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Crocs, Inc. - Quarter Report: 2011 March (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 March 31, 2011

 

or

 

o         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.)

 

6328 Monarch Park Place, 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 o

 

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 o No o

 

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 o

 

 

 

Non-accelerated filer o
(Do not check if a smaller reporting company)

 

Smaller reporting company o

 

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

 

As of April 29, 2011, Crocs, Inc. had 85,519,710 shares of its $0.001 par value common stock outstanding.

 

 

 



Table of Contents

 

Crocs, Inc.

Form 10-Q

Quarter Ended March 31, 2011

Table of Contents

 

PART I—Financial Information

 

Item 1.

Financial Statements

3

 

Unaudited Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2011 and 2010

3

 

Unaudited Condensed Consolidated Balance Sheets at March 31, 2011 and December 31, 2010

4

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

19

Item 4.

Controls and Procedures

20

 

 

 

PART II—Other Information

 

Item 1.

Legal Proceedings

20

Item 1A.

Risk Factors

21

Item 6.

Exhibits

21

Signatures

 

23

 

2



Table of Contents

 

PART I—FINANCIAL INFORMATION

 

ITEM 1.  Financial Statements

 

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended March 31,

 

($ thousands, except per share amounts)

 

2011

 

2010

 

Revenues

 

$

226,708

 

$

166,852

 

Cost of sales

 

107,502

 

80,148

 

Gross profit

 

119,206

 

86,704

 

Selling, general and administrative expenses

 

88,614

 

74,778

 

Foreign currency transaction (gains) losses, net

 

1,315

 

(292

)

Restructuring charges (Note 12)

 

 

2,539

 

Asset impairment (Note 12)

 

32

 

141

 

Charitable contributions expense

 

997

 

143

 

Income (loss) from operations

 

28,248

 

9,395

 

Interest expense

 

188

 

129

 

Gain on charitable contribution

 

(257

)

(84

)

Other expense (income), net

 

328

 

241

 

Income (loss) before income taxes

 

27,989

 

9,109

 

Income tax expense (benefit)

 

6,485

 

3,392

 

Net income (loss)

 

$

21,504

 

$

5,717

 

Net income (loss) per common share:

 

 

 

 

 

Basic

 

$

0.24

 

$

0.07

 

Diluted

 

$

0.24

 

$

0.07

 

 

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

 

3



Table of Contents

 

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

($ thousands, except number of shares)

 

March 31,
2011

 

December 31,
2010

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

115,499

 

$

145,583

 

Accounts receivable, net of allowance for doubtful accounts of $12,613 and $10,249, respectively

 

123,022

 

64,260

 

Inventories

 

153,844

 

121,155

 

Deferred tax assets, net

 

13,372

 

15,888

 

Income tax receivable

 

7,845

 

9,062

 

Other receivables

 

15,039

 

11,637

 

Prepaid expenses and other current assets

 

15,096

 

13,429

 

Total current assets

 

443,717

 

381,014

 

Property and equipment, net

 

69,455

 

70,014

 

Intangible assets, net

 

46,232

 

45,461

 

Deferred tax assets, net

 

34,862

 

34,711

 

Other assets

 

19,121

 

18,281

 

Total assets

 

$

613,387

 

$

549,481

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

68,141

 

$

35,669

 

Accrued expenses and other current liabilities

 

61,680

 

59,049

 

Accrued restructuring charges

 

293

 

439

 

Deferred tax liabilities, net

 

15,242

 

17,620

 

Income taxes payable

 

18,050

 

23,084

 

Note payable, current portion of long-term debt and capital lease obligations

 

7,305

 

1,901

 

Total current liabilities

 

170,711

 

137,762

 

Deferred tax liabilities, net

 

1,111

 

847

 

Long term income tax payable

 

30,498

 

29,861

 

Other liabilities

 

4,896

 

4,905

 

Total liabilities

 

207,216

 

173,375

 

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, 88,941,335 and 88,410,942 shares issued and outstanding, respectively, at March 31, 2011 and 88,600,860 and 88,065,859 shares issued and outstanding, respectively, at December 31, 2010

 

89

 

88

 

Treasury stock, at cost, 530,393 and 535,001 shares, respectively

 

(21,788

)

(22,008

)

Additional paid-in capital

 

281,166

 

277,293

 

Retained earnings

 

111,385

 

89,881

 

Accumulated other comprehensive income

 

35,319

 

30,852

 

Total stockholders’ equity

 

406,171

 

376,106

 

Total liabilities and stockholders’ equity

 

$

613,387

 

$

549,481

 

 

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

 

4



Table of Contents

 

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

For the Three Months
Ended March 31,

 

($ thousands)

 

2011

 

2010

 

Cash flows from operating activities:

 

 

 

 

 

Net income (loss)

 

$

21,504

 

$

5,717

 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

9,843

 

8,799

 

Loss (gain) on disposal of fixed assets

 

111

 

384

 

Unrealized (gain) loss on foreign exchange transactions

 

347

 

(1,237

)

Asset impairment

 

32

 

136

 

Charitable contributions

 

997

 

143

 

Gain on charitable contributions

 

(257

)

(84

)

Non-cash restructuring charges

 

 

196

 

Share-based compensation

 

1,467

 

1,649

 

Bad debt expense

 

(26

)

241

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(56,877

)

(47,750

)

Income tax receivable

 

3,357

 

(939

)

Inventories

 

(31,282

)

(14,991

)

Prepaid expenses and other assets

 

(7,138

)

3,003

 

Accounts payable

 

31,417

 

35,042

 

Accrued restructuring charges

 

(146

)

1,222

 

Accrued expenses and other liabilities

 

(2,085

)

(4,240

)

Cash provided by (used in) operating activities

 

(28,736

)

(12,709

)

Cash flows from investing activities:

 

 

 

 

 

Cash paid for purchases of property and equipment

 

(5,851

)

(7,616

)

Proceeds from disposal of property and equipment

 

65

 

634

 

Cash paid for intangible assets

 

(3,554

)

(2,791

)

Purchases of marketable securities

 

 

(2,822

)

Maturities of marketable securities

 

 

555

 

Change in restricted cash

 

(17

)

(85

)

Cash provided by (used in) investing activities

 

(9,357

)

(12,125

)

Cash flows from financing activities:

 

 

 

 

 

Proceeds from note payable

 

56,509

 

 

Repayment of note payable and capital lease obligations

 

(51,599

)

(267

)

Repurchase of stock for stock option exercise tax withholding

 

 

(237

)

Exercise of stock options

 

2,633

 

454

 

Cash provided by (used in) financing activities

 

7,543

 

(50

)

Effect of exchange rate changes on cash

 

466

 

1,341

 

Net increase (decrease) in cash and cash equivalents

 

(30,084

)

(23,543

)

Cash and cash equivalents—beginning of period

 

145,583

 

77,343

 

Cash and cash equivalents—end of period

 

$

115,499

 

$

53,800

 

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

 

 

 

 

 

Interest

 

$

153

 

$

127

 

Income taxes

 

$

10,330

 

$

4,482

 

Non-cash investing and financing activities:

 

 

 

 

 

Assets acquired through capital leases

 

$

 

$

1,693

 

Accrued purchases of property, plant and equipment

 

$

2,915

 

$

906

 

Accrued purchases of intangibles

 

$

405

 

$

2,598

 

 

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

 

5



Table of Contents

 

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, global marketing and brand management 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, 2010 (the “2010 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 2010 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, returns and discounts, impairment assessments and charges, recoverability of assets (including deferred tax assets), uncertain tax positions, share-based compensation expense, the fair value of acquired intangibles, the assessment of lower of cost or market on inventory, 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 14 - 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. If there is the potential to recover a portion of the estimated loss from a third party, the Company makes a separate assessment of recoverability and reduces the estimated loss if recovery is also deemed probable.

 

2. INVENTORIES

 

The following table summarizes inventories by major classification as of March 31, 2011 and December 31, 2010.

 

($ thousands)

 

March 31,
2011

 

December 31,
2010

 

Finished goods

 

$

144,012

 

$

111,134

 

Work-in-progress

 

206

 

248

 

Raw materials

 

9,626

 

9,773

 

Inventories

 

$

153,844

 

$

121,155

 

 

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Table of Contents

 

3. PROPERTY AND EQUIPMENT

 

The following table summarizes property and equipment by major classification as of March 31, 2011 and December 31, 2010.

 

($ thousands)

 

March 31,
2011

 

December 31,
2010

 

Machinery and equipment(1)

 

$

74,730

 

$

70,962

 

Leasehold improvements

 

52,819

 

49,519

 

Furniture and fixtures and other

 

15,421

 

16,587

 

Construction-in-progress

 

6,766

 

7,902

 

Property and equipment, gross

 

149,736

 

144,970

 

Accumulated depreciation(2)

 

(80,281

)

(74,956

)

Property and equipment, net

 

$

69,455

 

$

70,014

 

 


(1)          Includes $0.4 million of certain equipment held under capital leases and classified as equipment as of March 31, 2011 and December 31, 2010.

(2)          Includes $0.2 million of accumulated depreciation related to certain equipment held under capital leases, as of March 31, 2011 and December 31 2010.

 

During the three months ended March 31, 2011 and 2010, we recorded $7.6 million and $6.9 million, respectively, in depreciation expense of which $3.8 million and $3.5 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.

 

4. INTANGIBLE ASSETS

 

The following table summarizes the identifiable intangible assets as of March 31, 2011 and December 31, 2010.

 

 

 

March 31, 2011

 

December 31, 2010

 

($ thousands)

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Amount

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net
Carrying
Amount

 

Capitalized software

 

$

57,212

(1)

$

(15,406

)(2)

$

41,806

 

$

54,489

(1)

$

(13,674

)(2)

$

40,815

 

Customer relationships

 

6,397

 

(5,655

)

742

 

6,361

 

(5,485

)

876

 

Patents, copyrights, and trademarks

 

5,661

 

(2,098

)

3,563

 

5,703

 

(1,933

)

3,770

 

Core technology

 

4,986

 

(4,986

)

 

4,843

 

(4,843

)

 

Other

 

823

 

(792

)

31

 

636

 

(636

)

 

Total finite lived intangible assets

 

75,079

 

(28,937

)

46,142

 

72,032

 

(26,571

)

45,461

 

Indefinite lived intangible assets

 

90

 

 

90

 

 

 

 

Intangible assets

 

$

75,169

 

$

(28,937

)

$

46,232

 

$

72,032

 

$

(26,571

)

$

45,461

 

 


(1)                                  Includes $4.1 million of software held under a capital lease classified as capitalized software as of March 31, 2011 and December 31, 2010.

(2)                                  Includes $0.4 million and $0.3 million of accumulated amortization of software held under a capital lease which is amortized using the straight-line method over the useful life as of March 31, 2011 and December 31, 2010, respectively.

 

During the three months ended March 31, 2011 and 2010, amortization expense recorded for intangible assets with finite lives was $2.2 million and $1.9 million, respectively, of which $0.6 million and $0.5 million was recorded in cost of sales, respectively. The remaining amounts were recorded in selling, general and administrative expenses. Estimated future annual amortization of intangible assets is as follows (in thousands):

 

Fiscal years ending December 31,

 

Amortization

 

Remainder of 2011

 

$

7,677

 

2012

 

9,982

 

2013

 

9,352

 

2014

 

7,658

 

2015

 

5,175

 

Thereafter

 

6,298

 

Total

 

$

46,142

 

 

7



Table of Contents

 

5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

The following table summarizes accrued expenses and other current liabilities as of March 31, 2011 and December 31, 2010.

 

($ thousands)

 

March 31,
2011

 

December 31,
2010

 

Accrued compensation and benefits

 

$

18,308

 

$

25,666

 

Fulfillment and freight and duties

 

9,423

 

5,396

 

Professional services

 

4,352

 

4,704

 

Sales/use and VAT tax payable

 

9,354

 

6,061

 

Other

 

20,243

 

17,222

 

Accrued expenses and other current liabilities

 

$

61,680

 

$

59,049

 

 

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 March 31, 2011 and December 31, 2010. Other financial instruments including debt are not required to be carried at fair value on a recurring basis. The carrying value of these financial instruments, including cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate 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 line of credit approximate their fair values.

 

 

 

Fair Value as of
March 31, 2011

 

Fair Value as of
December 31, 2010

 

 

 

($ thousands)

 

Level 1

 

Level 2

 

Level 3

 

Level 1

 

Level 2

 

Level 3

 

Balance Sheet Classification

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

$

 

$

48

 

$

 

$

 

$

5

 

$

 

Prepaid expenses and other current assets

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency contracts

 

$

 

$

130

 

$

 

$

 

$

134

 

$

 

Accrued expenses and other current liabilities

 

 

Non-Recurring Fair Value Measurements

 

The majority of our non-financial instruments, which include inventories, property, plant and equipment and intangible assets are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur such that a non-financial instrument is required to be evaluated for impairment, a resulting asset impairment would require that the non-financial instrument be recorded at the lower of cost or its fair value.

 

Derivative Financial Instruments

 

The following tables present the amounts affecting the condensed consolidated statements of income for the three months ended March 31, 2011 and 2010.

 

($ thousands)

 

Three Months Ended
March 31, 2011

 

Three Months Ended
March 31, 2010

 

Location of Loss (Gain) Recognized
In Income on Derivatives

 

Derivatives not designated as hedging instruments:

 

 

 

 

 

 

 

Foreign currency exchange forwards

 

$

57

 

 

Other expense (income), net

 

 

The following table summarizes the notional amounts of the outstanding derivatives at March 31, 2011 (in thousands). The notional amounts of the derivative financial instruments 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.

 

Currency Sold

 

Currency Purchased

 

Maturity Date

 

Contract Type

JPY

83,740

 

USD

1,000

 

April 2011

 

Foreign currency exchange forward

JPY

83,720

 

USD

1,000

 

May 2011

 

Foreign currency exchange forward

JPY

83,710

 

USD

1,000

 

June 2011

 

Foreign currency exchange forward

USD

1,000

 

MXN

12,245

 

April 2011

 

Foreign currency exchange forward

EUR

750

 

USD

1,019

 

April 2011

 

Foreign currency exchange forward

EUR

500

 

USD

679

 

May 2011

 

Foreign currency exchange forward

EUR

500

 

USD

679

 

June 2011

 

Foreign currency exchange forward

EUR

500

 

USD

709

 

July 2011

 

Foreign currency exchange forward

EUR

500

 

USD

708

 

August 2011

 

Foreign currency exchange forward

EUR

500

 

USD

707

 

September 2011

 

Foreign currency exchange forward

GBP

750

 

USD

1,209

 

April 2011

 

Foreign currency exchange forward

GBP

500

 

USD

806

 

May 2011

 

Foreign currency exchange forward

USD

500

 

MXN

6,112

 

May 2011

 

Foreign currency exchange forward

CAD

170

 

USD

175

 

April 2011

 

Foreign currency exchange forward

 

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Table of Contents

 

7. NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

 

The following table summarizes notes payable and capital lease obligations as of March 31, 2011 and December 31, 2010.

 

($ thousands)

 

March 31, 2011

 

December 31, 2010

 

Revolving credit facility

 

$

5,381

 

$

3

 

Capital lease obligations (for certain capitalized software) bearing interest rates ranging from 8.7% to 12.4% and maturities through 2013

 

2,040

 

2,488

 

Capital lease obligations (for certain equipment) bearing interest at 8.8% and maturities through 2014

 

134

 

155

 

Total notes payable and capital lease obligations

 

$

7,555

 

$

2,646

 

 

As of March 31, 2011 and December 31, 2010, we had issued and outstanding letters of credit of $1.1 million and $1.0 million, respectively, which were reserved against the borrowing base under the terms of the revolving credit facility.

 

8. STOCK-BASED COMPENSATION

 

Options granted generally vest straight-line over four years with the first year vesting on a cliff basis followed by monthly vesting for the remaining three years. Restricted stock awards and restricted stock units 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 expense line items in the condensed consolidated statements of income. During the three months ended March 31, 2011 and 2010, $1.5 million and $1.8 million of stock-based compensation expense was recorded, respectively.

 

During the three months ended March 31, 2011, 0.4 million shares of common stock were issued related to stock option exercises and the vesting of restricted stock. During the year ended December 31, 2010, 2.8 million shares of common stock were issued related to stock option exercises and the vesting of restricted stock.

 

Stock Options

 

The following table summarizes the stock option activity for the three months ended March 31, 2011 and 2010.

 

 

 

Three Months Ended March 31, 2011

 

Three Months Ended March 31, 2010

 

Options

 

Shares

 

Weighted
Average
Exercise Price

 

Shares

 

Weighted
Average
Exercise Price

 

Outstanding at December 31, 2010 and 2009, respectively

 

5,007,337

 

$

9.10

 

7,755,254

 

$

7.67

 

Granted

 

211,000

 

17.18

 

49,750

 

7.32

 

Exercised

 

(341,551

)

7.71

 

(301,283

)

1.96

 

Forfeited or expired

 

(104,020

)

12.50

 

(449,167

)

9.10

 

Outstanding at March 31

 

4,772,766

 

$

9.48

 

7,054,554

 

$

7.82

 

 

Restricted Stock Shares and Units

 

From time to time, we grant restricted stock awards and restricted stock units to certain employees. The following table summarizes the restricted stock share activity for the three months ended March 31, 2011 and 2010. No restricted stock units were awarded during the three months ended March 31, 2011 and 2010.

 

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Three Months Ended March 31, 2011

 

Three Months Ended March 31, 2010

 

Restricted Stock Shares

 

Shares

 

Weighted
Average
Grant Date
Fair Value

 

Shares

 

Weighted
Average
Grant Date
Fair Value

 

Non-vested at December 31, 2010 and 2009, respectively

 

953,423

 

$

8.54

 

1,322,240

 

$

3.04

 

Granted

 

70,000

 

16.93

 

 

 

Vested

 

(29,071

)

17.50

 

(257,608

)

8.38

 

Forfeited or expired

 

(66,468

)

9.54

 

(225,334

)

1.34

 

Non-vested at March 31

 

927,884

 

$

9.64

 

839,298

 

$

3.94

 

 

9. INCOME TAXES

 

During the three months ended March 31, 2011, we recognized an income tax expense of $6.5 million on pre-tax income of $28.0 million, representing an effective income tax rate of 23.2% compared to an income tax expense of $3.4 million on pre-tax income of $9.1 million, representing an effective income tax rate of 37.2% for the same period in 2010. The change in effective tax rate is primarily the result of increased profitability of various domestic and international jurisdictions and fewer losses which do not qualify for tax benefit treatment. We had unrecognized tax benefits of $33.4 million at March 31, 2011 and $33.0 million at December 31, 2010.

 

10. EARNINGS (LOSS) PER SHARE

 

For all periods presented, basic and diluted earnings (loss) 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 (loss) 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 and must be included in the computation of earnings per share pursuant to the two-class method. Shares of non-vested restricted stock awards and units are considered participating securities.

 

The following table sets forth EPS for the three months ended March 31, 2011 and 2010.

 

 

 

Three Months Ended March 31,

 

($ thousands, except share and per share data)

 

2011

 

2010

 

Net income (loss) attributable to common stockholders

 

$

21,504

 

$

5,717

 

Income allocated to participating securities

 

(258

)

(56

)

Net income (loss) attributable to common stockholders — basic

 

$

21,246

 

$

5,661

 

 

 

 

 

 

 

Weighted average common shares outstanding — basic

 

87,278,713

 

84,485,728

 

Dilutive effect of stock options

 

1,901,444

 

1,893,776

 

Weighted average common shares outstanding — diluted

 

89,180,157

 

86,379,504

 

 

 

 

 

 

 

Net income (loss) per common share:

 

 

 

 

 

Basic

 

$

0.24

 

$

0.07

 

Diluted

 

$

0.24

 

$

0.07

 

 

For all periods presented above, there were certain outstanding share based payments which could potentially dilute basic EPS in the future which were not included in diluted income (loss) per share as their effect would have been anti-dilutive. For the three months ended March 31, 2011 and 2010, 0.7 million and 3.2 million options, respectfully, which could potentially dilute basic EPS in the future, were not included in diluted income (loss) 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 2026. 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 $17.7 million and $14.6 million for the three months ended March 31, 2011 and 2010, respectively. Included in such amounts are contingent rents of $1.7 million and $1.1 million in 2011 and 2010, respectively.

 

In February 2011, we renewed and amended our supply agreement with Finproject S.r.l. which provides us the exclusive right to purchase certain raw materials used to manufacture our products. The agreement also provides that we meet minimum purchase requirements to maintain exclusivity throughout the term of the agreement, which expires December 31, 2014. Historically, the

 

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minimum purchase requirements have not been onerous and we do not expect them to become onerous in the future. Depending on the material purchased, pricing is either based on contracted price or is subject to quarterly reviews and fluctuates based on order volume, currency fluctuations and raw material prices. Pursuant to the agreement, we guarantee the payment for certain third-party manufacturer purchases of these raw materials up to a maximum potential amount of €3.5 million (approximately $4.9 million as of March 31, 2011), through a letter of credit that was issued to Finproject S.r.l.

 

On March 29, 2011, we committed to donating 100,000 pairs of shoes to Feed The Children and other organizations which will work to distribute to those hardest hit by the Japanese earthquake and resulting tsunami. The total net impact on income before taxes due to these donations was $0.7 million.

 

12. OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION

 

We have three reportable operating segments: Americas, Europe and Asia. We also have an Other segment category which aggregates insignificant operating segments that do not meet the reportable threshold. Each of our reportable operating segments derives its revenues from the sale of footwear, apparel and accessories. 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. The internal segment reports used by our CODM separately illustrate performance metrics of certain operating segments which provide manufacturing support, located in Mexico and Italy. These operating segments make up our Other segment category.

 

Segment operating income (loss) 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. Segment operating income (loss) is defined as operating income before asset impairment charges and restructuring costs not included in cost of sales. Segment assets consist of cash, accounts receivable and inventory as these assets make up the asset information used by the CODM. Revenues of each of our reportable operating segments represent sales to external customers. Revenues of the Other segment are primarily made up of intersegment sales.

 

The following tables set forth information related to our reportable operating business segments during the three months ended

March 31, 2011 and 2010.

 

 

 

Three Months
Ended March 31,

 

Three Months
Ended March 31,

 

($ thousands)

 

2011

 

2010

 

Revenues:

 

 

 

 

 

Americas

 

$

100,211

 

$

74,240

 

Asia

 

72,623

 

54,670

 

Europe

 

53,841

 

37,776

 

Other

 

15,131

 

11,493

 

Total segment revenues

 

241,806

 

178,179

 

Corporate, intersegment eliminations and other(1)

 

(15,098

)

(11,327

)

Total consolidated revenues

 

$

226,708

 

$

166,852

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

Americas

 

$

2,285

 

$

2,040

 

Asia

 

1,693

 

1,600

 

Europe

 

628

 

528

 

Other

 

299

 

388

 

Total segment depreciation and amortization

 

4,905

 

4,556

 

Corporate, intersegment eliminations and other(2)

 

4,938

 

4,243

 

Total consolidated depreciation and amortization

 

$

9,843

 

$

8,799

 

 


(1)          Includes intersegment eliminations and certain corporate holding companies.

(2)          Includes depreciation and amortization on corporate and other assets not allocated to operating segments.

 

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Three Months
Ended March 31,

 

Three Months
Ended March 31,

 

($ thousands)

 

2011

 

2010

 

Operating income (loss):

 

 

 

 

 

Americas

 

$

16,845

 

$

11,407

 

Asia

 

16,188

 

12,537

 

Europe

 

17,083

 

9,404

 

Other

 

505

 

504

 

Total segment operating income (loss)

 

50,621

 

33,852

 

Corporate, intersegment eliminations and other(1)

 

(22,341

)

(21,777

)

SG&A restructuring(2)

 

 

(2,539

)

Asset impairment(3)

 

(32

)

(141

)

Total consolidated operating income (loss)

 

28,248

 

9,395

 

Interest expense

 

(188

)

(129

)

Gain on charitable contributions

 

257

 

84

 

Other expense, net

 

(328

)

(241

)

Income (loss) before income taxes

 

$

27,989

 

$

9,109

 

 


(1)                                  Includes (i) 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, (ii) intersegment eliminations and (iii) certain corporate holding companies.

(2)                                  During the three months ended March 31, 2010, approximately $0.5 million of restructuring charges were recorded in the Americas segment as a result of a change in estimate of our original accrual for lease termination costs of our office facility in Canada which was closed in 2008. The remaining $2.0 million of restructuring charges related to severance costs associated with the departure of a former executive.

(3)                              During the three months ended March 31, 2011, primarily all asset impairment losses incurred resulted from the impact of the March 2011 Japanese earthquakes and related to the write off of the leasehold improvements of our Sendai retail store. During the three months ended March 31, 2010, the asset impairment losses were primarily related to leasehold improvement write-offs due to a retail store closure in the Europe segment.

 

 

 

As of March 31

 

As of December 31,

 

($ thousands)

 

2011

 

2010

 

Assets:

 

 

 

 

 

Americas(1)

 

$

128,747

 

$

94,760

 

Asia

 

168,461

 

164,855

 

Europe

 

76,266

 

46,712

 

Other

 

18,620

 

16,533

 

Total segment assets

 

392,094

 

322,860

 

Corporate and other(2)

 

271

 

8,138

 

Other current assets

 

51,352

 

50,016

 

Property and equipment, net

 

69,455

 

70,014

 

Intangible assets, net

 

46,232

 

45,461

 

Deferred tax assets, net

 

34,862

 

34,711

 

Other assets

 

19,121

 

18,281

 

Total consolidated assets

 

$

613,387

 

$

549,481

 

 


(1)          Certain inventory assets disclosed in the Other segment as of December 31, 2010 have been reclassified to the Americas segment to reflect changes in the composition of the segment assets used in the internal reports in the first quarter of 2011, for comparability purposes.

(2)          Corporate assets primarily consist of cash and equivalents.

 

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13. COMPREHENSIVE INCOME (LOSS)

 

The following table summarizes our comprehensive income (loss) for the three months ended March 31, 2011 and 2010.

 

 

 

Three Months
Ended March 31,

 

($ thousands)

 

2011

 

2010

 

Net income (loss)

 

$

21,504

 

$

5,717

 

Foreign currency translation

 

4,467

 

(1,699

)

Comprehensive income (loss)

 

$

25,971

 

$

4,018

 

 

14. LEGAL PROCEEDINGS

 

On March 31, 2006, we filed a complaint with the International Trading Commission (“ITC”) against Acme Ex-Im, Inc., Australia Unlimited, Inc., Cheng’s Enterprises, Inc., Collective Licensing International, LLC, D. Myers & Sons, Inc., Double Diamond Distribution, Ltd., Effervescent, Inc., Gen-X Sports, Inc., Holey Soles Holdings, Ltd., Inter-Pacific Trading Corporation, and Shaka Holdings, Inc. (collectively, the “respondents”), alleging, among other things infringement of United States Patent Nos. 6,993,858 (the “‘858 Patent”) and D517,789 (the “‘789 Patent”) and seeking an exclusion order banning the importation and sale of infringing products. During the course of the investigation, the ITC issued final determinations terminating Shaka Holdings, Inc., Inter-Pacific Trading Corporation, Acme Ex-Im, Inc., D. Myers & Sons, Inc., Australia Unlimited, Inc. and Gen-X Sports, Inc. from the ITC investigation due to a settlement being reached with each of those entities. Cheng’s Enterprises, Inc. was removed from the ITC investigation because they ceased the accused activities. After a trial in the matter in September 2007, the ITC Administrative Law Judge (“ALJ”) issued an initial determination on April 11, 2008, finding the ‘858 patent infringed by certain accused products, but also finding the patent invalid as obvious. The ALJ found that the ‘789 patent was valid, but was not infringed by the accused products. On July 25, 2008, the ITC notified us of its decision to terminate the investigation with a finding of no violation as to either patent. We filed a Petition for Review of the decision with the United States Court of Appeals for the Federal Circuit on September 22, 2008. On October 4, 2009, a settlement was reached between us and Collective Licensing International, LLC. Collective Licensing International, LLC agreed to cease and desist infringing on our patents and to pay us certain monetary damages, which was recorded upon receipt. On February 24, 2010, the Federal Circuit found that the ITC erred in finding that the utility patent was obvious and also reversed the ITC’s determination of non-infringement of the design patent. The case has been remanded back to the ITC. On July 6, 2010, the ITC ordered the matter to be assigned to an ALJ for a determination on enforceability. On February 9, 2011, the ALJ issued a determination that the utility and design patents were both enforceable against the remaining respondents. On April 25, 2011, the ITC determined not to review the ALJ’s decision, making the determination of enforceability final. The ITC also confirmed the finding of a violation of section 337 by respondents Double Diamond and Effervescent. The ITC requested written submissions and proposed orders on remedies by May 6, 2011.

 

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 have filed a notice of appeal, seeking to challenge the court’s February 28, 2011 order. Due to the inherent uncertainties of litigation and because the litigation is at a preliminary stage, we cannot at this time accurately predict the ultimate outcome, or any potential liability, of the matter.

 

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. Spectrum alleges that we unlawfully terminated our agency agreement with them and failed to pay them certain sales commissions. On December 23, 2010, Crocs Europe submitted its response to Spectrum’s claim to the High Court of Justice. The case is now in the discovery stage. We believe Spectrum’s claims are without merit and we intend to vigorously defend ourselves against them.

 

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, 2010 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 fun, comfort 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. Certain shoes made with the Croslite material have been certified by U.S. Ergonomics to reduce peak pressure on the foot, reduce muscular fatigue while standing and walking and to relieve the musculoskeletal system.

 

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 branching out into other types of footwear, 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 look to offer more winter-oriented styles. Our marketing efforts surround specific product launches and employ a fully integrated approach utilizing a variety of media outlets, including print and online media and television. Our marketing efforts drive business to both our wholesale partners and our company-operated retail and internet stores, ensuring that our presentation and story are first class and drive purchasing at the point of sale.

 

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.

 

Financial Highlights

 

During the three months ended March 31, 2011, revenues increased $59.9 million, or 35.9%, net income increased $15.8 million to $21.5 million and diluted earnings per share improved $0.17 to $0.24 compared to the same period in 2010. These financial improvements reflect increased demand for our products throughout each of our geographic operating segments resulting from the collaborative efforts of our sales, marketing and merchandising teams to heighten and transform Crocs brand awareness as all-season footwear.

 

Recent Events

 

The earthquake on March 11, 2011 that occurred off the coast of Japan did not materially impact our assets or revenues during the first quarter of 2011. However, in light of the resulting damage to the country’s infrastructure, consumer confidence and overall economy, we expect to experience approximately a $2.5 million reduction in the Asia operating segment’s revenues during the second quarter of 2011. We expect to recover a significant portion of such revenue reduction during the remainder of 2011. However, consumer demand has not risen back to pre-disaster levels in Japan and there is a risk that recovery of consumer demand may take longer than anticipated or affect our wholesale customers’ sales. No loss contingencies were incurred as a result of the events.

 

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We have committed to donating 100,000 pairs of shoes to Feed The Children and other organizations which will work to distribute our shoes to those hardest hit by the earthquake and resulting tsunami. The total net impact on income before taxes due to these donations was $0.7 million.

 

Results of Operations

 

Comparison of the Three Months Ended March 31, 2011 and 2010

 

 

 

Three Months Ended March 31,

 

 

 

 

 

2011

 

2010

 

Change

 

 

 

(amounts in thousands, except per share data)

 

 

 

Revenues

 

$

226,708

 

$

166,852

 

$

59,856

 

35.9

%

Cost of sales

 

107,502

 

80,148

 

27,354

 

34.1

%

Gross profit

 

119,206

 

86,704

 

32,502

 

37.5

%

Selling, general and administrative expenses

 

88,614

 

74,778

 

13,836

 

18.5

%

Foreign currency transaction losses (gains), net

 

1,315

 

(292

)

1,607

 

550.3

%

Restructuring charges

 

 

2,539

 

(2,539

)

(100.0

)%

Asset Impairment

 

32

 

141

 

(109

)

(77.3

)%

Charitable contribution expense

 

997

 

143

 

854

 

597.2

%

Income (loss) from operations

 

28,248

 

9,395

 

18,853

 

200.7

%

Interest expense

 

188

 

129

 

59

 

45.7

%

Other, net

 

71

 

157

 

(86

)

(54.8

)%

Income (loss) before income taxes

 

27,989

 

9,109

 

18,880

 

207.3

%

Income tax (benefit) expense

 

6,485

 

3,392

 

3,093

 

91.2

%

Net income (loss)

 

$

21,504

 

$

5,717

 

$

15,787

 

276.1

%

Net income (loss) per basic share

 

$

0.24

 

$

0.07

 

$

0.17

 

N/M

 

Net income (loss) per diluted share

 

$

0.24

 

$

0.07

 

$

0.17

 

N/M

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

52.6

%

52.0

%

 

 

 

 

Operating margin

 

12.5

%

5.6

%

 

 

 

 

 


N/M — Not meaningful

 

Revenues.  The following table sets forth revenues by channel, unit sales and average selling price for the three months ended March 31, 2011 and 2010.

 

 

 

Three Months Ended March 31,

 

 

 

 

 

(thousands, except average selling price)

 

2011

 

2010

 

Change

 

Wholesale channel revenue

 

$

164,567

 

$

120,200

 

$

44,367

 

36.9

%

Retail channel revenue

 

$

45,488

 

$

34,343

 

$

11,145

 

32.5

%

Internet channel revenue

 

$

16,653

 

$

12,309

 

$

4,344

 

35.3

%

 

 

 

 

 

 

 

 

 

 

Average footwear selling price

 

$

17.38

 

$

16.41

 

$

0.97

 

5.9

%

 

 

 

 

 

 

 

 

 

 

Footwear unit sales

 

12,617

 

9,774

 

2,843

 

29.1

%

 

The table below sets forth information about the number of company-operated retail locations as of March 31, 2011 and 2010.

 

 

 

Three Months Ended March 31,

 

 

 

2011

 

2010

 

Change

 

Crocs Kiosk/Store in Store

 

156

 

166

 

(10

)

Crocs Retail Stores

 

135

 

100

 

35

 

Crocs Outlet Stores

 

80

 

67

 

13

 

Total company-operated retail locations

 

371

 

333

 

38

 

 

During the three months ended March 31, 2011, revenues increased $59.9 million, or 35.9%, compared to the same period in 2010, due to an increase of 2.8 million, or 29.1%, in global unit sales and an increase of 5.9% in average unit selling price.

 

Revenues by Channel.  During the three months ended March 31, 2011, revenues from our wholesale channel grew by $44.4 million, or 36.9%, which was primarily driven by continued market acceptance and growth of our new product line and heightened brand awareness. Revenues from our retail channel grew by $11.1 million, or 32.5%, primarily driven by the opening of 38 new company-operated retail locations since March 31, 2010, on a net basis. 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 $4.3 million, or 35.3% as a result of increased webstores in local languages and brand awareness.

 

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Impact on Revenues due to Foreign Exchange Rate Fluctuations.  Average foreign currency exchange rates during the three months ended March 31, 2011 increased revenue by $7.4 million as compared to the same period in 2010. Sales in international markets in foreign currencies are expected to continue to represent a substantial portion of our overall revenues. Accordingly, changes in foreign currency exchange rates could materially affect our overall revenues or the comparability of those revenues from period to period as a result of translating our financial statements into our reporting currency, the U.S. dollar.

 

Gross profit.  During the three months ended March 30, 2011, gross profit increased $32.5 million, or 37.5%, compared to the same period in 2010. Gross margin increased slightly to 52.6% during the three months ended March 31, 2011 compared to 52.0% during the same period in 2010. These increases are primarily attributable to an increase of 29.1% in unit sales and an increase of 5.9% in average selling price driven by increased demand, which was partially offset by higher production costs driven by higher sales volume.

 

Impact on Gross Profit due to Foreign Exchange Rate Fluctuations.  Changes in average foreign currency exchange rates used to translate revenues and costs of sales from our functional currencies to our reporting currency, the U.S. dollar, during the three months ended March 31, 2011 increased our gross profit by $3.9 million compared to the same period in 2010. We expect that sales at subsidiary companies with functional currencies other than the U.S. dollar will continue to generate a substantial portion of our overall gross profit. Accordingly, changes in foreign currency exchange rates could materially affect our overall gross profit or the comparability of our gross profit from period to period as a result of translating our financial statements into our reporting currency, the U.S. dollar.

 

Selling, general and administrative expenses and foreign currency transaction losses (gains).  Selling, general and administrative expense and losses on foreign currency transactions increased $15.4 million or 20.7% during the three months ended March 31, 2011 compared to the same period in 2010 primarily due to an increase of $6.3 million in salaries and related costs resulting from higher global headcount, an increase of $4.0 million in rent and building costs resulting from continued growth in the number company-operated retail stores which also contributed to the higher global headcount and an increase of $1.6 million in losses on foreign currency transactions.

 

Impact on Selling, General, and Administrative Expenses due to Foreign Exchange Rate Fluctuations Changes in average foreign currency exchange rates used to translate expenses from our functional currencies to our reporting currency during the three months ended March 31, 2011 increased selling, general and administrative expenses by approximately $2.1 million as compared to the same period in 2010.

 

Restructuring charges. Restructuring charges decreased by $2.5 million during the three months ended March 31, 2011 as we had no such charges during the period compared to $2.5 million in restructuring charges during the same period in 2010. The 2010 restructuring charges consisted primarily of severance costs related to the departure of a former executive as well as a change in estimate of our original accrual for lease termination costs for our office facility in Canada, which was closed in 2008.

 

Charitable contributions.  During the three months ended March 31, 2011, charitable contributions expense increased $0.9 million compared to the same period in 2010 primarily due to our commitment to donate 100,000 pairs of shoes to Japanese earthquake and tsunami victims.

 

Income tax expense.  During the three months ended March 31, 2011, income tax expense increased $3.1 million compared to the same period in 2010, which was primarily due to increased profitability of various domestic and international jurisdictions and fewer losses which did not qualify for tax benefit treatment. Our effective tax rate of 23.2% for the quarter ended March 31, 2011 differs from the federal U.S. statutory rate primarily because of differences between income tax rates between US and foreign jurisdictions.

 

Presentation of Reportable Operating Segments

 

We have three reportable operating segments: Americas, Europe and Asia. We also have an Other segment category which aggregates insignificant operating segments that do not meet the reportable threshold. See Note 12 — Operating Segments and Geographic Information in the accompanying notes to the financial statements for further details.

 

Americas Operating Segment.  The following table sets forth total revenues, operating income, footwear unit sales, footwear average selling price and retail store counts for the Americas operating segment during the three months ended March 31, 2011 and 2010.

 

 

 

Three Months Ended March 31,

 

 

 

 

 

($ thousands, except store data)

 

2011

 

2010

 

Change

 

Americas total revenue

 

$

100,211

 

$

74,240

 

$

25,971

 

35.0

%

Americas operating income (loss)

 

$

16,845

 

$

11,407

 

$

5,438

 

47.7

%

Americas company-operated retail locations

 

189

 

183

 

6

 

3.3

%

 

Revenues from the Americas segment increased $26.0 million, or 35.0%, during the three months ended March 31, 2011 compared to the same period in 2010, primarily due to wholesale channel revenue growth of $17.9 million, or 41.4%, and retail channel revenue

 

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growth of $6.4 million, or 32.4%. Operating income rose $5.4 million, or 47.7%, primarily due to a 31.4% increase in segment footwear unit sales. Company-operated retail locations in the segment grew by six locations, on a net basis, which contributed to segment retail channel revenue growth.

 

Asia Operating Segment.  The following table sets forth total revenues, operating income, footwear unit sales, footwear average selling price and retail store counts for the Asia operating segment during the three months ended March 31, 2011 and 2010.

 

 

 

Three Months Ended March 31,

 

 

 

 

 

($ thousands, except store data)

 

2011

 

2010

 

Change

 

Asia total revenue

 

$

72,623

 

$

54,670

 

$

17,953

 

32.8

%

Asia operating income (loss)

 

$

16,188

 

$

12,537

 

$

3,651

 

29.1

%

Asia company-operated retail locations

 

156

 

136

 

20

 

14.7

%

 

Revenues from the Asia segment increased $18.0 million, or 32.8%, during the three months ended March 31, 2011 compared to the same period in 2010, primarily due to wholesale channel revenue growth of $14.7 million, or 35.6%, and retail channel revenue growth of $1.6 million, or 14.8%. Operating income rose $3.7 million, or 29.1%, primarily due to a 10.1% increase in segment footwear unit sales and a higher average selling price. Company-operated retail locations in the segment grew by twenty locations, on a net basis, which also contributed to segment retail channel revenue growth.

 

Europe Operating Segment.  The following table sets forth total revenues, operating income, footwear unit sales, footwear average selling price and retail store counts for the Europe operating segment during the three months ended March 31, 2011 and 2010.

 

 

 

Three Months Ended March 31,

 

 

 

 

 

($ thousands, except store data)

 

2011

 

2010

 

Change

 

Europe total revenue

 

$

53,841

 

$

37,776

 

$

16,065

 

42.5

%

Europe operating income (loss)

 

$

17,083

 

$

9,404

 

$

7,679

 

81.7

%

Europe company-operated retail locations

 

26

 

14

 

12

 

85.7

%

 

Revenues in Europe increased $16.1 million, or 42.5%, during the three months ended March 31, 2011 compared to the same period in 2010, primarily due to wholesale channel revenue growth of $13.9 million, or 43.7%, and internet channel revenue growth of $1.8 million, or 70.3%. Operating income rose $7.7 million, or 81.7%, primarily due to a 49.3% increase in segment footwear unit sales which was partially offset by a slightly lower average selling price. Company-operated retail locations in the segment grew by twelve locations, on a net basis, which contributed to segment retail channel revenue growth of $1.2 million.

 

Liquidity and Capital Resources

 

At March 31, 2011, we had $115.5 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 an asset-backed revolving credit facility with PNC Bank, N.A. (“PNC”) (further discussed below), which provides us with up to $30.0 million in borrowings and matures on September 24, 2014. 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.

 

Credit Facility

 

On September 30, 2010, we amended our Revolving Credit and Security Agreement with PNC, originally dated September 25, 2009 (the “Credit Agreement”). Based on the amended terms, the Credit Agreement provides for an asset-backed revolving credit facility (the “Credit Facility”) of up to $30.0 million in total, which includes a $20.0 million sublimit for borrowings against our eligible inventory, a $2.0 million sublimit for borrowings against our eligible inventory in-transit, and a $10.0 million sublimit for letters of credit, and matures on September 24, 2014. Total borrowings available under the Credit Facility at any given time are subject to customary reserves and reductions to the extent our asset borrowing base changes. Borrowings under the Credit Facility are secured by all of our assets including all receivables, equipment, general intangibles, inventory, investment property, subsidiary stock and leasehold interests. The terms of the Credit Agreement require us to prepay borrowings in the event of certain dispositions of property. With respect to domestic rate loans, principal amounts outstanding bear interest at 1.5% plus the greater of either (i) PNC’s published reference rate, (ii) the Federal Funds Open Rate (as defined in the Credit Agreement) in effect on such day plus 0.5% or, (iii) the sum of the daily LIBOR rate and 1.0%. Eurodollar denominated principal amounts outstanding bear interest at 3.0% plus the Eurodollar rate (as defined in the Credit Agreement). The Credit Agreement requires monthly interest payments with respect to domestic rate loans and at the end of each interest period with respect to Eurodollar rate loans and contains certain customary restrictive and financial covenants. We were in compliance with these financial covenants as of March 31, 2011. As of March 31, 2011, we had $5.4

 

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million of outstanding borrowings under the Credit Facility. As of December 31, 2010, we had an immaterial amount of outstanding borrowings under the Credit Facility. At March 31, 2011 and December 31, 2010, we had issued and outstanding letters of credit of $1.1 million and $1.0 million, respectively, which were reserved against the borrowing base.

 

Working Capital

 

As of March 31, 2011, accounts receivable increased $25.6 million when compared to the same period in 2010, primarily due to increased sales in March 2011 compared to March of 2010. Days sales outstanding improved to 48.9 at March 31, 2011 compared to 52.5 at March 31, 2010. Inventories increased $32.7 million as of March 31, 2011 when compared to same period in 2010, primarily due to global growth in wholesale orders and the increase in company-operated retail stores.

 

Capital Assets

 

During the three months ended March 31, 2011, net capital expenditures, inclusive of intangible assets, remained relatively flat at $9.3 million compared to $9.8 million during the same period in 2010 as we continue our global retail store growth.

 

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 $146.8 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

 

We are a global business with operations in many different countries, which requires cash accounts to be held in various currencies. The global market has recently experienced many fluctuations in foreign currency exchange rates which impacts our results of operations and cash positions. The 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 $50.0 million in cash that was accrued for as a repatriation of 2010 foreign subsidiary current-year earnings. However, most of the cash 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 may adversely affect our liquidity. As of March 31, 2011, we held $112.9 million of our total $115.5 million in cash in international locations. This cash is primarily used for the ongoing operations of the business in the locations in which the cash is held. Of the $112.9 million, $33.6 million could potentially be restricted, as described above. If the remaining $79.3 million were to be repatriated to the U.S., we would be required to pay approximately $4.9 million in international withholding taxes with no offsetting credit.

 

Contractual Obligations and Off-Balance Sheet Arrangements

 

In February 2011, we renewed and amended our supply agreement with Finproject S.r.l. which provides us the exclusive right to purchase certain raw materials used to manufacture our products. The agreement also provides that we meet minimum purchase requirements to maintain exclusivity throughout the term of the agreement, which expires December 31, 2014. Historically, the minimum purchase requirements have not been onerous and we do not expect them to become onerous in the future. Depending on the material purchased, pricing is either based on contracted price or is subject to quarterly reviews and fluctuates based on order volume, currency fluctuations and raw material prices. Pursuant to the agreement, we guarantee the payment for certain third-party manufacturer purchases of these raw materials up to a maximum potential amount of €3.5 million (approximately $4.9 million as of March 31, 2011), through a letter of credit that was issued to Finproject S.r.l.

 

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The following table summarizes aggregate information about our significant contractual cash obligations as of March 31, 2011, excluding the supply agreement mentioned above.

 

 

 

Payments due by period

 

($ thousands)

 

Total

 

Less than
1 year

 

1-3
years

 

4-5
years

 

More than
5 years

 

Operating lease obligations

 

$

209,966

 

$

45,864

 

$

63,219

 

$

37,751

 

$

63,132

 

Inventory purchase obligations with third-party manufacturers

 

95,165

 

95,165

 

 

 

 

Estimated liability for uncertain tax positions

 

33,425

 

60

 

23,377

 

8,603

 

1,385

 

Capital lease obligations

 

2,174

 

1,924

 

250

 

 

 

Long-term debt obligations

 

5,381

 

5,381

 

 

 

 

Total

 

$

346,111

 

$

148,394

 

$

86,846

 

$

46,354

 

$

64,517

 

 

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.

 

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, 2010 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, 2010 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 variable rates which are based on either the lender’s published rate, the Federal Funds Open Rate, LIBOR or the Eurodollar Rate (as defined in the revolving credit facility), and are subject to risk based upon prevailing market interest rates. Interest rate risk may result from many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors that are beyond our control. As of March 31, 2011, the amount of total borrowings outstanding under the revolving credit facility was $5.4 million. Fluctuations in the prevailing market interest rates by 10% relative to these borrowings during the three months ended March 31, 2011, would have an immaterial impact on the consolidated statements of income.

 

Fluctuations in the prevailing market interest rates, earned on our cash and cash equivalents and restricted cash balances during the three months ended March 31, 2011, would have an immaterial impact on the consolidated statements of income.

 

Foreign Currency Exchange Risk

 

We have significant revenues from foreign sales in recent periods. While the majority of expenses attributable to our foreign operations are paid in the functional currency of the country in which such operations are conducted, we 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. A decrease 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. A decrease of 1% in value of U.S. dollar relative to foreign currencies would have increased income before taxes

 

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during the three months ended March 31, 2011 by approximately $1.0 million. 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 7, “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 months ended March 31, 2011.

 

We enter into foreign currency exchange forward contracts to reduce our exposure to changes in exchange rates. The following table summarizes the notional amounts of the outstanding derivatives at March 31, 2011 (in thousands). The notional amounts of the derivative financial instruments 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.

 

Currency Sold

 

Currency Purchased

 

Maturity Date

 

Contract Type

JPY

83,740

 

USD

1,000

 

April 2011

 

Foreign currency exchange forward

JPY

83,720

 

USD

1,000

 

May 2011

 

Foreign currency exchange forward

JPY

83,710

 

USD

1,000

 

June 2011

 

Foreign currency exchange forward

USD

1,000

 

MXN

12,245

 

April 2011

 

Foreign currency exchange forward

EUR

750

 

USD

1,019

 

April 2011

 

Foreign currency exchange forward

EUR

500

 

USD

679

 

May 2011

 

Foreign currency exchange forward

EUR

500

 

USD

679

 

June 2011

 

Foreign currency exchange forward

EUR

500

 

USD

709

 

July 2011

 

Foreign currency exchange forward

EUR

500

 

USD

708

 

August 2011

 

Foreign currency exchange forward

EUR

500

 

USD

707

 

September 2011

 

Foreign currency exchange forward

GBP

750

 

USD

1,209

 

April 2011

 

Foreign currency exchange forward

GBP

 500

 

USD

806

 

May 2011

 

Foreign currency exchange forward

USD

500

 

MXN

6,112

 

May 2011

 

Foreign currency exchange forward

CAD

170

 

USD

175

 

April 2011

 

Foreign currency exchange forward

 

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 March 31, 2011 (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 March 31, 2011 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

 

On March 31, 2006, we filed a complaint with the International Trading Commission (“ITC”) against Acme Ex-Im, Inc., Australia Unlimited, Inc., Cheng’s Enterprises, Inc., Collective Licensing International, LLC, D. Myers & Sons, Inc., Double Diamond Distribution, Ltd., Effervescent, Inc., Gen-X Sports, Inc., Holey Soles Holdings, Ltd., Inter-Pacific Trading Corporation, and Shaka Holdings, Inc. (collectively, the “respondents”), alleging, among other things infringement of United States Patent Nos. 6,993,858 (the “‘858 Patent”) and D517,789 (the “‘789 Patent”) and seeking an exclusion order banning the importation and sale of infringing products. During the course of the investigation, the ITC issued final determinations terminating Shaka Holdings, Inc., Inter-Pacific Trading Corporation, Acme Ex-Im, Inc., D. Myers & Sons, Inc., Australia Unlimited, Inc. and Gen-X Sports, Inc. from the ITC investigation due to a settlement being reached with each of those entities. Cheng’s Enterprises, Inc. was removed from the ITC investigation because they ceased the accused activities. After a trial in the matter in September 2007, the ITC Administrative Law Judge (“ALJ”) issued an initial determination on April 11, 2008, finding the ‘858 patent infringed by certain accused products, but also finding the patent invalid as obvious. The ALJ found that the ‘789 patent was valid, but was not infringed by the accused products. On July 25, 2008, the ITC notified us of its decision to terminate the investigation with a finding of no violation as to either

 

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patent. We filed a Petition for Review of the decision with the United States Court of Appeals for the Federal Circuit on September 22, 2008. On October 4, 2009, a settlement was reached between us and Collective Licensing International, LLC. Collective Licensing International, LLC agreed to cease and desist infringing on our patents and to pay us certain monetary damages, which was recorded upon receipt. On February 24, 2010, the Federal Circuit found that the ITC erred in finding that the utility patent was obvious and also reversed the ITC’s determination of non-infringement of the design patent. The case has been remanded back to the ITC. On July 6, 2010, the ITC ordered the matter to be assigned to an ALJ for a determination on enforceability. On February 9, 2011, the ALJ issued a determination that the utility and design patents were both enforceable against the remaining respondents. On April 25, 2011, the ITC determined not to review the ALJ’s decision, making the determination of enforceability final. The ITC also confirmed the finding of a violation of section 337 by respondents Double Diamond and Effervescent. The ITC requested written submissions and proposed orders on remedies by May 6, 2011.

 

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 have filed a notice of appeal, seeking to challenge the court’s February 28, 2011 order. Due to the inherent uncertainties of litigation and because the litigation is at a preliminary stage, we cannot at this time accurately predict the ultimate outcome, or any potential liability, of the matter.

 

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. Spectrum alleges that we unlawfully terminated our agency agreement with them and failed to pay them certain sales commissions. On December 23, 2010, Crocs Europe submitted its response to Spectrum’s claim to the High Court of Justice. The case is now in the discovery stage. We believe Spectrum’s claims are without merit and we intend to vigorously defend ourselves against them.

 

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, 2010.

 

ITEM 6.  Exhibits.

 

Exhibit List

 

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

 

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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.

 


††                                    Filed herewith.

 

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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: May 4, 2011

By:

/s/ Jeffrey J. Lasher

 

 

Name:

Jeffrey J. Lasher

 

 

Title:

Senior Vice President-Finance, Chief Financial Officer

 

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