Business news : Crocs Sees Double-Digit Q4 Gain.

Crocs Inc. reported a loss of $3.6 million, or 4 cents a share, in the fourth quarter, compared with net income of $5.6 million or 6 cents, a  year ago. Excluding non-recurring charges, earnings were slightly down. Revenue for the fourth quarter of 2012 increased 10.4 percent to $225.0 million compared with revenue of $203.7 million reported in the fourth quarter of 2011.

Fourth quarter 2012 results included non-cash expenses of $5.9 million for contingency accruals, which adversely impacted selling, general and administrative (SG&A) expenses by $2.2 million and cost of goods sold by $3.7 million. In addition, in the 2012 period, the company had total expenses of $1.5 million relating to its implementation of a new ERP system including non-cash accelerated depreciation and cash expenses for program management, training and other non-capitalized costs. Adjusting for these non-operating items, the company had Non-GAAP net income of $3.8 million in the quarter or 4 cents per diluted share.

 “For the fourth quarter we are pleased with our 11 percent constant currency revenue growth which was ahead of our prior guidance, and our $3.8 million net income, after adjustments,” said John McCarvel, President and Chief Executive Officer “We saw good reception of our fall holiday products during the season and we continued to position the brand for greater success in the back half of the year. For the quarter we saw gross margins after adjustments for special items in line with the prior year.”

Revenue for the fourth quarter of 2012 increased 10.4% to $225.0 million compared with revenue of $203.7 million reported in the fourth quarter of 2011. On a constant currency basis revenue increased 10.9% for the fourth quarter of 2012.

Gross profit for the fourth quarter of 2012 was $106.4 million, or 47.3% as a percentage of sales, compared with $99.8 million, or 49.0% as a percentage of sales in the same period last year. Gross Margins in the fourth quarter of 2012 were negatively impacted by the aforementioned $3.7 million contingency accrual.

Fourth Quarter Revenue Results

The following tables detail the company’s fourth quarter 2012 and 2011 revenues:

				Three Months Ended
				December 31,								Change									Constant Currency Change(1)
($ thousands)				2012				2011				$					%				$					%
Channel revenues:
Wholesale:
Americas				$	48,118			$	41,209			$	6,909				16.8	%			$	7,725				18.7	%
Asia					48,859				47,370				1,489				3.1					1,693				3.6
Europe					13,174				15,389				(2,215	)			(14.4	)				(1,800	)			(11.7	)
Other businesses					241				88				153				173.9					156				177.4
Total Wholesale					110,392				104,056				6,336				6.1					7,774				7.4
Consumer-direct:
Retail
Americas					47,415				43,436				3,979				9.2					4,122				9.5
Asia					32,296				26,349				5,947				22.6					5,623				21.3
Europe					9,894				4,334				5,560				128.3					5,054				116.6
Total Retail					89,605				74,119				15,486				20.9					14,799				20.0
Internet
Americas					16,453				18,979				(2,526	)			(13.3	)				(2,514	)			(13.2	)
Asia					3,680				2,340				1,340				57.3					1,366				58.4
Europe					4,862				4,219				643				15.2					812				19.2
Total Internet					24,995				25,538				(543	)			(2.1	)				(336	)			(1.3	)
Total Revenues				$	224,992			$	203,713			$	21,279				10.4	%			$	22,237				10.9	%
				Three Months Ended
				December 31,								Change									Constant Currency Change(1)
($ thousands)				2012				2011				$					%				$					%
Regional Revenue:
Americas				$	111,986			$	103,624			$	8,362				8.1	%			$	9,333				9.0	%
Asia					84,835				76,059				8,776				11.5					8,682				11.4
Europe					27,930				23,942				3,988				16.7					4,066				17.0
Other businesses					241				88				153				173.9					156				177.4
Total Revenues				$	224,992			$	203,713			$	21,279				10.4	%			$	22,237				10.9	%

Full Year 2012 Results

Net income for the year ended December 31, 2012 was $131.3 million, or $1.44 per diluted share, compared with net income of $112.8 million, or $1.24 per diluted share, in 2011. Non-GAAP net income1, adjusted for a tax benefit in the third quarter of 2012, contingency accruals of $5.9 million in the fourth quarter of 2012 and $1.8 million of expense related to the implementation of a new enterprise resource planning (ERP) system, for the full year 2012 was $127.7 million or $1.40 per diluted share compared with Non-GAAP net income of $109.2 million or $1.20 per diluted share in the same period last year.

Revenue for 2012 was $1.12 billion, up 12.2 percent over 2011. On a constant currency basis, revenue increased 14.0 percent for the full year 2012.

Gross profit for 2012 was $608.0 million, or 54.1 percent as a percentage of sales, compared with $536.4 million, or 53.6 percent as a percentage of sales in the same period last year. SG&A increased 13.7 percent to $460.4 million compared with $404.8 million a year ago. As a percentage of sales, SG&A was 41.0 percent compared with 40.4 percent for the full year 2011.

Operating income for the full year 2012 was $146.2 million compared with $131.1 million in the prior year.“Our strong performance in 2012 reflects our ongoing investment in our multi channel strategy. We saw revenue growth during 2012 of 14 percent on a constant currency basis, while also approaching a record 50 million units and increasing average selling prices,” said McCarvel. “Looking forward into 2013, our customers are eagerly anticipating delivery of our spring summer line in the next few weeks, including the Huarache collection, which we expect to be the thirtieth member of our million pair seller club, our molded boat shoes, and our women’s wedge line. We believe our focus on bringing innovative, colorful, comfortable and fun products to the marketplace allows us to grow our business thoughtfully and provide long-term value to our stockholders.”

Other Financial Information

Comparable Store Sales Results

Comparable store sales on a constant currency basis for the fourth quarter of 2012 compared to the fourth quarter 2011 were as follows: Global decreased 3.5 percent, Americas decreased 0.9 percent, Asia decreased 8.5 percent and Europe decreased 2.3 percent.

Comparable store sales on a constant currency basis for the full year 2012 compared with the full year 2011 were as follows: Global increased 1.5 percent, Americas increased 2.6 percent, Asia decreased 1.0 percent and Europe increased 5.4 percent.

Balance Sheet

Cash and cash equivalents at December 31, 2012 increased 14.2 percent to $294.3 million compared with $257.6 million at December 31, 2011. During the fourth quarter of 2012 we repurchased 1.9 million shares of common stock for an aggregate of approximately $25.0 million in cash. Inventories at December 31, 2012 were $164.8 million, up 27.1 percent compared with inventories at December 31, 2011 of $129.6 million. The year over year increase in inventory levels was partially driven by a terms and conditions change with our factories, which added $12.5 million of additional inventory commitments that were not owned as of December 31, 2011. Inventory levels also reflect the 24.9 percent increase in retail store locations in the full year 2012 compared with the prior year and the need for additional inventory for the 35 to 40 new store openings planned for the first quarter of 2013.

Backlog

Spring/summer backlog at December 31, 2012 increased 15.3 percent to $354.3 million compared with backlog of $307.4 million at December 31, 2011.

ERP System Implementation

In October 2012, we began the implementation of a new ERP system that is expected to launch in the first half of 2014. The introduction of this new ERP system to our current environment will allow for seamless, high-quality, and compliant data across the Company. We expect that the ERP system implementation will reduce earnings per diluted share by $0.08 - $0.10 in the full year 2013.

Financial Outlook

“As we look out into 2013, the strength of our backlog and our increased retail presence around the globe gives us confidence that our first half revenue growth will be approximately 13 to 15 percent and our initial expectations are for slightly better growth in the second half of 2013 compared with the second half of 2012,” said John McCarvel.

For the first quarter of 2013, the company expects revenue between $305 million and $310 million and diluted earnings per share between $0.32 and $0.34. This outlook includes $0.02 per diluted share of ERP implementation expense.

( SportsOneSource Media )

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