Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to

Commission File No. 000-51754

 

 

Crocs, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   20-2164234

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

7477 East Dry Creek Parkway, Niwot, Colorado 80503

(Address of registrant’s principal executive offices)

(303) 848-7000

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in

Rule 12b-2 of the Exchange Act:

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of October 26, 2012, Crocs, Inc. had 90,979,136 shares of its $0.001 par value common stock outstanding.

 

 

 


Table of Contents

Crocs, Inc.

Form 10-Q

Quarter Ended September 30, 2012

Table of Contents

 

PART I—Financial Information

  

Item 1.

   Financial Statements      3   
   Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2012 and 2011      3   
   Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2011      4   
   Unaudited Condensed Consolidated Balance Sheets at September 30, 2012 and December 31, 2011      5   
   Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011      6   
   Notes to Unaudited Condensed Consolidated Financial Statements      7   

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      18   

Item 3.

   Quantitative and Qualitative Disclosures About Market Risk      28   

Item 4.

   Controls and Procedures      29   

PART II—Other Information

  

Item 1.

   Legal Proceedings      29   

Item 1A.

   Risk Factors      30   

Item 6.

   Exhibits      31   
   Signatures      32   

 

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PART I—FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

($ thousands, except per share data)

   2012     2011     2012     2011  

Revenues

   $ 295,569      $ 274,897      $ 898,309      $ 797,189   

Cost of sales

     134,826        127,722        396,682        360,591   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     160,743        147,175        501,627        436,598   

Selling, general and administrative expenses

     120,729        111,672        349,737        309,769   

Asset impairment

     —          495        819        527   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     40,014        35,008        151,071        126,302   

Foreign currency transaction (gains) losses, net

     21        (2,358     2,670        (4,560

Other (income) expense, net

     (80     335        (1,747     636   

Interest expense

     377        204        556        632   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     39,696        36,827        149,592        129,594   

Income tax expense (benefit)

     (5,384     6,620        14,642        22,377   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 45,080      $ 30,207      $ 134,950      $ 107,217   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share (Note 10):

        

Basic

   $ 0.50      $ 0.34      $ 1.50      $ 1.21   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.49      $ 0.33      $ 1.48      $ 1.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

($ thousands)

   2012      2011     2012     2011  

Net income

   $ 45,080       $ 30,207      $ 134,950      $ 107,217   

Other comprehensive income (loss):

         

Foreign currency translation adjustments

     7,563         (14,714     3,118        (9,297

Reclassification of cumulative foreign exchange translation adjustments to net income

     —           —          (658     —     
  

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income

   $ 52,643       $ 15,493      $ 137,410      $ 97,920   
  

 

 

    

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

($ thousands)

   September 30,
2012
    December 31,
2011
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 312,580      $ 257,587   

Accounts receivable, net of allowances of $17,557 and $15,508, respectively

     121,396        84,760   

Inventories

     187,527        129,627   

Deferred tax assets, net

     8,042        7,047   

Income tax receivable

     5,829        5,828   

Other receivables

     26,105        20,295   

Prepaid expenses and other current assets

     26,813        20,199   
  

 

 

   

 

 

 

Total current assets

     688,292        525,343   

Property and equipment, net

     76,577        67,684   

Intangible assets, net

     61,049        48,641   

Deferred tax assets, net

     32,882        30,375   

Other assets

     32,804        23,410   
  

 

 

   

 

 

 

Total assets

   $ 891,604      $ 695,453   
  

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable

   $ 78,103      $ 66,517   

Accrued expenses and other current liabilities

     94,389        76,506   

Deferred tax liabilities, net

     3,497        2,889   

Income taxes payable

     25,260        8,273   

Bank borrowings and current portion of capital lease obligations

     28        1,118   
  

 

 

   

 

 

 

Total current liabilities

     201,277        155,303   

Long term income tax payable

     30,449        41,665   

Other liabilities

     18,894        6,705   
  

 

 

   

 

 

 

Total liabilities

     250,620        203,673   
  

 

 

   

 

 

 

Commitments and contingencies (Note 11)

    

Stockholders’ equity:

    

Preferred shares, par value $0.001 per share, 5,000,000 shares authorized, none outstanding

     —          —     

Common shares, par value $0.001 per share, 250,000,000 shares authorized, 90,972,999 and 90,465,878 shares issued and outstanding, respectively, at September 30, 2012 and 90,306,432 and 89,807,146 shares issued and outstanding, respectively, at December 31, 2011

     91        90   

Treasury stock, at cost, 507,121 and 499,286 shares, respectively

     (19,211     (19,759

Additional paid-in capital

     305,204        293,959   

Retained earnings

     337,620        202,669   

Accumulated other comprehensive income

     17,280        14,821   
  

 

 

   

 

 

 

Total stockholders’ equity

     640,984        491,780   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 891,604      $ 695,453   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Nine Months Ended September 30,  

($ thousands)

   2012     2011  

Cash flows from operating activities:

    

Net income

   $ 134,950     $ 107,217  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     26,815       28,789  

Unrealized (gain) loss on foreign exchange, net

     5,530       (10,941

Charitable contributions

     1,491       1,911  

Provision for (recovery of) doubtful accounts, net

     1,619       (254

Share-based compensation

     8,971       6,438  

Other non-cash items

     667       71  

Changes in operating assets and liabilities:

    

Accounts receivable

     (34,568     (32,269

Inventories

     (57,180     (33,871

Prepaid expenses and other assets

     (19,791     (15,690

Accounts payable

     6,619       24,551  

Accrued expenses and other liabilities

     26,849       17,051  

Income taxes

     5,294       358  
  

 

 

   

 

 

 

Cash provided by operating activities

     107,266       93,361  

Cash flows from investing activities:

    

Purchases of marketable securities

     (2,630     —     

Cash paid for purchases of property and equipment

     (25,866     (21,163

Proceeds from disposal of property and equipment

     855       217  

Cash paid for intangible assets

     (14,254     (11,434

Business acquisitions, net of cash

     (5,152     —     

Restricted cash

     (1,858     (511
  

 

 

   

 

 

 

Cash (used in) investing activities

     (48,905     (32,891

Cash flows from financing activities:

    

Proceeds from bank borrowings

     89,505       267,523  

Repayment of bank borrowings and capital lease obligations

     (90,617     (268,910

Issuances of common stock

     3,358       9,810  

Repurchase of common stock for tax withholding

     (493     —     
  

 

 

   

 

 

 

Cash provided by financing activities

     1,753       8,423  

Effect of exchange rate changes on cash

     (5,121     5,912  
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     54,993       74,805  

Cash and cash equivalents—beginning of year

     257,587       145,583  
  

 

 

   

 

 

 

Cash and cash equivalents—end of year

   $ 312,580     $ 220,388  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information—cash paid during the year for:

    

Interest

   $ 542     $ 687  

Income taxes

   $ 16,937     $ 21,414  

Supplemental disclosure of non-cash, investing, and financing activities:

    

Assets acquired under capitalized leases

   $ 35     $ —     

Accrued purchases of property and equipment

   $ 3,996     $ 2,310  

Accrued purchases of intangibles

   $ 4,281     $ 1,049  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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CROCS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. BASIS OF PRESENTATION

Crocs, Inc. and its subsidiaries (collectively, “we,” “us,” or the “Company”) are engaged in the design, manufacture and sale of footwear, apparel and accessories for men, women and children.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, these statements do not include all of the information and disclosures required by GAAP or SEC rules and regulations for complete financial statements. In the opinion of management, these financial statements reflect all adjustments (consisting solely of normal recurring matters) considered necessary for a fair presentation of the results for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year.

These statements should be read in conjunction with the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 Form 10-K”). The accounting policies used in preparing these unaudited condensed consolidated financial statements are the same as those described in Note 1—Summary of Significant Accounting Policies to the consolidated financial statements in the 2011 Form 10-K.

The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Management believes that the estimates, judgments and assumptions made when accounting for items and matters such as, but not limited to, the allowance for doubtful accounts, sales returns and discounts, impairment assessments and charges, recoverability of assets (including deferred tax assets), uncertain tax positions, share-based compensation expense, useful lives assigned to long-lived assets, depreciation and provisions for contingencies are reasonable based on information available at the time they are made. Management also makes estimates in the assessments of potential losses in relation to threatened or pending legal and tax matters (see Note 13 – Legal Proceedings). Actual results could materially differ from these estimates. For matters not related to income taxes, if a loss is considered probable and the amount can be reasonably estimated, the Company recognizes an expense for the estimated loss.

Recently Adopted Accounting Standards

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, “Testing Goodwill for Impairment.” This pronouncement was issued to allow companies to assess qualitative factors to determine if it is more-likely-than-not that goodwill might be impaired and whether it is necessary to perform the two-step goodwill impairment test required under current accounting standards. This pronouncement is effective for reporting periods beginning after December 15, 2011. The adoption of ASU 2011-08 did not have a significant impact to our consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Standards

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment.” This pronouncement was issued to simplify how an entity tests indefinite-lived intangible assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This pronouncement is effective for reporting periods beginning after September 15, 2012. We do not anticipate the adoption of ASU 2012-02 to have a significant impact to the consolidated financial position, results of operations or cash flows.

In December 2011, the FASB issued ASU No. 2011-11, “Disclosures About Offsetting Assets and Liabilities.” This pronouncement was issued enhance disclosure requirements surrounding the nature of an entity’s right to offset and related arrangements associated with its financial instruments and derivative instruments. This new guidance requires companies to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to master netting arrangements. This pronouncement is effective for reporting periods beginning on or after January 1, 2013. We do not anticipate the adoption of ASU 2011-11 to have a significant impact to the consolidated financial position, results of operations or cash flows.

Reclassifications—Certain prior period amounts presented in the condensed consolidated financial statements have been reclassified to conform to current period presentation. We reclassified the Foreign currency transaction (gains) losses, net line item from Income from operations to Income before income taxes in the consolidated statements of income. We also reclassified (gains) losses on our

 

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derivative contracts from Other (income) expense to the Foreign currency transaction (gains) losses, net line item. As a result of these reclassifications, Income from operations decreased $2.1 million and $3.8 million for the three and nine months ended September 30, 2011, respectively, from the amounts previously reported. These reclassifications did not affect net income.

2. INVENTORIES

The following table summarizes inventories by major classification as of September 30, 2012 and December 31, 2011.

 

($ thousands)

   September 30, 2012      December 31, 2011  

Finished goods

   $ 178,466       $ 124,203   

Work-in-progress

     894         291   

Raw materials

     8,167         5,133   
  

 

 

    

 

 

 

Inventories

   $ 187,527       $ 129,627   
  

 

 

    

 

 

 

3. PROPERTY AND EQUIPMENT

The following table summarizes property and equipment by major classification as of September 30, 2012 and December 31, 2011.

 

($ thousands)

   September 30, 2012     December 31, 2011  

Machinery and equipment

   $ 68,294      $ 68,005   

Leasehold improvements

     81,829        65,338   

Furniture, fixtures and other

     19,795        16,196   

Construction-in-progress

     8,601        7,902   
  

 

 

   

 

 

 

Property and equipment, gross

     178,519        157,441   

Less: Accumulated depreciation

     (101,942     (89,757
  

 

 

   

 

 

 

Property and equipment, net

   $ 76,577      $ 67,684   
  

 

 

   

 

 

 

During the three months ended September 30, 2012 and 2011, we recorded $5.8 million and $6.8 million, respectively, in depreciation expense of which $1.1 million and $2.6 million, respectively, was recorded in Cost of sales, with the remaining amounts recorded in Selling, general and administrative expenses in the condensed consolidated statements of income. During the nine months ended September 30, 2012 and 2011, we recorded $17.2 million and $21.7 million, respectively, in depreciation expense of which $3.7 million and $9.7 million, respectively, was recorded in Cost of sales, with the remaining amounts recorded in Selling, general and administrative expenses in the condensed consolidated statements of income.

We periodically review all of our stores for indicators of impairment. During the nine months ended September 30, 2012, we determined that certain underperforming domestic stores in the Americas segment were unlikely to generate sufficient cash flows to recover the carrying value of the stores’ assets over the remaining economic life of those assets. As a result, we recorded impairment charges of $0.8 million during the nine months ended September 30, 2012 to adjust the carrying value of these store assets to our estimate of their fair value, which is based on our estimate of future discounted cash flows. We did not record any impairment charges during the three months ended September 30, 2012.

 

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4. GOODWILL & INTANGIBLE ASSETS

The following table summarizes the identifiable intangible assets as of September 30, 2012 and December 31, 2011.

 

     September 30, 2012      December 31, 2011  

($ thousands)

   Gross Carrying
Amount
    Accumulated
Amortization
    Net Carrying
Amount
     Gross
Carrying
Amount
    Accumulated
Amortization
    Net
Carrying
Amount
 

Capitalized software

   $ 84,926 (1)    $ (30,422 )(2)    $ 54,504       $ 66,530 (1)    $ (22,156 )(2)    $ 44,374   

Customer relationships

     7,172        (6,183     989         6,321        (5,641     680   

Patents, copyrights, and trademarks

     6,066        (3,333     2,733         6,109        (2,994     3,115   

Core technology

     4,938        (4,938     —           4,743        (4,743     —     

Other

     681        (636     45         997        (636     361   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total finite lived intangible assets

     103,783        (45,512     58,271         84,700        (36,170     48,530   

Indefinite lived intangible assets

     114        —          114         111        —          111   

Goodwill (3)

     2,664        —          2,664         —          —          —     
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Intangible assets

   $ 106,561      $ (45,512   $ 61,049       $ 84,811      $ (36,170   $ 48,641   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

(1) 

Includes $4.1 million of software held under a capital lease classified as capitalized software as of September 30, 2012 and December 31, 2011.

(2) 

Includes $1.2 million and $0.7 million of accumulated amortization of software held under a capital lease as of September 30, 2012 and December 31, 2011, respectively.

(3) 

On July 16, 2012, our subsidiaries Crocs Europe B.V., Crocs Stores B.V. and Crocs Belgium N.V. (collectively referred to as Crocs Europe), which are part of our Europe segment, acquired certain net assets and activities from Crocs Benelux B.V. (Benelux) pursuant to a sale and purchase agreement dated July 9, 2012. Prior to the acquisition, Benelux was a distributor of the Company. The Company acquired Benelux’ retail business and wholesale business, including inventory, fixed assets, customer relationships, 10 retail stores and their associated leases. Total consideration paid was cash of € 3.6 million (approximately $4.6 million). This acquisition will allow us to take direct control in expanding our business in the Benelux region.

During the three months ended September 30, 2012 and 2011, amortization expense recorded for intangible assets with finite lives was $3.8 million and $2.6 million, respectively, of which $1.0 million and $0.7 million, respectively, was recorded in Cost of sales. The remaining amounts were recorded in Selling, general and administrative expenses. During the nine months ended September 30, 2012 and 2011, amortization expense recorded for intangible assets with finite lives was $9.6 million and $7.1 million, respectively, of which $2.7 million and $2.1 million, respectively, was recorded in Cost of sales. The remaining amounts were recorded in Selling, general and administrative expenses.

Estimated future annual amortization of intangible assets as of September 30, 2012 is set forth in the following table.

 

Fiscal years ending December 31,

   Amortization
($ thousands)
 

Remainder of 2012

   $ 5,369   

2013

     21,336   

2014

     15,063   

2015

     7,568   

2016

     6,094   

Thereafter

     2,841   
  

 

 

 

Total

   $ 58,271   
  

 

 

 

 

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5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

The following table summarizes accrued expenses and other current liabilities as of September 30, 2012 and December 31, 2011.

 

($ thousands)

   September 30,
2012
     December 31,
2011
 

Accrued compensation and benefits

   $ 26,535       $ 28,680   

Fulfillment, freight and duties

     8,327         7,151   

Professional services

     7,622         8,429   

Sales/use and VAT tax payable

     16,610         9,642   

Entrusted loan payable(2)

     11,266         9,133   

Accrued rent and occupancy

     9,623         5,476   

Other(1)

     14,406         7,995   
  

 

 

    

 

 

 

Total accrued expenses and other current liabilities

   $ 94,389       $ 76,506   
  

 

 

    

 

 

 

 

(1) 

The amounts in Other consist of various accrued expenses and no individual item accounted for more than 5% of the total balance at September 30, 2012 or December 31, 2011.

(2) 

A corresponding entrusted loan receivable of $11.3 million and $9.1 million are recorded in Prepaid expenses and other current assets as of September 30, 2012 and December 31, 2011, respectively, as amounts are related to our subsidiaries in China.

6. FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

Recurring Fair Value Measurements

The following table summarizes the financial instruments required to be measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011.

 

     Fair Value as of September 30, 2012      Fair Value as of December 31, 2011       

($ thousands)

   Level 1      Level 2      Level 3      Level 1      Level 2      Level 3     

Balance Sheet Classification

Cash equivalents

   $ 3,173       $ —         $ —         $ 10,286       $ —         $ —         Cash and cash equivalents

Certificates of deposit

     —           2,484         —           —           —           —         Prepaid expenses and other current assets

Derivative assets:

                    

Foreign currency contracts

     —           227         —           —           596         —         Prepaid expenses and other current assets

Derivative liabilities:

                    

Foreign currency contracts

   $ —         $ 6,957       $ —         $ —         $ 1,035       $ —         Accrued expense and other current liabilities and other liabilities

Other financial instruments including accounts receivable, accounts payable, debt and accrued liabilities are not required to be measured at fair value on a recurring basis. The carrying value of these financial instruments approximates fair value due to their short maturities. Based on borrowing rates currently available to us, with similar terms, the carrying values of capital lease obligations and the revolving credit facility approximate their fair values.

Non-Recurring Fair Value Measurements

The majority of our non-financial instruments including inventories, property, plant and equipment and intangible assets are not required to be measured at fair value on a recurring basis. However, if certain triggering events occur such that a non-financial instrument is determined to be impaired, it is recorded at its fair value and any difference between its carrying value and fair value is reflected in the consolidated statements of income as an impairment loss. See Note 3—Property and Equipment for more information regarding impairment charges related to non-recurring fair value measurements.

Derivative Financial Instruments

We transact business in various foreign countries and are therefore exposed to foreign currency exchange rate risk inherent in revenues, costs, and monetary assets and liabilities denominated in non-functional currencies. We enter into foreign currency exchange forward contracts and currency swaps to selectively protect against volatility in the value of non-functional currency denominated monetary assets and liabilities, and of future cash flows caused by changes in foreign currency exchange rates. The following table summarizes the notional amounts of the outstanding foreign currency exchange contracts at September 30, 2012 and December 31, 2011. The notional amounts of the derivative financial instruments shown below are denominated in their U.S. dollar

 

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equivalents and represent the amount of all contracts of the foreign currency specified. These notional values do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the foreign currency exchange risks.

 

($ thousands)

   September 30, 2012      December 31, 2011  

Foreign currency exchange forward contracts by currency:

     

Japanese Yen

   $ 127,701       $ 27,500   

Euro

     9,968         10,055   

Australian Dollar

     5,180         —     

Mexican Peso

     13,761         6,500   

Pound Sterling

     13,458         6,345   

New Zealand Dollar

     1,147         —     

Brazilian Real

     6,400         —     

Hong Kong Dollar

     2,999         —     
  

 

 

    

 

 

 

Total notional value, net

   $ 180,614       $ 50,400   
  

 

 

    

 

 

 

Latest maturity date

     December 2015         December 2012   

Undesignated Derivative Instruments

We may elect to enter into foreign exchange forwards and currency swaps to mitigate the change in fair value of specific assets and liabilities on the balance sheet, as explained above. These foreign currency exchange contracts are not designated as hedging instruments under the accounting standards for derivatives and hedging. Accordingly, these undesignated instruments are recorded at fair value as a derivative asset or liability on the balance sheet with their corresponding change in fair value recognized in Foreign currency transaction (gains) losses, net together with the re-measurement gain or loss from the hedged balance sheet position. For purposes of the cash flow statement, the Company classifies the cash flows at settlement from undesignated instruments in the same category as the cash flows from the related hedged items, generally within Cash provided by operating activities.

The following table presents the amounts affecting the consolidated statements of income from derivative instruments for the three and nine months ended September 30, 2011 and 2012.

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
     

($ thousands)

   2012      2011     2012      2011    

Location of (Gain) Loss Recognized in Income

Derivatives not designated as hedging instruments:

            

Foreign currency exchange forwards

   $ 2,793       $ (298   $ 4,977       $ (773   Foreign currency transaction (gains) losses, net

7. BANK BORROWINGS AND CAPITAL LEASE OBLIGATIONS

Bank borrowings and capital lease obligations as of September 30, 2012 and December 31, 2011 consist of the following:

 

($ thousands)

   September 30,
2012
     December 31,
2011
 

Revolving credit facility

   $ —         $ 422   

Capital lease obligations for capitalized software bearing interest rates ranging from 8.7% to 12.4% and maturities through 2012

     —           640   

Capital lease obligations for equipment bearing interest at 8.8% and maturities through 2017

     65         81   
  

 

 

    

 

 

 

Total bank borrowings and capital lease obligations

   $ 65       $ 1,143   
  

 

 

    

 

 

 

As of September 30, 2012 and December 31, 2011, we had issued and outstanding letters of credit of $6.1 million and $6.0 million, respectively, which were reserved against the borrowing base under the terms of our revolving credit facility.

8. STOCK-BASED COMPENSATION

Options granted generally vest on a straight-line basis over four years with the first year vesting on a cliff basis followed by monthly vesting for the remaining three years. Restricted stock awards (“RSA”) and restricted stock units (“RSU”) granted generally vest on a straight-line basis over three or four years depending on the terms of the grant. Stock-based compensation expense is recognized on a straight-line basis over the applicable vesting period and is recognized in the Cost of sales and Selling, general and administrative

 

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expense line items in the condensed consolidated statements of income. During the three months ended September 30, 2012 and 2011, $2.8 million and $2.5 million, respectively, of stock-based compensation expense was recorded of which $0.5 million and $0.4 million, respectively, was recorded in Cost of sales. During the nine months ended September 30, 2012 and 2011, $9.0 million and $6.4 million, respectively, of stock-based compensation expense was recorded of which $1.5 million and $1.0 million, respectively, was recorded in Cost of sales.

Stock Options

The following table summarizes the stock option activity for the three and nine months ended September 30, 2012 and 2011.

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2012      2011      2012      2011  

Options

   Options     Weighted
Average
Exercise
Price
     Options     Weighted
Average
Exercise
Price
     Options     Weighted
Average
Exercise
Price
     Options     Weighted
Average
Exercise
Price
 

Outstanding at June 30, 2012 and 2011 and December 31, 2011 and 2010, respectively

     2,974,613      $ 12.48         3,903,041      $ 11.07         3,331,031      $ 11.91         5,007,337      $ 9.10   

Granted

     69,500        17.19         40,000        27.03         183,400        17.18         388,000        20.62   

Exercised

     (257,570     7.10         (373,991     8.64         (543,014     6.18         (1,633,671     6.30   

Forfeited or expired

     (55,886     17.13         (81,704     9.93         (240,760     16.42         (274,320     10.98   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Outstanding at September 30

     2,730,657      $ 13.01         3,487,346      $ 11.54         2,730,657      $ 13.01         3,487,346      $ 11.54   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Restricted Stock Awards and Units

From time to time, we grant RSAs and RSUs to our employees. Unvested RSAs have the same rights as those of common shares including voting rights and non-forfeitable dividend rights. However, ownership of unvested RSAs cannot be transferred until they are vested. An unvested RSU is a contractual right to receive a share of common stock only upon its vesting. RSUs have dividend equivalent rights which accrue over the term of the award and are paid if and when the RSUs vest, but no they have voting rights.

During the nine months ended September 30, 2012, the Board of Directors approved grants of 0.4 million RSUs to certain executives as part of a performance incentive program. Half of these grants vest ratably on each of the first three anniversaries of the grant date; 25% will vest upon achievement of certain performance metrics; and the remaining 25% will vest one year from the date upon which certain performance metrics are achieved. If actual performance metrics exceed the targeted performance metrics by a predetermined amount, the executives are eligible to receive up to 200% of the performance-based portion of their award. During the three and nine months ended September 30, 2012, $0.2 million and $0.5 million, respectively, of stock-based payment expense related to these RSUs was recorded.

The following table summarizes the RSA activity for the three and nine months ended September 30, 2012 and 2011.

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2012      2011      2012      2011  

Restricted Stock Awards

   Shares     Weighted
Average
Grant
Date Fair
Value
     Shares     Weighted
Average
Grant
Date Fair
Value
     Shares     Weighted
Average
Grant
Date Fair
Value
     Shares     Weighted
Average
Grant
Date Fair
Value
 

Outstanding at June 30, 2012 and 2011 and December 31, 2011 and 2010, respectively

     383,410      $ 13.53         752,239      $ 10.39         571,175      $ 11.87         953,423      $ 8.54   

Granted

     —             —             18,813        16.48         118,520        19.10   

Vested

     (7,600     16.77         (4,136     25.65         (187,078     9.04         (250,172     7.88   

Forfeited or expired

     (5,100     12.51         (48,500     7.00         (32,200     12.51         (122,168     8.70   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Outstanding at September 30

     370,710      $ 13.47         699,603      $ 10.54         370,710      $ 13.47         699,603      $ 10.54   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

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The following table summarizes the RSU activity for the three and nine months ended September 30, 2012 and 2011.

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2012      2011      2012      2011  

Restricted Stock Units

   Units     Weighted
Average
Grant
Date Fair
Value
     Units     Weighted
Average
Grant
Date Fair
Value
     Units     Weighted
Average
Grant
Date Fair
Value
     Units     Weighted
Average
Grant
Date Fair
Value
 

Outstanding at June 30, 2012 and 2011 and December 31, 2011 and 2010, respectively

     1,465,715      $ 21.00         669,149      $ 23.93         711,980      $ 23.43         116,400      $ 12.99   

Granted

     59,500        17.19         19,692        27.19         948,059        19.28         589,791        25.88   

Vested

     (7,984     26.81         (4,200     25.85         (113,225     24.65         (18,350     15.93   

Forfeited or expired

     (29,996     19.19         (2,031     25.85         (59,579     20.22         (5,231     17.98   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Outstanding at September 30

     1,487,235      $ 20.86         682,610      $ 24.01         1,487,235      $ 20.86         682,610      $ 24.01   
  

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

9. INCOME TAXES

During the three months ended September 30, 2012, we recognized an income tax benefit of $5.4 million on pre-tax income of $39.7 million, representing an effective income tax benefit rate of (13.6%) compared to an income tax expense of $6.6 million on pre-tax income of $36.8 million, representing an effective income tax rate of 18.0% for the same period in 2011. During the nine months ended September 30, 2012, we recognized an income tax expense of $14.6 million on pre-tax income of $149.6 million, representing an effective income tax rate of 9.8% compared to an income tax expense of $22.4 million on pre-tax income of $129.6 million, representing an effective income tax rate of 17.3% for the same period in 2011. The decrease in the effective tax rate in 2012 is primarily the result of a reversal of certain tax provisions and the release of certain valuation allowances associated with deferred tax assets. Our effective tax rates for all periods presented differ from the federal U.S. statutory rate primarily due to differences between income tax rates between U.S. and foreign jurisdictions. We had unrecognized tax benefits of $29.1 million at September 30, 2012 and $44.5 million at December 31, 2011.

 

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10. EARNINGS PER SHARE

For all periods presented, basic and diluted earnings per common share (“EPS”) is presented using the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividend rights and participation rights in undistributed earnings. Under the two-class method, EPS is computed by dividing the sum of distributed and undistributed earnings attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. A participating security is an unvested share-based payment award containing non-forfeitable rights to dividends (whether or not declared) and must be included in the computation of earnings per share pursuant to the two-class method. Shares of unvested restricted stock are considered participating securities as they have non-forfeitable dividend rights. The following table sets forth EPS for the three and nine months ended September 30, 2012 and 2011.

 

     Three Months Ended September 30,     Nine Months Ended September 30,  

($ thousands, except per share data)

   2012     2011     2012     2011  

Numerator:

        

Net income

   $ 45,080      $ 30,207      $ 134,950      $ 107,217   

Income allocated to participating securities

     (188     (251     (702     (1,034
  

 

 

   

 

 

   

 

 

   

 

 

 

Numerator for net income attributable to common stockholders—basic and diluted

   $ 44,892      $ 29,956      $ 134,248      $ 106,183   
  

 

 

   

 

 

   

 

 

   

 

 

 

Denominator:

        

Weighted average common shares outstanding—basic

     89,948        88,805        89,592        88,043   

Dilutive effect of stock options and unvested restricted stock units

     902        1,684        1,080        1,842   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding—diluted

     90,850        90,489        90,672        89,885   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

        

Basic

   $ 0.50      $ 0.34      $ 1.50      $ 1.21   

Diluted

   $ 0.49      $ 0.33      $ 1.48      $ 1.18   

For the three and nine months ended September 30, 2012, approximately 1.7 million and 1.5 million, respectively, options and RSUs were not included in the calculation of diluted net income per share because they were anti-dilutive. For the three and nine months ended September 30, 2011, approximately 0.3 million and 0.7 million, respectively, options and RSUs were not included in diluted net income per share as their effect would have been anti-dilutive.

11. COMMITMENTS AND CONTINGENCIES

We lease space for certain of our offices, warehouses, vehicles and equipment under leases expiring at various dates through 2023. Certain leases contain rent escalation clauses (step rents) that require additional rental amounts in the later years of the term. Rent expense for leases with step rents or rent holidays is recognized on a straight-line basis over the minimum lease term. Deferred rent is included in the consolidated balance sheet in Accrued expenses and other current liabilities. Total rent expense was $26.1 million and $22.4 million for the three months ended September 30, 2012 and 2011, respectively. Included in such amounts are contingent rents of $4.9 million and $4.8 million in 2012 and 2011, respectively. Total rent expense was $74.1 million and $61.5 million for the nine months ended September 30, 2012 and 2011, respectively. Included in such amounts are contingent rents of $13.6 million and $11.5 million in 2012 and 2011, respectively.

12. OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION

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 from the sale of footwear, apparel and accessories to external customers. Revenues of the Other businesses category are primarily made up of intersegment sales which are eliminated when deriving total consolidated revenues. The remaining revenues for the Other businesses represent non-footwear product sales to external customers. Segment assets consist of cash and cash equivalents, accounts receivable and inventory.

 

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Segment operating income is the primary measure used by our CODM to evaluate segment operating performance and to decide how to allocate resources to segments. Segment performance evaluation is based primarily on segment results without allocating corporate expenses, or indirect general, administrative and other expenses. Segment profits or losses of our reportable operating segments include adjustments to eliminate intersegment profit or losses on intersegment sales.

During the first quarter of 2012, we changed the internal reports used by our CODM to align the definition of our segment operating income with Income from operations. Previously, segment operating income excluded asset impairment charges and restructuring costs not included in cost of sales. Segment operating income also reflects the reclassification of Foreign currency transaction (gains) losses, net, from Income (loss) from operations on the consolidated statements of income. See Note 1—Basis of Presentation for further discussion. Segment information for all periods presented has been reclassified to reflect these changes.

The following table sets forth information related to our reportable operating business segments during the three and nine months ended September 30, 2012 and 2011.

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 

($ thousands)

   2012     2011     2012     2011  

Revenues:

        

Americas

   $ 131,948      $ 122,847      $ 383,866      $ 344,453   

Asia

     123,695        111,185        372,576        305,707   

Europe

     39,765        40,945        141,534        146,926   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment revenues

     295,408        274,977        897,976        797,086   

Other businesses

     161        (80     333        103   
  

 

 

   

 

 

   

 

 

   

 

 

 

Revenues

   $ 295,569      $ 274,897      $ 898,309      $ 797,189   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income:

        

Americas

   $ 27,610      $ 20,512      $ 77,299      $ 60,608   

Asia

     39,013        38,037        127,154        107,020   

Europe

     1,351        4,992        27,730        38,518   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment operating income

     67,974        63,541        232,183        206,146   

Reconciliation of total segment operating income to income before income taxes:

        

Other businesses

     (2,690     (3,650     (8,598     (12,559

Intersegment eliminations

     15        15        54        50   

Unallocated corporate and other (1)

     (25,285     (24,898     (72,568     (67,335
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     40,014        35,008        151,071        126,302   

Foreign currency transaction (gains) losses, net

     21        (2,358     2,670        (4,560

Other (income) expense, net

     (80     335        (1,747     636   

Interest expense

     377        204        556        632   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

   $ 39,696      $ 36,827      $ 149,592      $ 129,594   
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization:

        

Americas

   $ 2,347      $ 2,259      $ 7,530      $ 6,929   

Asia

     1,831        1,654        5,031        4,642   

Europe

     787        662        2,079        1,941   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment depreciation and amortization

     4,965        4,575        14,640        13,512   

Other businesses

     1,704        2,760        4,765        9,746   

Unallocated corporate and other

     2,890        2,046        7,410        5,531   
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization

   $ 9,559      $ 9,381      $ 26,815      $ 28,789   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

Includes a corporate component consisting primarily of corporate support and administrative functions, costs associated with share-based compensation, research and development, brand marketing, legal, depreciation and amortization of corporate and other assets not allocated to operating segments and costs of the same nature related to certain corporate holding companies.

 

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The following table sets forth asset information related to our reportable operating business segments as of September 30, 2012 and December 31, 2011.

 

($ thousands)

   September 30,
2012
     December 31,
2011
 

Assets:

     

Americas

   $ 162,210       $ 107,330   

Asia

     315,897         241,354   

Europe

     98,079         83,909   
  

 

 

    

 

 

 

Total segment current assets

     576,186         432,593   

Other businesses

     15,439         17,598   

Unallocated corporate and other(1)

     29,878         21,783   

Deferred tax assets, net

     8,042         7,047   

Income tax receivable

     5,829         5,828   

Other receivables

     26,105         20,295   

Prepaid expenses and other current assets

     26,813         20,199   
  

 

 

    

 

 

 

Total current assets

     688,292         525,343   

Property and equipment, net

     76,577         67,684   

Intangible assets, net

     61,049         48,641   

Deferred tax assets, net

     32,882         30,375   

Other assets

     32,804         23,410   
  

 

 

    

 

 

 

Total assets

   $ 891,604       $ 695,453   
  

 

 

    

 

 

 

 

1) 

Corporate and other assets primarily consist of cash and cash equivalents

13. LEGAL PROCEEDINGS

We and certain current and former officers and directors have been named as defendants in complaints filed by investors in the United States District Court for the District of Colorado. The first complaint was filed in November 2007 and several other complaints were filed shortly thereafter. These actions were consolidated and, in September 2008, the district court appointed a lead plaintiff and counsel. An amended consolidated complaint was filed in December 2008. The amended complaint purports to state claims under Section 10(b), 20(a), and 20A of the Exchange Act on behalf of a class of all persons who purchased our common stock between April 2, 2007 and April 14, 2008 (the “Class Period”). The amended complaint also added our independent auditor as a defendant. The amended complaint alleges that, during the Class Period, the defendants made false and misleading public statements about us and our business and prospects and, as a result, the market price of our common stock was artificially inflated. The amended complaint also claims that certain current and former officers and directors traded in our common stock on the basis of material non-public information. The amended complaint seeks compensatory damages on behalf of the alleged class in an unspecified amount, including interest, and also added attorneys’ fees and costs of litigation. On February 28, 2011, the District Court granted motions to dismiss filed by the defendants and dismissed all claims. A final judgment was thereafter entered. Plaintiffs subsequently appealed to the United States Court of Appeals for the Tenth Circuit.

We and those current and former officers and directors named as defendants have entered into a Stipulation of Settlement with the plaintiffs that would, if approved by the United States District Court for the District of Colorado, resolve all claims asserted against us by the plaintiffs on behalf of the putative class, and plaintiffs’ appeal would be dismissed. Our independent auditor is not a party to the Stipulation of Settlement. The Stipulation of Settlement is subject to customary conditions, including preliminary court approval, and final court approval following notice to stockholders. If the settlement becomes final, all amounts required by the settlement will be paid by our insurers. There can be no assurance that the settlement will be finally approved by the District Court, or that approval by the District Court will, if challenged, be upheld by the Tenth Circuit.

On October 27, 2010, Spectrum Agencies (“Spectrum”) filed suit against our subsidiary, Crocs Europe B.V. (“Crocs Europe”), in the High Court of Justice, Queen’s Bench Division, Royal Courts of Justice in London, United Kingdom (“UK”). Spectrum acted as an agent for Crocs products in the UK from 2005 until Crocs Europe terminated the relationship on July 3, 2008 due to Spectrum’s breach of its duty to act in good faith towards Crocs Europe. Spectrum alleges that Crocs Europe unlawfully terminated the agency relationship and failed to pay certain sales commissions. A trial on the liability, not quantum (compensation and damages), was held at the High Court in London from November 30, 2011 to December 5, 2011. On December 16, 2011, the High Court of Justice issued a judgment that found that although Spectrum’s actions were a breach of its duty to act in good faith towards Crocs Europe the breach was not sufficiently severe to justify termination. We believe that the trial judge erred in his findings and permission to appeal the judgment was requested. Given that this phase of the proceedings only pertains to liability, there have been no findings in relation to the amount of compensation or damages other than with respect to legal fees. Under English law, the prevailing party is entitled to

 

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reimbursement of reasonable legal fees incurred in the liability proceedings. Spectrum has not quantified its claim for compensation and damages and the amount will be assessed later in the proceedings. Such assessment may be stayed pending the outcome of an appeal on liability. We were granted permission to appeal and the appeal hearing took place on July 4, 2012. On October 30, 2012, the Court of Appeal handed down its judgment confirming the High Court’s judgment. Crocs Europe currently intends to submit a request to the Supreme Court seeking permission to appeal. We anticipate that a decision by the Supreme Court on permission to appeal will be rendered in the first quarter of 2013. Proceedings on quantum shall be stayed until a final decision on permission to appeal has been handed down or in the event that permission is granted, until a final decision on the merits.

With respect to our outstanding litigation matters, we have accrued an aggregate of $0.4 million in Accrued expenses and other current liabilities on the consolidated balance sheets as of September 30, 2012.

We are currently subject to an audit by the U.S. Customs Service in respect of the period from 2006 to present. We have been informed that a draft audit report may be issued before the end of 2012 but the Company believes that a final report (and notice of a formal claim) will not be issued until sometime in 2013. U.S. Customs has provided the Company with preliminary projections that reflect unpaid duties totaling approximately $14.3 million during the period under review. The Company believes that these projections are erroneous and the Company intends to argue the amount due in connection with this matter, if any, is considerably less than the preliminary projection. It is not possible at this time to predict whether the Company’s arguments will be successful in eliminating or reducing the alleged unpaid duties. Likewise, it is not possible to predict whether U.S. Customs may seek to assert a claim for penalties in addition to any loss of revenue claim.

While we intend to vigorously defend these matters, based on our current knowledge, it is reasonably possible that adverse outcomes could result in aggregate losses beyond accrued amounts. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. Due to the nature of these legal proceedings we are currently unable to reasonably estimate a range of potential outcomes. If unfavorable final outcomes were to occur beyond amounts accrued, it may have a material adverse effect on our financial statements.

Although we are subject to other litigation from time to time in the ordinary course of business, including employment, intellectual property and product liability claims, we are not party to any other pending legal proceedings that we believe will have a material adverse impact on its business.

 

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

 

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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
  

 

 

    

 

 

   

 

 

   

 

 

 

 

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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.

 

Company-operated retail locations by operating segment:

   September 30,
2012
     September 30,
2011
     Change     Comparable
store sales
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.

 

Company-operated retail locations by type:

   September 30,
2012
     September 30,
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.

 

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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.

 

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Table of Contents

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.

 

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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.

 

Company-operated retail locations by operating segment:

   September 30,
2012
     September 30,
2011
     Change     Comparable
store sales
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

 

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Table of Contents

from the sale of footwear, apparel and accessories to external customers. Revenues of the Other businesses category are primarily made up of intersegment sales which are eliminated when deriving total consolidated revenues. The remaining revenues for the Other businesses represent non-footwear product sales to external customers. Segment assets consist of cash and cash equivalents, accounts receivable and inventory.

Segment operating income is the primary measure used by our CODM to evaluate segment operating performance and to decide how to allocate resources to segments. Segment performance evaluation is based primarily on segment results without allocating corporate expenses, or indirect general, administrative and other expenses. Segment profits or losses of our reportable operating segments include adjustments to eliminate intersegment profit or losses on intersegment sales.

During the first quarter of 2012, for operational purposes, we changed the internal reports used by our CODM to align the definition of our segment operating income with Income from operations. Previously, segment operating income was a non-GAAP measure that excluded asset impairment charges and restructuring costs not included in cost of sales. Segment operating income also reflects the reclassification of Foreign currency transaction (gains) losses, net, from Income from operations on the consolidated statements of income, see Note 1—Basis of Presentation for further discussion. Segment information for all periods presented has been reclassified to reflect these changes.

 

     Three Months Ended
September 30,
    Change  

($ thousands)

   2012     2011     $     %  

Revenues:

        

Americas

   $ 131,948      $ 122,847      $ 9,101        7.4

Asia

     123,695        111,185        12,510        11.3   

Europe

     39,765        40,945        (1,180     (2.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment revenues

     295,408        274,977        20,431        7.4   

Other businesses

     161        (80     241        (301.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 295,569      $ 274,897      $ 20,672        7.5
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income:

        

Americas

   $ 27,610      $ 20,512      $ 7,098        34.6

Asia

     39,013        38,037        976        2.6   

Europe

     1,351        4,992        (3,641     (72.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment operating income

     67,974        63,541        4,433        7.0   

Other businesses

     (2,690     (3,650     960 (1)      (26.3

Intersegment eliminations

     15        15        —          —     

Unallocated corporate and other

     (25,285     (24,898     (387 )(2)      1.6   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income from operations

   $ 40,014      $ 35,008      $ 5,006        14.3
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

During the three months ended September 30, 2012, operating losses of Other businesses decreased $1.0 million compared to the same period in 20ll, primarily due to an increase of $2.0 million of revenues driven by higher global sales which was primarily offset by $1.0 million of increased volume and product mix related cost of sales.

(2) 

Includes a corporate component consisting primarily of corporate support and administrative functions, costs associated with share-based compensation, research and development, brand marketing, legal, depreciation on corporate and other assets not allocated to operating segments and costs of the same nature of certain corporate holding companies. For the three months ended September 30, 2012, operating losses from Unallocated corporate and other increased $0.4 million compared to the same period in 2011, primarily due to increased salaries and wages associated with higher corporate headcount.

Americas Operating Segment. Revenues from the Americas segment increased $9.1 million, or 7.4%, during the three months ended September 30, 2012 compared to the same period in 2011, primarily due to a 5.3% increase in footwear average selling price and a 2.6% increase in footwear units sold, which was partially offset by an unfavorable impact of $1.5 million from foreign currency fluctuations. Revenue growth for the region was realized primarily in the retail channel which increased $6.4 million, or 12.2%, and in the internet channel which increased $1.7 million, or 11.3%. We continue to focus on disciplined expansion of our retail channel, by growing our full price and outlet stores, partially offset by closing underperforming kiosk locations. Segment operating income increased $7.1 million, or 34.6%, driven mainly by the increase in revenues, which resulted from the continued expansion of the retail channel, and a slight increase in gross margin. Foreign currency fluctuations had a net negative impact on the Americas gross profit of $0.5 million and a net positive impact on operating income of $0.2 million.

Asia Operating Segment. Revenues from the Asia segment increased $12.5 million, or 11.3%, during the three months ended September 30, 2012 compared to the same period in 2011, primarily due to a 16.4% increase in footwear units sold, partially offset by a 2.5% decrease in footwear average selling price and an unfavorable impact of $1.9 million from foreign currency fluctuations.

 

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Revenue growth for the region was realized primarily in the wholesale channel which increased $5.7 million, or 8.0%, primarily driven by new stores and same store sales growth, and in the retail channel which increased $5.6 million, or 15.4%. Within the retail channel we continue to focus on store growth with full priced, store in store, and outlet locations. Segment operating income increased by $1.0 million, or 2.6%, which was driven mainly by the increase in revenues and a slight increase in gross margin, offset by an increase of $5.2 million, or 15.9%, in SG&A which resulted from the continued expansion of the retail channel. Foreign currency fluctuations had a net negative impact of $1.1 million and $0.5 million on the Asia gross profit and operating income, respectively.

Europe Operating Segment. Revenues from the Europe segment decreased $1.2 million, or 2.9%, during the three months ended September 30, 2012 compared to the same period in 2011, primarily due to a 4.4% decrease in footwear units sold and a $4.2 million unfavorable impact from foreign currency fluctuations which were partially offset by a 3.4% increase in footwear average selling price. A decrease of $4.7 million, or 17.1%, in wholesale channel revenues drove the decline in total segment revenues which was primarily due to challenging macroeconomic conditions in Europe. This wholesale revenue decrease, in addition to a revenue decrease of $1.4 million, or 20.2%, in the internet channel, was partially offset by a revenue increase of $4.9 million, or 73.7% in the retail channel. Segment operating income decreased by $3.6 million, or 72.9%, driven mainly by the decrease in revenues and an increase of $3.1 million, or 21.9%, in SG&A which resulted from the continued expansion of the retail channel. Foreign currency fluctuations had a net negative impact of $1.9 million and $0.5 million on the Europe gross profit and operating income, respectively.

 

     Nine Months Ended
September 30,
    Change  

($ thousands)

   2012     2011     $     %  

Revenues:

        

Americas

   $ 383,866      $ 344,453      $ 39,413        11.4

Asia

     372,576        305,707        66,869        21.9   

Europe

     141,534        146,926        (5,392     (3.7
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment revenues

     897,976        797,086        100,890        12.7   

Other businesses

     333        103        230        223.3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

   $ 898,309        797,189        101,120        12.7   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating Income:

        

Americas

   $ 77,299      $ 60,608      $ 16,691        27.5   

Asia

     127,154        107,020        20,134        18.8   

Europe

     27,730        38,518        (10,788     (28.0
  

 

 

   

 

 

   

 

 

   

 

 

 

Total segment operating income

     232,183        206,146        26,037        12.6   

Other businesses

     (8,598     (12,559     3,961 (1)      (31.5

Intersegment eliminations

     54        50        4        8.0   

Unallocated corporate and other

     (72,568     (67,335     (5,233 )(2)      7.8   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income from operations

   $ 151,071      $ 126,302      $ 24,769        19.6
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

During the nine months ended September 30, 2012, operating losses of Other businesses decreased $4.0 million compared to the same period in 20ll, primarily due to an increase of $9.9 million of intercompany revenues driven by higher global sales which was partially offset by $6.9 million of increased volume and product mix related cost of sales.

(2) 

Includes a corporate component consisting primarily of corporate support and administrative functions, costs associated with share-based compensation, research and development, brand marketing, legal, depreciation on corporate and other assets not allocated to operating segments and costs of the same nature of certain corporate holding companies. For the nine months ended September 30, 2012, operating losses from Unallocated corporate and other increased $5.2 million compared to the same period in 2011, primarily due to increased salaries and wages associated with higher corporate headcount.

Americas Operating Segment. Revenues from the Americas segment increased $39.4 million, or 11.4%, during the nine months ended September 30, 2012 compared to the same period in 2011, primarily due to a 4.3% increase in footwear units sold and a 6.5% increase in footwear average selling price, which were partially offset by an unfavorable impact of $4.1 million from foreign currency fluctuations. Revenue growth for the region was realized primarily in the retail channel which increased $17.9 million, or 13.6%, and in the wholesale channel which increased $15 million, or 8.7%. We continue to focus on disciplined expansion of our retail channel, by growing our full price and outlet stores, partially offset by closing underperforming kiosk locations. Segment operating income increased by $16.7 million, or 27.5%, driven mainly by the increase in revenues, partially offset by an increase of $9.6 million, or 8.4%, in SG&A which resulted from the continued expansion of the retail channel. Foreign currency fluctuations had a net negative impact on the Americas gross profit of $1.4 million and a net positive impact on operating income of $0.2 million.

 

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Asia Operating Segment. Revenues from the Asia segment increased $66.9 million, or 21.9%, during the nine months ended September 30, 2012 compared to the same period in 2011, primarily due to a 15.0% increase in footwear units sold and a 6.4% increase in footwear average selling price, which were partially offset by an unfavorable impact of $1.1 million from foreign currency fluctuations. Revenue growth for the region was realized primarily in the wholesale channel which increased $37.8 million, or 17.8%, and in the retail channel which increased $25.5 million, or 29.9%, and was primarily driven by new stores and same store sales growth. Within the retail channel we continue to focus on store growth with full priced, store in store, and outlet locations. Segment operating income increased by $20.1 million, or 18.8%, which was driven mainly by the increase in revenues, partially offset by an increase of $20.9 million, or 23.9% in SG&A which resulted from the continued expansion of the retail channel. Foreign currency fluctuations had a net negative impact on the Asia gross profit of $0.5 million and a net positive impact of $0.3 million on the operating income.

Europe Operating Segment. Revenues from the Europe segment decreased $5.4 million, or 3.7%, during the nine months ended September 30, 2012 compared to the same period in 2011, primarily due to a 12.9% decrease in footwear units sold and a $12.1 million unfavorable impact from foreign currency fluctuations, which were partially offset by an 12.8% increase in footwear average selling prices. A decrease of $11.8 million, or 10.8%, in wholesale channel revenues drove the decline in total segment revenues which was primarily due to challenging macroeconomic conditions in Europe. This revenue decrease, in addition to a revenue decrease of $2.9 million, or 13.4%, in the internet channel, was offset by a revenue increase of $9.3 million, or 58.9%, in the retail channel. Segment operating income decreased by $10.8 million, or 28.0%, driven mainly by the decrease in revenues and an increase of $6.8 million, or 17.7%, in SG&A which resulted from the continued expansion of the retail channel. Foreign currency fluctuations had a net negative impact of $6.2 million and $2.8 million on the Europe gross profit and operating income, respectively.

Liquidity and Capital Resources

At September 30, 2012, we had $312.6 million in cash and cash equivalents. We anticipate that cash flows from operations will be sufficient to meet the ongoing needs of our business for the next twelve months. In order to provide additional liquidity in the future and to help support our strategic goals, we also have a revolving credit facility with PNC Bank, N.A. (“PNC”) and a syndicate of other lenders (further discussed below), which currently provides us with up to $70.0 million in borrowings and matures in December 2016. Additional future financing may be necessary; however, there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all.

We continue to evaluate options to maximize the returns on our cash and maintain an appropriate capital structure, including, among other alternatives, repurchases of our common stock. Subject to certain restrictions on repurchases under our revolving credit facility, we have authorization to repurchase up to 5.5 million shares of our common stock under previous board authorizations. The number, price and timing of repurchases, if any, will be at our sole discretion and will be evaluated depending on market conditions, liquidity needs and other factors.

Credit Facility

On December 16, 2011, we entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with a syndicate of lenders, including PNC, which replaced our asset-backed line of credit. The Credit Agreement provides for a revolving credit facility of $70.0 million (the “Credit Facility”), which can be increased to $100.0 million subject to certain conditions. The Credit Facility is available for working capital, capital expenditures and other corporate purposes, including acquisitions, and is currently set to mature in December 2016. Borrowings under the Credit Facility are secured by a pledge of all of our assets including all receivables, equipment, general intangibles, inventory, investment property, subsidiary stock and intellectual property. Borrowings under the Credit Agreement bear interest at a variable rate. For domestic rate loans, the interest rate is equal to the highest of (i) the daily federal funds open rate as quoted by ICAP North America, Inc. plus 0.5%, (ii) PNC’s prime rate and (iii) a daily LIBOR rate plus 1.0%, in each case there is an additional margin ranging from 0.75% to 1.50% based on certain conditions. For LIBOR rate loans, the interest rate is equal to a LIBOR rate plus a margin ranging from 1.75% to 2.50% based on certain conditions. The Credit Agreement requires monthly interest payments with respect to domestic rate loans and at the end of each interest period with respect to LIBOR rate loans and contains certain customary restrictive and financial covenants. We were in compliance with these restrictive financial covenants as of September 30, 2012. As of September 30, 2012, we had no outstanding borrowings under the Credit Facility. At September 30, 2012 and December 31, 2011, we had issued and outstanding letters of credit of $6.1 million and $6.0 million, respectively, which were reserved against the borrowing base.

Acquisitions

On July 16, 2012, our subsidiaries Crocs Europe B.V., Crocs Stores B.V. and Crocs Belgium N.V. (collectively referred to as “Crocs Europe”), acquired certain net assets and activities from Crocs Benelux B.V. (“Benelux”) pursuant to a sale and purchase agreement dated July 9, 2012. Prior to the acquisition, Benelux was a distributor of the Company. The Company acquired Benelux’ retail business and wholesale business, including inventory, fixed assets, customer relationships, 10 retail stores and their associated leases. Total consideration paid was cash of € 3.6 million (approximately $4.6 million). This acquisition will allow us to take direct control in expanding our business in the Benelux region.

 

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Working Capital

As of September 30, 2012, accounts receivable increased $36.6 million when compared to December 31, 2011, primarily due to increased sales in the third quarter of 2012 compared to the fourth quarter of 2011. Inventories increased $57.9 million as of September 30, 2012 when compared to December 31, 2011, primarily due to wholesale order growth and higher cost new product introductions, particularly in the Americas and Asia, in addition to the global increase in company-operated retail stores.

Capital Assets

During the nine months ended September 30, 2012, net capital expenditures, inclusive of intangible assets, acquired with cash increased to $40.1 million compared to $32.6 million during the same period in 2011.

We have entered into various operating leases that require cash payments on a specified schedule. Over the next five years we are committed to make payments of approximately $242.0 million related to our operating leases. We plan to continue to enter into operating leases related to our retail stores. We also continue to evaluate cost reduction opportunities. Our evaluation of cost reduction opportunities will include an evaluation of contracts for sponsorships, operating lease contracts and other contracts that require future minimum payments resulting in fixed operating costs. Any changes to these contracts may require early termination fees or other charges that could result in significant cash expenditures.

Repatriation of Cash

As we are a global business, we have cash balances which are located in various countries and are denominated in various currencies. Fluctuations in foreign currency exchange rates impact our results of operations and cash positions. Future fluctuations in foreign currencies may have a material impact on our cash flows and capital resources. Cash balances held in foreign countries have additional restrictions and covenants associated with them which adds increased strains on our liquidity and ability to timely access and transfer cash balances between entities.

We generally consider unremitted earnings of subsidiaries operating outside of the U.S. to be indefinitely reinvested and it is not our current intent to change this position with the exception of the expected repatriation of up to approximately $13.6 million in cash that was previously accrued for as a repatriation of 2010 foreign subsidiary earnings and approximately $15.0 million of 2012 foreign subsidiary earnings. Most of the cash balances held outside of the U.S. could be repatriated to the U.S., but under current law, would be subject to U.S. federal and state income taxes less applicable foreign tax credits. In some countries, repatriation of certain foreign balances is restricted by local laws and could have adverse tax consequences if we were to move the cash to another country. Certain countries, including China, have monetary laws which may limit our ability to utilize cash resources in those countries for operations in other countries. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. or other countries and could adversely affect our liquidity. As of September 30, 2012, essentially all of our cash was held in international jurisdictions, which is primarily used for ongoing operations. Of the total cash held in international locations, $44.3 million could potentially be restricted. If the remaining balance were to be immediately repatriated to the U.S., we would be required to pay approximately $36.9 million in taxes that were not previously provided for in our consolidated statement of operations.

Contractual Obligations

The following table summarizes aggregate information about our significant contractual cash obligations as of September 30, 2012.

 

     Payments due by period  

($ thousands)

   Total      Less than
1 year
     1-3
years
     4-5
years
     More than
5 years
 

Operating lease obligations

   $ 326,795       $ 71,922       $ 100,403       $ 69,710       $ 84,760   

Inventory purchase obligations with third-party manufacturers

     134,343         134,343         —           —           —     

Estimated liability for uncertain tax positions

     29,109         440         12,411         7,855         8,403   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 490,247       $ 206,705       $ 112,814       $ 77,565       $ 93,163   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Off-Balance Sheet Arrangements

We had no material off balance sheet arrangements at September 30, 2012.

Seasonality

Due to the seasonal nature of our footwear which is more heavily focused on styles suitable for warm weather, revenues generated during our first and fourth quarters are typically less than revenues generated during our second and third quarters, when the northern hemisphere is experiencing warmer weather. We continue to expand our product line to include more winter-oriented styles to mitigate some of the seasonality of our revenues. Our quarterly results of operations may also fluctuate significantly as a result of a variety of other factors, including the timing of new model introductions or general economic or consumer conditions. Accordingly, results of operations and cash flows for any one quarter are not necessarily indicative of results to be expected for any other quarter or for any other year.

 

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Critical Accounting Policies

For a discussion of accounting policies that we consider critical to our business operations and understanding of our results of operations, and that affect the more significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies” contained in our Annual Report on Form 10-K for the year ended December 31, 2011 and incorporated by reference herein.

Significant Accounting Policies

For a discussion of accounting policies that we consider significant to our business operations and understanding of our results of operations, see Note 1—“Summary of Significant Accounting Policies” to our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2011 and incorporated by reference herein.

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our exposure to market risk includes interest rate fluctuations in connection with our revolving credit facility. Borrowings under the revolving credit facility bear interest at a variable rate. For domestic rate loans, the interest rate is equal to the highest of (i) the daily federal funds open rate as quoted by ICAP North America, Inc. plus 0.5%, (ii) PNC’s prime rate and (iii) a daily LIBOR rate plus 1.0%, in each case there is an additional margin ranging from 0.75% to 1.50% based on certain conditions. For LIBOR rate loans, the interest rate is equal to a LIBOR rate plus a margin ranging from 1.75% to 2.50% based on certain conditions. Borrowings under the revolving credit facility are therefore subject to risk based upon prevailing market interest rates. Interest rates fluctuate as a result of many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control. During the three months ended September 30, 2012, there were no amounts borrowed under the Credit Facility. During the nine months ended September 30, 2012, the maximum amount borrowed under the Credit Facility was $31.0 million and the average amount of borrowings outstanding was $8.2 million. As of September 30, 2012, there were no borrowings outstanding under the revolving credit facility. If the prevailing market interest rates relative to these borrowings changed by 10% during the three and nine months ended September 30, 2012, our interest expense would have not have materially changed.

Fluctuations in the prevailing market interest rates, earned on our cash and cash equivalents and restricted cash balances during the three and nine months ended September 30, 2012, had an immaterial impact on the condensed consolidated statements of income.

Foreign Currency Exchange Risk

As a global company, we have significant revenues, costs and monetary assets and liabilities denominated in currencies other than the U.S. dollar. We pay the majority of expenses attributable to our foreign operations in the functional currency of the country in which such operations are conducted and pay the majority of our overseas third-party manufacturers in U.S. dollars. Our ability to sell our products in foreign markets and the U.S. dollar value of the sales made in foreign currencies can be significantly influenced by foreign currency fluctuations. Fluctuations in the value of foreign currencies relative to the U.S. dollar could result in downward price pressure for our products and increase losses from currency exchange rates. An increase of 1% in value of the U.S. dollar relative to foreign currencies would have decreased income before taxes during the three and nine months ended September 30, 2012, excluding the impact of our foreign currency contracts, by approximately $2.1 million and $2.9 million, respectively. The volatility of the applicable exchange rates is dependent on many factors that cannot be forecasted with reliable accuracy. In the event our foreign sales and purchases increase and are denominated in currencies other than the U.S. dollar, our operating results may be affected by fluctuations in the exchange rate of currencies we receive for such sales. See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for a discussion of the impact of foreign exchange rate variances experienced during the three and nine months ended September 30, 2012 and 2011.

We enter into foreign currency exchange forward contracts as economic cash flow hedges to reduce our exposure to the effect of changes in exchange rates on our operating results. The following table summarizes the notional amounts of the outstanding foreign currency exchange forward contracts at September 30, 2012 and December 31, 2011. The notional amounts of the derivative financial instruments shown below are denominated in their U.S. dollar equivalents and represent the amount of all contracts of the foreign currency specified. These notional values do not necessarily represent amounts exchanged by the parties and, therefore, are not a direct measure of our exposure to the foreign currency exchange risks.

 

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($ thousands)

   September 30, 2012      December 31, 2011  

Foreign currency exchange forward contracts by currency:

     

Japanese Yen

   $ 127,701       $ 27,500   

Euro

     9,968         10,055   

Australian Dollar

     5,180         —     

Mexican Peso

     13,761         6,500   

Pound Sterling

     13,458         6,345   

New Zealand Dollar

     1,147         —     

Brazilian Real

     6,400         —     

Hong Kong Dollar

     2,999         —     
  

 

 

    

 

 

 

Total notional value, net

   $ 180,614       $ 50,400   
  

 

 

    

 

 

 

Latest maturity date

     December 2015         December 2012   

 

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision of and with the participation of our senior management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of September 30, 2012 (the “Evaluation Date”). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the Evaluation Date, our disclosure controls and procedures were effective, such that the information relating to us, including our consolidated subsidiaries, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting during the three months ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

 

ITEM 1. Legal Proceedings

We and certain current and former officers and directors have been named as defendants in complaints filed by investors in the United States District Court for the District of Colorado. The first complaint was filed in November 2007 and several other complaints were filed shortly thereafter. These actions were consolidated and, in September 2008, the district court appointed a lead plaintiff and counsel. An amended consolidated complaint was filed in December 2008. The amended complaint purports to state claims under Section 10(b), 20(a), and 20A of the Exchange Act on behalf of a class of all persons who purchased our common stock between April 2, 2007 and April 14, 2008 (the “Class Period”). The amended complaint also added our independent auditor as a defendant. The amended complaint alleges that, during the Class Period, the defendants made false and misleading public statements about us and our business and prospects and, as a result, the market price of our common stock was artificially inflated. The amended complaint also claims that certain current and former officers and directors traded in our common stock on the basis of material non-public information. The amended complaint seeks compensatory damages on behalf of the alleged class in an unspecified amount, including interest, and also added attorneys’ fees and costs of litigation. On February 28, 2011, the District Court granted motions to dismiss filed by the defendants and dismissed all claims. A final judgment was thereafter entered. Plaintiffs subsequently appealed to the United States Court of Appeals for the Tenth Circuit.

We and those current and former officers and directors named as defendants have entered into a Stipulation of Settlement with the plaintiffs that would, if approved by the United States District Court for the District of Colorado, resolve all claims asserted against us by the plaintiffs on behalf of the putative class, and plaintiffs’ appeal would be dismissed. Our independent auditor is not a party to the Stipulation of Settlement. The Stipulation of Settlement is subject to customary conditions, including preliminary court approval, and final court approval following notice to stockholders. If the settlement becomes final, all amounts required by the settlement will be paid by our insurers. There can be no assurance that the settlement will be finally approved by the District Court, or that approval by the District Court will, if challenged, be upheld by the Tenth Circuit.

 

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On October 27, 2010, Spectrum Agencies (“Spectrum”) filed suit against our subsidiary, Crocs Europe B.V. (“Crocs Europe”), in the High Court of Justice, Queen’s Bench Division, Royal Courts of Justice in London, United Kingdom (“UK”). Spectrum acted as an agent for Crocs products in the UK from 2005 until Crocs Europe terminated the relationship on July 3, 2008 due to Spectrum’s breach of its duty to act in good faith towards Crocs Europe. Spectrum alleges that Crocs Europe unlawfully terminated the agency relationship and failed to pay certain sales commissions. A trial on the liability, not quantum (compensation and damages), was held at the High Court in London from November 30, 2011 to December 5, 2011. On December 16, 2011, the High Court of Justice issued a judgment that found that although Spectrum’s actions were a breach of its duty to act in good faith towards Crocs Europe the breach was not sufficiently severe to justify termination. We believe that the trial judge erred in his findings and permission to appeal the judgment was requested. Given that this phase of the proceedings only pertains to liability, there have been no findings in relation to the amount of compensation or damages other than with respect to legal fees. Under English law, the prevailing party is entitled to reimbursement of reasonable legal fees incurred in the liability proceedings. Spectrum has not quantified its claim for compensation and damages and the amount will be assessed later in the proceedings. Such assessment may be stayed pending the outcome of an appeal on liability. We were granted permission to appeal and the appeal hearing took place on July 4, 2012. On October 30, 2012, the Court of Appeal handed down its judgment confirming the High Court’s judgment. Crocs Europe currently intends to submit a request to the Supreme Court seeking permission to appeal. We anticipate that a decision by the Supreme Court on permission to appeal will be rendered in the first quarter of 2013. Proceedings on quantum shall be stayed until a final decision on permission to appeal has been handed down or in the event that permission is granted, until a final decision on the merits.

We are currently subject to an audit by the U.S. Customs Service in respect of the period from 2006 to present. We have been informed that a draft audit report may be issued before the end of 2012 but the Company believes that a final report (and notice of a formal claim) will not be issued until sometime in 2013. U.S. Customs has provided the Company with preliminary projections that reflect unpaid duties totaling approximately $14.3 million during the period under review. The Company believes that these projections are erroneous and the Company intends to argue the amount due in connection with this matter, if any, is considerably less than the preliminary projection. It is not possible at this time to predict whether the Company’s arguments will be successful in eliminating or reducing the alleged unpaid duties. Likewise, it is not possible to predict whether U.S. Customs may seek to assert a claim for penalties in addition to any loss of revenue claim.

Although we are subject to other litigation from time to time in the ordinary course of business, including employment, intellectual property and product liability claims, we are not party to any other pending legal proceedings that we believe will have a material adverse impact on its business.

 

ITEM 1A. Risk Factors

There have been no material changes to the risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2011.

 

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ITEM 6. Exhibits

 

Exhibit

Number

   Description
3.1    Restated Certificate of Incorporation of Crocs, Inc. (incorporated herein by reference to Exhibit 4.1 to Crocs, Inc.’s Registration Statement on Form S-8, filed on March 9, 2006 (File No. 333-132312)).
3.2    Certificate of Amendment to the Restated Certificate of Incorporate of Crocs, Inc. (incorporated herein by reference to Exhibit 3.1 to Crocs, Inc.’s Current Report on Form 8-K, filed on July 12, 2007).
3.3    Amended and Restated Bylaws of Crocs, Inc. (incorporated herein by reference to Exhibit 4.2 to Crocs, Inc.’s Registration Statement on Form S-8, filed on March 9, 2006 (File No. 333-132312)).
4.1    Specimen common stock certificate (incorporated herein by reference to Exhibit 4.2 to Crocs, Inc.’s Amendment No. 4 to Registration Statement on Form S-1, filed on January 19, 2006 (File No. 333-127526)).
31.1††    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.
31.2††    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.
32††    Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS††    XBRL Instance Document**
101.SCH††    XBRL Taxonomy Extension Schema Document**
101.CAL††    XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF††    XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB††    XBRL Taxonomy Extension Label Linkbase Document**
101.PRE††    XBRL Taxonomy Extension Presentation Linkbase Document**

 

†† Filed herewith.
** Pursuant to Rule 406T of Regulation S-T, the information in Exhibit 101 is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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Table of Contents

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 thereunto duly authorized.

 

    CROCS, INC.
Date: October 30, 2012     By:   /s/ Jeffrey J. Lasher
      Name:   Jeffrey J. Lasher
      Title:    Senior Vice President-Finance, Chief Financial Officer

 

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