Crocs Cash For Clunkers Earnings (CROX)

Crocs, Inc. (NASDAQ: CROX) is soaring in the after-hours session on its earnings report.  The numbers were ahead of plan enough that many might think Crocs was the winner in the “Cash for Clunkers” pact in the auto sector.  The company said revenue fell to $197.7 million from $222.8 million a year ago.  On a non-GAAP EPS, it lost $5.0 million or -$0.06 EPS.  The company’s prior range was $0.31 to $0.15.  Thomson Reuters estimates are -$0.21 EPS and $149.95 million in revenues.  The guidance is much less bad than many expected.

Its non-GAAP income before taxes was $2.6 million in the second quarter if you include impairment and restructuring charges, stock-based compensation expenses, net charitable donations, sales of product that had been previously impaired, and a gain from foreign currency exchange rate fluctuations.

Crocs said that the cash and cash equivalents rose by 50% to $77.5 million at June 30, 2009 from $51.7 million as of December 31, 2008. It further noted that teh strong cash position has allowed it to completely repay the $17.3 million borrowed under the credit facility, which was extinguished on August 3, 2009 ahead of the September 30, 2009 maturity date.

More importantly, Crocs has signed a term sheet (with a well-known lender) and intends to secure a new asset-backed revolving credit facility by the end of the third quarter.

The company also has consolidated its U.S. distribution facilities down from seven locations to one.  It also cut inventory by 22%.  But this is the sharp call that may surprise many.  Its CEO said, “… As we continue to streamline our cost base, we expect to reduce our operating losses through the balance of this year and return to profitability next year.” How that profitability is defined will be the hinge for debate.  Fiscal Dec-2010 estimates from Thomson Reuters is for a loss at -$0.26 EPS on over $534 million in revenues.

The company’s formal guidance is as follows: revenues of $150 to $160 million in Q3, with a loss of -$0.14 and -$0.06 (excluding one-time and non-recurring charges).  Thomson Reuters has estimates pegged at -$0.20 EPS and $140.85 million in revenues.

Crocs closed up over 5% at $4.27, and shares are screaming by 32% to $5.66 in after-hours trading.  This won’t help holders from 2007 and 2006, but this might be within striking distance of the $5.80 high of the last 52-week period.

Suddenly, ugly shoes are back in favor.

JON C. OGG
AUGUST 6, 2009