Add
CROX to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| CROX > SEC Filings for CROX > Form 10-Q on 30-Oct-2012 | All Recent SEC Filings |
30-Oct-2012
Quarterly Report
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. This Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements. In addition, we may make other written and oral communications from time to time that contain such statements. Forward-looking statements include statements as to industry trends and our future expectations and other matters that do not relate strictly to historical facts and are based on certain assumptions of our management. These statements are often identified by the use of words such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate," or "continue," and similar expressions or variations. These statements are based on the beliefs and assumptions of our management based on information currently available to us. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, among others, the risks described in the section entitled "Risk Factors" under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2011 and subsequent filings with the Securities and Exchange Commission. We caution the reader to carefully consider such factors. Furthermore, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Business Overview
We are a designer, manufacturer, distributor, worldwide marketer and brand manager of footwear, apparel and accessories for men, women and children. We strive to be the global leader in molded footwear design and development. We design, manufacture and sell a broad product offering that provides new and exciting molded footwear products that feature comfort, fun, color and functionality. Our products include footwear and accessories that utilize our proprietary closed cell-resin, called Croslite. Our Croslite material is unique in that it enables us to produce an innovative, lightweight, non-marking, and odor-resistant shoe.
Since the initial introduction and popularity of our Beach and Crocs Classic designs, we have expanded our Croslite products to include a variety of new styles and products and have extended our product reach through the acquisition of brand platforms such as Jibbitz, LLC ("Jibbitz") and Ocean Minded, Inc. ("Ocean Minded"). We intend to continue to expand the breadth of our footwear product lines, bringing a unique and original perspective to the consumer in styles that may be unexpected from Crocs. In part, we believe this will help us to continue to build a stable year-round business as we move towards becoming a four-season brand.
We currently sell our Crocs-branded products globally through domestic and international retailers and distributors. We also sell our products directly to consumers through our webstores, company-operated retail stores, outlets and kiosks. The broad appeal of our footwear has allowed us to market our products to a wide range of distribution channels, including department stores and traditional footwear retailers as well as a variety of specialty and independent retail channels.
As a global company, we have significant revenues and costs denominated in currencies other than the U. S. dollar. Sales in international markets in foreign currencies are expected to continue to represent a substantial portion of our revenues. Likewise, we expect our subsidiaries with functional currencies other than the U.S. dollar will continue to represent a substantial portion of our overall gross margin and related expenses. Accordingly, changes in foreign currency exchange rates could materially affect revenues and costs or the comparability of revenues and costs from period to period as a result of translating our financial statements into our reporting currency.
Financial Highlights
During the three months ended September 30, 2012, revenues increased $20.7 million to $295.6 million, net income increased $14.9 million to $45.1 million and diluted earnings per share increased $0.16 to $0.49 compared to the same period in 2011. During the nine months ended September 30, 2012, revenues increased $101.1 million to $898.3 million, net income increased $27.7 million to $135.0 million and diluted earnings per share increased $0.30 to $1.48 compared to the same period in 2011.
Despite current macroeconomic conditions, we were able to generate strong increases in both revenue and diluted earnings per share period over period. The increase in revenues for the three months ended September 30, 2012 compared to the same period in 2011 were driven by increased sales in all three channels of business. On a percentage basis, sales growth was driven by a 17.7% increase in retail revenue coupled with a 6.0% increase in internet revenue and a 1.5% increase in wholesale revenue.
Results of Operations
Comparison of the Three Months Ended September 30, 2012 and 2011
Three Months Ended
September 30, Change
($ thousands, except per share data) 2012 2011 $ %
Revenues $ 295,569 $ 274,897 $ 20,672 7.5 %
Cost of sales 134,826 127,722 7,104 5.6
Gross profit 160,743 147,175 13,568 9.2
Selling, general and administrative expenses 120,729 111,672 9,057 8.1
Asset impairment - 495 (495 ) (100.0 )
Income from operations 40,014 35,008 5,006 14.3
Foreign currency transaction (gains) losses, net 21 (2,358 ) 2,379 (100.9 )
Other (income) expense, net (80 ) 335 (415 ) (123.9 )
Interest expense 377 204 173 84.8
Income before income taxes 39,696 36,827 2,869 7.8
Income tax expense (benefit) (5,384 ) 6,620 (12,004 ) (181.3 )
Net income $ 45,080 $ 30,207 $ 14,873 49.2 %
Net income per common share:
Basic $ 0.50 $ 0.34 $ 0.16 47.1 %
Diluted $ 0.49 $ 0.33 $ 0.16 48.5 %
Gross Margin 54.4 % 53.5 % 0.9 % 1.7 %
Operating Margin 13.5 % 12.7 % 0.8 % 6.3 %
Footwear unit sales 12,420 11,715 705 6.0 %
Average footwear selling price $ 22.77 $ 22.18 $ 0.59 2.7 %
|
Total Revenues by Channel
Three Months Ended
September 30, Change
($ thousands) 2012 2011 $ %
Channel revenues:
Wholesale:
Americas $ 56,445 $ 55,430 $ 1,015 1.8 %
Asia 76,976 71,286 5,690 8.0
Europe 22,667 27,343 (4,676 ) (17.1 )
Other businesses 161 (80 ) 241 (301.3 )
Total Wholesale 156,249 153,979 2,270 1.5
Consumer-direct:
Retail
Americas 58,798 52,407 6,391 12.2
Asia 41,826 36,245 5,581 15.4
Europe 11,550 6,649 4,901 73.7
Total Retail 112,174 95,301 16,873 17.7
Internet
Americas 16,705 15,010 1,695 11.3
Asia 4,893 3,654 1,239 33.9
Europe 5,548 6,953 (1,405 ) (20.2 )
Total Internet 27,146 25,617 1,529 6.0
Total Revenues $ 295,569 $ 274,897 $ 20,672 7.5 %
|
Revenues. During the three months ended September 30, 2012, revenues increased $20.7 million, or 7.5%, compared to the same period in 2011, due to an increase of 2.7% in average footwear selling price and an increase of 0.7 million, or 6%, in footwear unit sales.
During the three months ended September 30, 2012, revenues from our wholesale channel grew by $2.3 million, or 1.5%, compared to the same period in 2011, which was primarily driven by continued strong demand in both the Americas and Asia operating segments. Revenues from our retail channel grew by $16.9 million, or 17.7%, compared to the same period in 2011, due to a net increase of 89 global company-operated retail locations and growth in comparable store revenues (defined below) of 1.0%. We continue to close certain kiosks and open more branded stores where we can better merchandise the full breadth and depth of our product line. Revenues from our internet channel grew by $1.5 million, or 6.0%, compared to the same period in 2011, primarily as a result of increased brand awareness in the Americas.
The table below sets forth information about the number of company-operated retail locations as of September 30, 2012 and 2011 and comparable store sales growth for the three months ended September 30, 2012 compared to the same period in 2011.
Comparable
September 30, September 30, store sales
Company-operated retail locations by operating segment: 2012 2011 Change growth (1)
Americas 189 195 (6 ) 5.5 %
Asia 233 182 51 (6.3 )
Europe 77 33 44 0.9
Total company-operated retail locations 499 410 89 1.0 %
|
(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 growth is calculated on a currency neutral basis using historical annual average currency rates.
September 30, September 30,
Company-operated retail locations by type: 2012 2011 Change
Retail stores 245 167 78
Outlet stores 121 84 37
Store in Store 99 92 7
Kiosk 34 67 (33 )
Total company-operated retail locations 499 410 89
|
Impact on Revenues due to Foreign Exchange Rate Fluctuations. Changes in average foreign currency exchange rates used to translate revenues from our functional currencies to our reporting currency, the U.S. dollar, during the three months ended September 30, 2012 decreased revenues by $8.2 million as compared to the same period in 2011.
Gross profit. During the three months ended September 30, 2012, gross profit increased $13.6 million, or 9.2%, compared to the same period in 2011 and gross margin increased to 54.4%. These increases are primarily attributable to an increase of 2.7% in our global average footwear selling price and increased volume, which was partially offset by higher cost of sales driven by product mix.
Impact on Gross Profit due to Foreign Exchange Rate Fluctuations. Changes in average foreign currency exchange rates used to translate revenues and cost of sales from our functional currencies to our reporting currency during the three months ended September 30, 2012 decreased our gross profit by $3.2 million compared to the same period in 2011.
Selling, general and administrative expenses. Selling, general and administrative expense ("SG&A") increased $9.1 million, or 8.1%, during the three months ended September 30, 2012 compared to the same period in 2011. This increase was primarily due to increases of $6.0 million in rent and building costs resulting from continued growth in the number of company-operated retail stores, $2.7 million in other expenses including increases in depreciation and amortization expenses, and $1.7 million in salaries and related costs resulting from higher global headcount. As a percentage of revenues, SG&A increased to 40.8% from 40.6% during the three months ended September 30, 2012 compared to the same period 2011.
Impact on SG&A due to Foreign Exchange Rate Fluctuations. Changes in average foreign currency exchange rates used to translate SG&A from our functional currencies to our reporting currency during the three months ended September 30, 2012 decreased SG&A by approximately $2.3 million as compared to the same period in 2011.
Foreign currency transaction (gains)losses. The line item entitled Foreign currency transaction (gains) losses is comprised of foreign currency gains and losses from the re-measurement and settlement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments. There was an insignificant loss on foreign currency during the three months ended September 30, 2012 compared to $2.4 million of gains during the same period in 2011.
Income tax benefit. During the three months ended September 30, 2012, income tax decreased $12.0 million compared to the same period in 2011, which was primarily due to a reversal of certain tax provisions and the release of certain valuation allowances associated with deferred tax assets. Our effective tax rate for the three months ended September 30, 2012 differs from the federal U.S. statutory rate primarily because of differences between income tax rates between U.S. and foreign jurisdictions. Our effective tax rate for the three months ended September 30, 2012 was 31.6% lower than the rate for the quarter ended September 30, 2011 primarily due to a reversal of certain tax provisions and the release of certain valuation allowances associated with deferred tax assets.
Comparison of the Nine Months Ended September 30, 2012 and 2011
Nine Months Ended
September 30, Change
($ thousands, except per share data) 2012 2011 $ %
Revenues $ 898,309 $ 797,189 $ 101,120 12.7 %
Cost of sales 396,682 360,591 36,091 10.0
Gross profit 501,627 436,598 65,029 14.9
Selling, general and administrative expenses 349,737 309,769 39,968 12.9
Asset impairment 819 527 292 55.4
Income from operations 151,071 126,302 24,769 19.6
Foreign currency transaction (gains) losses, net 2,670 (4,560 ) 7,230 (158.6 )
Other (income) expense, net (1,747 ) 636 (2,383 ) (374.7 )
Interest expense 556 632 (76 ) (12.0 )
Income before income taxes 149,592 129,594 19,998 15.4
Income tax expense 14,642 22,377 (7,735 ) (34.6 )
Net income $ 134,950 $ 107,217 $ 27,733 25.9 %
Net income per common share:
Basic $ 1.50 $ 1.21 $ 0.29 23.8 %
Diluted $ 1.48 $ 1.18 $ 0.30 25.5 %
Gross Margin 55.8 % 54.8 % 1.0 % 1.8 %
Operating Margin 16.8 % 15.8 % 1.0 % 6.3 %
Footwear unit sales 40,126 38,494 1,632 4.2 %
Average footwear selling price $ 21.45 $ 19.79 $ 1.66 8.4 %
|
Total Revenues by Channel
Nine Months Ended
September 30, Change
($ thousands) 2012 2011 $ %
Channel revenues:
Wholesale:
Americas $ 187,870 $ 172,853 $ 15,017 8.7 %
Asia 249,491 211,734 37,757 17.8
Europe 97,773 109,606 (11,833 ) (10.8 )
Other businesses 333 103 230 223.3
Total Wholesale 535,467 494,296 41,171 8.3
Consumer-direct:
Retail
Americas 149,296 131,404 17,892 13.6
Asia 110,766 85,301 25,465 29.9
Europe 25,158 15,832 9,326 58.9
Total Retail 285,220 232,537 52,683 22.7
Internet
Americas 46,700 40,196 6,504 16.2
Asia 12,319 8,672 3,647 42.1
Europe 18,603 21,488 (2,885 ) (13.4 )
Total Internet 77,622 70,356 7,266 10.3
Total Revenues $ 898,309 $ 797,189 $ 101,120 12.7 %
|
Revenues. During the nine months ended September 30, 2012, revenues increased $101.1 million, or 12.7%, compared to the same period in 2011, due to an increase of 8.4% in average footwear selling price and an increase of 1.6 million, or 4.2%, in footwear unit sales.
During the nine months ended September 30, 2012, revenues from our wholesale channel grew by $41.2 million, or 8.3%, compared to the same period in 2011, which was primarily driven by continued strong demand in both the Americas and Asia operating segments. Revenues from our retail channel grew by $52.7 million, or 22.7%, compared to the same period in 2011, due to a net increase of 89 global retail locations and growth in comparable store revenues of 3.1%. We continue to close certain kiosks and open more branded stores where we can better merchandise the full breadth and depth of our product line. Revenues from our internet channel grew by $7.3 million, or 10.3%, compared to the same period in 2011, as a result of increased brand awareness in the Americas.
The table below sets forth information about the number of company-operated retail locations as of September 30, 2012 and 2011 and comparable store sales growth for the nine months ended September 30, 2012 compared to the same period in 2011.
Comparable
September 30, September 30, store sales
Company-operated retail locations by operating segment: 2012 2011 Change growth
Americas 189 195 (6 ) 3.7 %
Asia 233 182 51 1.2
Europe 77 33 44 7.5
Total company-operated retail locations 499 410 89 3.1 %
|
Impact on Revenues due to Foreign Exchange Rate Fluctuations. Changes in average foreign currency exchange rates used to translate revenues from our functional currencies to our reporting currency, the U.S. dollar, during the nine months ended September 30, 2012 decreased revenues $21.9 million as compared to the same period in 2011.
Gross profit. During the nine months ended September 30, 2012, gross profit increased $65.0 million, or 14.9%, compared to the same period in 2011 and gross margin increased to 55.8%. These increases are primarily attributable to an increase of 8.4% in our global average footwear selling price and an increase of 4.2% in global footwear unit sales which were partially offset by higher cost of sales driven by product mix and increased volume.
Impact on Gross Profit due to Foreign Exchange Rate Fluctuations. Changes in average foreign currency exchange rates used to translate revenues and cost of sales from our functional currencies to our reporting currency during the nine months ended September 30, 2012 decreased our gross profit by $7.7 million compared to the same period in 2011.
Selling, general and administrative expenses. Selling, general and administrative expense increased $40.0 million, or 12.9%, during the nine months ended September 30, 2012 compared to the same period in 2011. This increase was primarily due to increases of $16.2 million in rent and building costs resulting from continued growth in the number of company-operated retail stores, $12.4 million in salaries and related costs resulting from higher global headcount, and $8.3 million in other expenses including increases in depreciation and amortization expenses. As a percentage of revenues, SG&A was 38.9% the same for the nine months ended September 30, 2012 and 2011.
Impact on SG&A due to Foreign Exchange Rate Fluctuations. Changes in average foreign currency exchange rates used to translate SG&A from our functional currencies to our reporting currency during the nine months ended September 30, 2012 decreased SG&A by approximately $5.5 million as compared to the same period in 2011.
Foreign currency transaction (gains)losses. The line item entitled Foreign currency transaction (gains) losses is comprised of foreign currency gains and losses from the re-measurement and settlement of monetary assets and liabilities denominated in non-functional currencies and the impact of certain foreign currency derivative instruments. Foreign currency transactions were in a loss position of $2.7 million during the nine months ended September 30, 2012 compared to $4.6 million of gains for the same period in 2011, primarily due to the re-measurement of monetary assets and liabilities in certain non-functional currencies, net of related undesignated forward instruments, as the U.S. dollar strengthened against those currencies.
Income tax expense. During the nine months ended September 30, 2012, income tax expense decreased $7.8 million compared to the same period in 2011, which was primarily due to a reversal of certain tax provisions and the release of certain valuation allowances associated with deferred tax assets. Our effective tax rate for the nine months ended September 30, 2012 differs from the federal U.S. statutory rate primarily because of differences between income tax rates between U.S. and foreign jurisdictions. Our effective tax rate for the nine months ended September 30, 2012 was 7.5% lower than the rate for the quarter ended September 30, 2011 primarily due to a reversal of certain tax provisions and the release of certain valuation allowances associated with deferred tax assets.
Presentation of Reportable Operating Segments
We have three reportable operating segments: Americas, Europe and Asia. We also have an Other businesses category which aggregates insignificant operating segments that do not meet the reportable threshold and represent manufacturing operations located in Mexico and Italy. The composition of our reportable operating segments is consistent with that used by our chief operating decision maker ("CODM") to evaluate performance and allocate resources. Each of our reportable operating segments derives its revenues
|
|