CROCS reports fiscal 2008 third quarter financial results

25 Nov '08

5 min read

Crocs Inc. reported a net loss of $148.0 million, or $1.79 per diluted share compared to net income of $56.5 million, or $0.66 per diluted share for the three months ended September 30, 2007. The reported net loss of $148.0 million, on a loss before income taxes of $135.7 million, includes approximately $104.1 million in restructuring, impairment and inventory related non-cash charges taken during the three months ended September 30, 2008 as follows:

1). a $31.6 million asset impairment charge related to goodwill, intangible assets and the write-off of excess equipment and tooling;

2). a $70.0 million charge related to a write-down of certain products held in inventory and expected losses on inventory purchase commitments; and

3). a $2.5 million restructuring charge related to the closing of the Company's Canadian manufacturing and distribution operations.

The Company also recognized foreign currency exchange rate losses of approximately $14.6 million and increased its provision for returns and allowances, net by $19.5 million to $29.1 million during the three months ended September 30, 2008 from $9.6 million for the three months ended September 30, 2007.

These items and charges, when aggregated, contributed $138.2 million, on a pre-tax basis, to our operating loss for the three months ended September 30, 2008.

Gross profit for the third quarter 2008 was $2.4 million, or 1.4% of revenues, compared to $155.4 million, or 60.6% of revenues, for the third quarter of 2007. Selling, general and administrative expenses, including foreign currency exchange rate gain or loss, for the three months ended September 30, 2008 were $104.4 million, or 59.9% of revenues, compared to $77.2 million, or 30.1% of revenues, in the three months ended September 30, 2007.

Ron Snyder, President and Chief Executive Officer of Crocs, Inc. commented: “Our performance was below expectations and continued to be impacted by the extremely challenging retail environments in the U.S. and Europe during the third quarter. Based on current trends we have lowered our projected sales volumes and made the strategic decision to further right-size our operations to better align with our lower volumes and revenues.

The realignment of our business included, in part, asset impairment charges on certain machinery and tooling, efforts to consolidate our warehousing and distribution centers, writing down a portion of our inventory and the decision to close our manufacturing facility in Brazil during the fourth quarter. When combined with the shutdown of our Canadian plant and the reductions in headcount since the start of the year, these actions will allow us to begin 2009 with a much leaner, more efficient cost structure.

Additionally, we are committed to continuing to aggressively manage expenses and inventories consistent with our planned sales levels. In light of the weak economy, we are closely evaluating our 2009 capital expenditure plan and expect to reduce capital expenditures in 2009 by approximately 50% from 2008.”

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