six months ended June 30, 2019, represents $3.0 million paid to induce conversion of Series A Convertible Preferred Stock to common stock.
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 profit,” “Non-GAAP gross margin,” “Non-GAAP selling, general, and administrative expenses,” “Non-GAAP net income,” “Non-GAAP income from operations”, “Non-GAAP operating margin,” “Non-GAAP weighted average common shares outstanding - basic and diluted,” and “Non-GAAP basic and diluted net income 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 condensed 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 GAAP. Constant currency represents current period results that have been retranslated using exchange rates used in the prior year comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.
Management uses 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 condensed consolidated financial statements as an additional tool for evaluating operating performance and trends. For the three and six months ended June 30, 2020, management believes it is helpful to evaluate our results excluding the impacts of various adjustments relating to special or non-recurring items. 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
(UNAUDITED)
Non-GAAP cost of sales, gross profit, and gross margin reconciliation:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (in thousands) | ||||||||||||
| GAAP revenues | $ | 331,549 | $ | 358,899 | $ | 612,709 | $ | 654,848 | ||||
| GAAP cost of sales | $ | 151,616 | $ | 169,520 | $ | 298,614 | $ | 327,854 | ||||
| New distribution centers ^(1)^ | (812) | $ | (3,138) | (1,739) | (4,303) | |||||||
| COVID-19 inventory write-off ^(2)^ | (2,396) | — | (2,396) | — | ||||||||
| Other | — | (23) | — | (133) | ||||||||
| Total adjustments | (3,208) | (3,161) | (4,135) | (4,436) | ||||||||
| Non-GAAP cost of sales | $ | 148,408 | $ | 166,359 | $ | 294,479 | $ | 323,418 | ||||
| GAAP gross profit | $ | 179,933 | $ | 189,379 | $ | 314,095 | $ | 326,994 | ||||
| GAAP gross margin | 54.3 | % | 52.8 | % | 51.3 | % | 49.9 | % | ||||
| Non-GAAP gross profit | $ | 183,141 | $ | 192,540 | $ | 318,230 | $ | 331,430 | ||||
| Non-GAAP gross margin | 55.2 | % | 53.6 | % | 51.9 | % | 50.6 | % |
^(1)^Represents non-recurring expenses, including expansion costs, related to our distribution centers in Dayton, Ohio and Dordrecht, the Netherlands.
^(2)^Represents an inventory write-off in our Asia Pacific segment associated with the impact of COVID-19.
Non-GAAP selling, general and administrative expenses reconciliation:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (in thousands) | ||||||||||||
| GAAP revenues | $ | 331,549 | $ | 358,899 | $ | 612,709 | $ | 654,848 | ||||
| GAAP selling, general and administrative expenses | $ | 123,338 | $ | 141,548 | $ | 236,688 | $ | 246,585 | ||||
| Donations of inventory | (8,218) | — | (9,920) | — | ||||||||
| COVID-19 severance costs | (2,403) | — | (2,403) | |||||||||
| COVID-19 impact of bad debt expense ^(1)^ | (1,708) | — | (4,481) | — | ||||||||
| Other COVID-19 costs ^(2)^ | (644) | — | (644) | — | ||||||||
| Duplicate headquarters rent ^(3)^ | (487) | — | (694) | — | ||||||||
| Non-recurring expenses associated with cost reduction initiatives in 2019 | — | (204) | — | (889) | ||||||||
| Other | (550) | — | (481) | — | ||||||||
| Total adjustments | (14,010) | (204) | (18,623) | (889) | ||||||||
| Non-GAAP selling, general and administrative expenses ^(4)^ | $ | 109,328 | $ | 141,344 | $ | 218,065 | $ | 245,696 | ||||
| GAAP selling, general and administrative expenses as a percent of revenues | 37.2 | % | 39.4 | % | 38.6 | % | 37.7 | % | ||||
| Non-GAAP selling, general and administrative expenses as a percent of revenues | 33.0 | % | 39.4 | % | 35.6 | % | 37.5 | % |
^(1)^ Represents bad debt expense associated with the impact of COVID-19 on wholesale partners in our Asia Pacific and Americas segments.
^(2)^ Represents costs incurred in response to the COVID-19, including hazard pay, cleaning costs, and legal costs.
^(3)^ Represents ongoing duplicate rent costs associated with our move to our new headquarters in Broomfield, Colorado, while we conclude the lease for our former headquarters in Niwot, Colorado.
^(4)^Non-GAAP selling, general and administrative expenses are presented gross of tax.
Non-GAAP income from operations and operating margin reconciliation:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||||||
| (in thousands) | ||||||||||||
| GAAP revenues | $ | 331,549 | $ | 358,899 | $ | 612,709 | $ | 654,848 | ||||
| GAAP income from operations | $ | 56,595 | $ | 47,831 | $ | 77,407 | $ | 80,409 | ||||
| Non-GAAP cost of sales adjustments ^(1)^ | 3,208 | 3,161 | 4,135 | 4,436 | ||||||||
| Non-GAAP selling, general and administrative expenses adjustments ^(2)^ | 14,010 | 204 | 18,623 | 889 | ||||||||
| Non-GAAP income from operations | $ | 73,813 | $ | 51,196 | $ | 100,165 | $ | 85,734 | ||||
| GAAP operating margin | 17.1 | % | 13.3 | % | 12.6 | % | 12.3 | % | ||||
| Non-GAAP operating margin | 22.3 | % | 14.3 | % | 16.3 | % | 13.1 | % |
^(1)^ See 'Non-GAAP cost of sales, gross profit, and gross margin reconciliation' above for more details.
^(2)^ See 'Non-GAAP selling, general and administrative expenses reconciliation' above for more details.
Non-GAAP earnings per share reconciliation:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| (in thousands, except per share data) | ||||||||
| Numerator: | ||||||||
| GAAP net income | $ | 56,551 | $ | 39,198 | $ | 67,642 | $ | 63,908 |
| Non-GAAP cost of sales adjustments ^(1)^ | 3,208 | 3,161 | 4,135 | 4,436 | ||||
| Non-GAAP selling, general and administrative expenses adjustments ^(2)^ | 14,010 | 204 | 18,623 | 889 | ||||
| Non-GAAP other income adjustment ^(3)^ | (919) | — | (919) | — | ||||
| Tax effect of non-GAAP adjustments ^(4)^ | (4,075) | — | (5,460) | — | ||||
| Non-GAAP net income | $ | 68,775 | $ | 42,563 | $ | 84,021 | $ | 69,233 |
| Denominator: | ||||||||
| GAAP weighted average common shares outstanding - basic | 67,416 | 70,936 | 67,674 | 71,967 | ||||
| Plus: GAAP dilutive effect of stock options and unvested restricted stock units | 622 | 979 | 990 | 1,402 | ||||
| GAAP weighted average common shares outstanding - diluted | 68,038 | 71,915 | 68,664 | 73,369 | ||||
| GAAP net income per common share: | ||||||||
| Basic | $ | 0.84 | $ | 0.55 | $ | 1.00 | $ | 0.89 |
| Diluted | $ | 0.83 | $ | 0.55 | $ | 0.99 | $ | 0.87 |
| Non-GAAP net income per common share: | ||||||||
| Basic | $ | 1.02 | $ | 0.60 | $ | 1.24 | $ | 0.96 |
| Diluted | $ | 1.01 | $ | 0.59 | $ | 1.22 | $ | 0.94 |
^(1)^See 'Non-GAAP cost of sales, gross profit, and gross margin reconciliation' above for more information.
^(2)^See 'Non-GAAP selling, general and administrative expenses reconciliation' above for more information.
^(3)^ Represents a fair value adjustment associated with our donations of inventory.
^(4)^ In the three months and six months ended June 30, 2019, non-GAAP adjustments were in jurisdictions subject to a full valuation allowance, and thus had no material net tax impact.
CROCS, INC. AND SUBSIDIARIES
REVENUES BY SEGMENT
(UNAUDITED)
| Three Months Ended<br>June 30, | Six Months Ended<br>June 30, | % Change | Constant Currency % Change ^(1)^ | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | Q2 2020-2019 | YTD 2020-2019 | Q2 2020-2019 | YTD 2020-2019 | ||||||||||
| (in thousands) | |||||||||||||||||
| Americas: | |||||||||||||||||
| Wholesale | $ | 67,428 | $ | 69,957 | $ | 158,233 | $ | 141,186 | (3.6) | % | 12.1 | % | (2.6) | % | 13.3 | % | |
| Retail | 34,220 | 65,900 | 68,839 | 103,976 | (48.1) | % | (33.8) | % | (48.0) | % | (33.8) | % | |||||
| E-commerce | 69,936 | 34,583 | 92,236 | 54,404 | 102.2 | % | 69.5 | % | 102.6 | % | 69.8 | % | |||||
| Total Americas | 171,584 | 170,440 | 319,308 | 299,566 | 0.7 | % | 6.6 | % | 1.2 | % | 7.2 | % | |||||
| Asia Pacific: | |||||||||||||||||
| Wholesale | 35,282 | 63,862 | 80,863 | 132,812 | (44.8) | % | (39.1) | % | (43.1) | % | (37.3) | % | |||||
| Retail | 21,805 | 26,865 | 31,991 | 40,768 | (18.8) | % | (21.5) | % | (15.7) | % | (18.5) | % | |||||
| E-commerce | 36,486 | 27,697 | 46,179 | 35,891 | 31.7 | % | 28.7 | % | 34.6 | % | 31.7 | % | |||||
| Total Asia Pacific | 93,573 | 118,424 | 159,033 | 209,471 | (21.0) | % | (24.1) | % | (18.7) | % | (21.8) | % | |||||
| EMEA | |||||||||||||||||
| Wholesale | 42,166 | 46,136 | 98,877 | 110,627 | (8.6) | % | (10.6) | % | (5.3) | % | (7.6) | % | |||||
| Retail | 4,187 | 10,688 | 8,181 | 16,105 | (60.8) | % | (49.2) | % | (59.5) | % | (48.0) | % | |||||
| E-commerce | 20,023 | 13,137 | 27,218 | 18,953 | 52.4 | % | 43.6 | % | 57.6 | % | 48.1 | % | |||||
| Total EMEA | 66,376 | 69,961 | 134,276 | 145,685 | (5.1) | % | (7.8) | % | (1.8) | % | (4.8) | % | |||||
| Total segment revenues | 331,533 | 358,825 | 612,617 | 654,722 | (7.6) | % | (6.4) | % | (6.0) | % | (4.7) | % | |||||
| Other businesses | 16 | 74 | 92 | 126 | (78.4) | % | (27.0) | % | (78.4) | % | (27.0) | % | |||||
| Total consolidated revenues | $ | 331,549 | $ | 358,899 | $ | 612,709 | $ | 654,848 | (7.6) | % | (6.4) | % | (6.0) | % | (4.7) | % | |
| Total wholesale | $ | 144,892 | $ | 180,029 | $ | 338,065 | $ | 384,751 | (19.5) | % | (12.1) | % | (17.7) | % | (10.2) | % | |
| Total retail | 60,212 | 103,453 | 109,011 | 160,849 | (41.8) | % | (32.2) | % | (40.8) | % | (31.3) | % | |||||
| Total e-commerce | 126,445 | 75,417 | 165,633 | 109,248 | 67.7 | % | 51.6 | % | 69.8 | % | 53.6 | % | |||||
| Total consolidated revenues | $ | 331,549 | $ | 358,899 | $ | 612,709 | $ | 654,848 | (7.6) | % | (6.4) | % | (6.0) | % | (4.7) | % |
^(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’ above for more information.
CROCS, INC. AND SUBSIDIARIES
RETAIL STORE COUNTS
(UNAUDITED)
| March 31, 2020 | Opened | Closed | June 30,<br>2020 | |
|---|---|---|---|---|
| Type: | ||||
| Outlet stores | 194 | 3 | 6 | 191 |
| Retail stores | 108 | 2 | 6 | 104 |
| Kiosk/store in store | 65 | — | — | 65 |
| Total | 367 | 5 | 12 | 360 |
| Operating segment: | ||||
| Americas | 166 | 1 | 2 | 165 |
| Asia Pacific | 146 | 4 | 8 | 142 |
| EMEA | 55 | — | 2 | 53 |
| Total | 367 | 5 | 12 | 360 |
| December 31, 2019 | Opened | Closed/Transferred | June 30,<br>2020 | |
| --- | --- | --- | --- | --- |
| Type: | ||||
| Outlet stores | 193 | 5 | 7 | 191 |
| Retail stores | 109 | 3 | 8 | 104 |
| Kiosk/store-in-store | 65 | 1 | 1 | 65 |
| Total | 367 | 9 | 16 | 360 |
| Operating segment: | ||||
| Americas | 165 | 2 | 2 | 165 |
| Asia Pacific | 145 | 5 | 8 | 142 |
| EMEA | 57 | 2 | 6 | 53 |
| Total | 367 | 9 | 16 | 360 |
CROCS, INC. AND SUBSIDIARIES
DIGITAL SALES PERCENTAGE, COMPARABLE RETAIL STORE SALES, AND DIRECT-TO-CONSUMER COMPARABLE SALES
(UNAUDITED)
Digital sales, which includes sales through our company-owned website, third party marketplaces, and e-tailers, as a percent of total revenues, by operating segment were:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Digital sales as a percent of total revenues: | ||||||||
| Americas | 58.4 | % | 30.7 | % | 44.8 | % | 28.7 | % |
| Asia Pacific | 46.6 | % | 30.9 | % | 37.5 | % | 25.7 | % |
| EMEA | 63.4 | % | 40.3 | % | 50.7 | % | 35.9 | % |
| Global | 56.1 | % | 32.6 | % | 44.2 | % | 29.4 | % |
Comparable retail store sales and direct-to-consumer store sales by operating segment are shown below. Consistent with our definition of comparable store sales described in a footnote to the below tables, these results include 94 comparable stores in April, 110 comparable stores in May, and 247 comparable stores in June.
| Constant Currency ^(1)^ | ||||||||
|---|---|---|---|---|---|---|---|---|
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| Comparable retail store sales: ^(2)^ | ||||||||
| Americas | 18.2 | % | 17.6 | % | 21.0 | % | 15.6 | % |
| Asia Pacific | 8.5 | % | 0.7 | % | (2.8) | % | 0.3 | % |
| EMEA | (14.0) | % | 8.2 | % | (6.5) | % | 8.6 | % |
| Global | 10.5 | % | 11.8 | % | 9.0 | % | 10.6 | % |
| Constant Currency ^(1)^ | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2020 | 2019 | 2020 | 2019 | |||||
| Direct-to-consumer comparable sales (includes retail and e-commerce): ^(2)^ | ||||||||
| Americas | 74.9 | % | 20.8 | % | 49.9 | % | 18.7 | % |
| Asia Pacific | 22.7 | % | 3.5 | % | 13.9 | % | 3.0 | % |
| EMEA | 40.6 | % | 14.5 | % | 32.7 | % | 16.0 | % |
| Global | 49.1 | % | 14.2 | % | 34.7 | % | 13.5 | % |
^(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 Measures to Non-GAAP Measures’ above 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.
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