SEC Form 10-Q filed by Crocs Inc.

8/1/24 11:02:08 AM ET

$CROX

Shoe Manufacturing

Consumer Discretionary

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crox-20240630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________________________

FORM 10-Q

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

For the quarterly period ended June 30, 2024

☐ 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.)

500 Eldorado Blvd., Building 5, Broomfield, Colorado 80021

(Address, including zip code, of registrant’s principal executive offices)

(303) 848-7000

(Registrant’s telephone number, including area code)

_____________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

Trading symbol:

Name of each exchange on which registered:

Common Stock, par value $0.001 per share

CROX

The Nasdaq Global Select Market

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

☒

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of July 25, 2024, Crocs, Inc. had 59,385,132 shares of its common stock, par value $0.001 per share, outstanding.

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Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995.

Statements that refer to industry trends, projections of our future financial performance, anticipated trends in our business and other characterizations of future events or circumstances are forward-looking statements. These statements, which express management’s current views concerning future events or results, use words like “anticipate,” “assume,” “believe,” “continue,” “estimate,” “expect,” “future,” “intend,” “plan,” “project,” “strive,” and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will,” “would,” and similar expressions or variations. Examples of forward-looking statements include, but are not limited to, statements we make regarding:

•our expectations regarding future trends, expectations, and performance of our business;

•our expectations regarding the impact on our business of economic trends;

•our belief that we have sufficient liquidity to fund our business operations during the next twelve months; and

•our expectations about the impact of our strategic plans.

Forward-looking statements are subject to risks, uncertainties, and other factors, which may 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, without limitation, those described in the section entitled “Risk Factors” under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2023 and our subsequent filings with the Securities and Exchange Commission, including those described in the section entitled “Risk Factors” under Item 1A in this report. Caution should be taken not to place undue reliance on any such forward-looking statements. Moreover, 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, except as required by applicable law.

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Crocs, Inc.

Table of Contents to the Quarterly Report on Form 10-Q

For the Quarterly Period Ended June 30, 2024


PART I — Financial Information

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Income	1
	Condensed Consolidated Statements of Comprehensive Income	2
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	32

PART II — Other Information		33

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	33
Item 5.	Other Information	33
Item 6.	Exhibits	34
Signatures		35

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PART I — Financial Information

ITEM 1. Financial Statements

CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues	$	1,111,502	$	1,072,367	$	2,050,135	$	1,956,533
Cost of sales	429,586		451,060		846,142		858,856
Gross profit	681,916		621,307		1,203,993		1,097,677
Selling, general and administrative expenses	356,178		302,818		651,826		544,260

Income from operations	325,738		318,489		552,167		553,417
Foreign currency gains (losses), net	(1,323)		551		(3,596)		148
Interest income	1,126		548		1,542		719
Interest expense	(29,161)		(43,063)		(59,724)		(85,700)
Other income, net	45		717		65		424
Income before income taxes	296,425		277,242		490,454		469,008
Income tax expense	67,518		64,830		109,093		107,053
Net income	$	228,907	$	212,412	$	381,361	$	361,955
Net income per common share:
Basic	$	3.79	$	3.42	$	6.31	$	5.84
Diluted	$	3.77	$	3.39	$	6.26	$	5.78
Weighted average common shares outstanding:
Basic	60,320		62,037		60,442		61,937
Diluted	60,766		62,603		60,910		62,616

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

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CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	228,907	$	212,412	$	381,361	$	361,955
Other comprehensive income (loss), net of tax:
Derivatives designated as hedging instruments:
Unrealized gains (losses) on derivative instruments	269		223		694		(156)
Reclassification adjustment for realized (gains) losses on derivative instruments	(256)		217		(426)		600
Net increase from derivatives designated as hedging instruments	13		440		268		444
Foreign currency translation gains (losses), net	(6,419)		1,190		(17,831)		5,143

Total comprehensive income, net of tax	$	222,501	$	214,042	$	363,798	$	367,542

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

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CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and par value amounts)


	June 30, 2024		December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents	$	167,734	$	149,288
Restricted cash - current	2		2
Accounts receivable, net of allowances of $34,899 and $27,591, respectively	420,199		305,747
Inventories	376,599		385,054
Income taxes receivable	2,502		4,413
Other receivables	20,282		21,071
Prepaid expenses and other assets	39,586		45,129
Total current assets	1,026,904		910,704
Property and equipment, net of accumulated depreciation of $133,215 and $120,510, respectively	244,067		238,315
Intangible assets, net of accumulated amortization of $150,026 and $138,611, respectively	1,785,303		1,792,562
Goodwill	711,542		711,588
Deferred tax assets, net	640,587		667,972
Restricted cash	3,292		3,807
Right-of-use assets	292,089		287,440
Other assets	16,014		31,446
Total assets	$	4,719,798	$	4,643,834
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	244,853	$	260,978
Accrued expenses and other liabilities	285,095		285,771
Income taxes payable	92,550		65,952
Current borrowings	—		23,328
Current operating lease liabilities	63,918		62,267
Total current liabilities	686,416		698,296
Deferred tax liabilities, net	12,841		12,912
Long-term income taxes payable	557,581		565,171
Long-term borrowings	1,529,566		1,640,996
Long-term operating lease liabilities	277,112		269,769
Other liabilities	3,071		2,767
Total liabilities	3,066,587		3,189,911
Commitments and contingencies
Stockholders’ equity:

Common stock, par value $0.001 per share, 250.0 million shares authorized, 110.3 million and 110.1 million issued, 59.6 million and 60.5 million outstanding, respectively	110		110
Treasury stock, at cost, 50.8 million and 49.6 million shares, respectively	(2,071,289)		(1,888,869)
Additional paid-in capital	844,595		826,685
Retained earnings	2,993,126		2,611,765
Accumulated other comprehensive loss	(113,331)		(95,768)
Total stockholders’ equity	1,653,211		1,453,923
Total liabilities and stockholders’ equity	$	4,719,798	$	4,643,834

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

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CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at March 31, 2024	60,696	$	110	49,605	$	(1,894,782)	$	834,433	$	2,764,219	$	(106,925)	$	1,597,055
Share-based compensation	—	—		—	—		10,162		—		—		10,162
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units, net of shares withheld for taxes	26	—		—	—		—		—		—		—
Repurchases of common stock, including excise tax	(1,170)	—		1,170	(176,507)		—		—		—		(176,507)

Net income	—	—		—	—		—		228,907		—		228,907
Other comprehensive loss	—	—		—	—		—		—		(6,406)		(6,406)
Balance at June 30, 2024	59,552	$	110	50,775	$	(2,071,289)	$	844,595	$	2,993,126	$	(113,331)	$	1,653,211


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at March 31, 2023	62,023	$	110	47,813	$	(1,705,896)	$	805,078	$	1,968,742	$	(99,534)	$	968,500
Share-based compensation	—	—		—	—		8,388		—		—		8,388
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units, net of shares withheld for taxes	44	—		12	(1,240)		—		—		—		(1,240)


Net income	—	—		—	—		—		212,412		—		212,412
Other comprehensive income	—	—		—	—		—		—		1,630		1,630
Balance at June 30, 2023	62,067	$	110	47,825	$	(1,707,136)	$	813,466	$	2,181,154	$	(97,904)	$	1,189,690

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

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CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2023	60,495	$	110	49,558	$	(1,888,869)	$	826,685	$	2,611,765	$	(95,768)	$	1,453,923
Share-based compensation	—	—		—	—		17,744		—		—		17,744
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units, net of shares withheld for taxes	227	—		47	(5,913)		166		—		—		(5,747)
Repurchases of common stock, including excise tax	(1,170)	—		1,170	(176,507)		—		—		—		(176,507)

Net income	—	—		—	—		—		381,361		—		381,361
Other comprehensive loss	—	—		—	—		—		—		(17,563)		(17,563)
Balance at June 30, 2024	59,552	$	110	50,775	$	(2,071,289)	$	844,595	$	2,993,126	$	(113,331)	$	1,653,211


	Common Stock			Treasury Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Stockholders' Equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	61,749	$	110	47,730	$	(1,695,501)	$	797,614	$	1,819,199	$	(103,491)	$	817,931
Share-based compensation	—	—		—	—		15,852		—		—		15,852
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units, net of shares withheld for taxes	318	—		95	(11,635)		—		—		—		(11,635)


Net income	—	—		—	—		—		361,955		—		361,955
Other comprehensive income	—	—		—	—		—		—		5,587		5,587
Balance at June 30, 2023	62,067	$	110	47,825	$	(1,707,136)	$	813,466	$	2,181,154	$	(97,904)	$	1,189,690

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

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CROCS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	381,361	$	361,955
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	33,705		25,780
Operating lease cost	40,654		36,592


Share-based compensation	17,744		15,852
Asset impairment	24,081		—

Other non-cash items	18,517		769
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:
Accounts receivable	(119,159)		(113,838)
Inventories	5,172		34,884
Prepaid expenses and other assets	2,247		(32,413)
Accounts payable, accrued expenses and other liabilities	(19,034)		27,819
Right-of-use assets and operating lease liabilities	(42,069)		(35,176)
Income taxes	30,443		8,389
Cash provided by operating activities	373,662		330,613
Cash flows from investing activities:
Purchases of property, equipment, and software	(32,806)		(51,645)



Cash used in investing activities	(32,806)		(51,645)
Cash flows from financing activities:

Proceeds from borrowings	78,156		214,634
Repayments of borrowings	(216,405)		(513,703)
Deferred debt issuance costs	(1,173)		(612)
Repurchases of common stock	(175,011)		—
Repurchases of common stock for tax withholding	(5,913)		(11,636)
Other	168		—
Cash used in financing activities	(320,178)		(311,317)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(2,747)		7,049
Net change in cash, cash equivalents, and restricted cash	17,931		(25,300)
Cash, cash equivalents, and restricted cash—beginning of period	153,097		194,885
Cash, cash equivalents, and restricted cash—end of period	$	171,028	$	169,585

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

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CROCS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise noted in this report, any description of the “Company,” “we,” “us,” or “our” includes Crocs, Inc. and our consolidated subsidiaries within our reportable operating segments and corporate operations. We are engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for all. We strive to be the global leader in the sale of casual footwear characterized by functionality, comfort, color, and lightweight design.

Our reportable operating segments include: (i) the Crocs Brand and (ii) the HEYDUDE Brand. See Note 13 — Operating Segments and Geographic Information for additional information.

The accompanying unaudited condensed consolidated interim financial statements include our accounts and those of our wholly-owned subsidiaries and reflect all adjustments which are necessary for a fair statement of the financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Such unaudited condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

These unaudited condensed consolidated interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023 (“Annual Report”) and have been prepared on a consistent basis with the accounting policies described in Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report. Our accounting policies did not change during the six months ended June 30, 2024, other than with respect to the new accounting pronouncements adopted, as applicable, as described in Note 2 — Recent Accounting Pronouncements.

Reclassifications

We have reclassified certain amounts in Note 3 — Accrued Expenses and Other Liabilities, Note 9 — Revenues, and Note 13 — Operating Segments and Geographic Information to conform to current period presentation.

Use of Estimates

U.S. GAAP requires us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions used to determine certain amounts that affect the financial statements are reasonable, based on information available at the time they are made. 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, customer rebates, sales returns and allowances, impairment assessments and charges, recoverability of long-lived assets, deferred tax assets, valuation allowances, uncertain tax positions, income tax expense, share-based compensation expense, the assessment of lower of cost or net realizable value on inventory, useful lives assigned to long-lived assets, goodwill, and indefinite-lived intangible assets are reasonable based on information available at the time they are made. To the extent there are differences between these estimates and actual results, our condensed consolidated financial statements may be materially affected.

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Condensed Consolidated Statements of Cash Flows - Supplemental Disclosures


	Six Months Ended June 30,
	2024		2023
	(in thousands)
Cash paid for interest	$	54,708	$	81,354
Cash paid for income taxes	71,829		102,107
Cash paid for operating leases	43,226		35,259

Non-Cash Investing and Financing Activities:
Right-of-use assets obtained in exchange for operating lease liabilities, net of terminations	$	50,423	$	19,062
Accrued purchases of property, equipment, and software	9,589		20,657

2. RECENT ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncement Not Yet Adopted

Pillar Two Global Minimum Tax

The Organization for Economic Co-operation and Development (“OECD”) has released Pillar Two model rules introducing a 15% global minimum tax rate for large multinational corporations to be effective starting with tax periods ending in 2024. Various jurisdictions we operate in have enacted or plan to enact legislation beginning in 2024 or in subsequent years. There remains uncertainty as to the final Pillar Two rules as the OECD continues to release guidance and modifications to the rules. We do not anticipate the Pillar Two rules will have a material impact on our 2024 consolidated financial statements.

Income Taxes: Improvements to Income Tax Disclosure

In December 2023, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance related to the disclosure of rate reconciliation and income taxes paid. This guidance becomes effective for annual periods beginning after December 15, 2024 with early adoption permitted and should be applied on a prospective basis. We do not expect this standard to have a material impact on our consolidated financial statements, but it will require increased disclosures within the notes to our consolidated financial statements.

Segment Reporting: Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued authoritative guidance related to the segment disclosures. This guidance becomes effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with early adoption permitted and should be applied on a retrospective basis. We do not expect this standard to have a material impact on our consolidated financial statements, but it will require increased disclosures within the notes to our consolidated financial statements.

Other new pronouncements issued but not effective until after June 30, 2024 are not expected to have a material impact on our condensed consolidated financial statements.

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3. ACCRUED EXPENSES AND OTHER LIABILITIES

Amounts reported in ‘Accrued expenses and other liabilities’ in the condensed consolidated balance sheets were:


	June 30, 2024		December 31, 2023
	(in thousands)
Professional services	$	69,584	$	80,986
Accrued compensation and benefits	48,883		70,245
Return liabilities	33,179		38,644
Sales/use and value added taxes payable	30,478		23,768
Fulfillment, freight, and duties	35,042		22,269
Royalties payable (1)	10,492		10,097
Accrued rent and occupancy	10,699		8,246
Customer deposit liability and deferred revenue (1)	10,182		7,568
Accrued legal fees	6,198		2,546
Other (1)	30,358		21,402
Total accrued expenses and other liabilities	$	285,095	$	285,771

(1) Amounts as of December 31, 2023 have been reclassified to conform to current period presentation.

4. LEASES

Right-of-Use Assets and Operating Lease Liabilities

Amounts reported in the condensed consolidated balance sheets were:


	June 30, 2024		December 31, 2023
	(in thousands)
Assets:
Right-of-use assets	$	292,089	$	287,440
Liabilities:
Current operating lease liabilities	$	63,918	$	62,267
Long-term operating lease liabilities	277,112		269,769
Total operating lease liabilities	$	341,030	$	332,036

Lease Costs and Other Information

Lease-related costs reported within ‘Cost of sales’ and ‘Selling, general and administrative expenses’ in our condensed consolidated statements of income were:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Operating lease cost	$	20,409	$	18,393	$	40,654	$	36,592
Short-term lease cost	5,214		4,192		10,013		7,234
Variable lease cost	15,944		14,570		23,307		20,118
Total lease costs	$	41,567	$	37,155	$	73,974	$	63,944

The weighted average remaining lease term and discount rate related to our lease liabilities as of June 30, 2024 were 6.6 years and 6.3%, respectively. As of June 30, 2023, the weighted average remaining lease term and discount rate related to our lease liabilities were 6.6 years and 4.1%, respectively.

During the six months ended June 30, 2024, we impaired our right-of-use assets for our former HEYDUDE Brand warehouses in Las Vegas, Nevada and our former Crocs Brand warehouse in Oudenbosch, the Netherlands, as described in Note 5 — Fair Value Measurements.

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Maturities

The maturities of our operating lease liabilities were:


	As of June 30, 2024
	(in thousands)
2024 (remainder of year)	$	36,311
2025	75,419
2026	64,100
2027	55,168
2028	46,099
Thereafter	144,622
Total future minimum lease payments	421,719
Less: imputed interest	(80,689)
Total operating lease liabilities	$	341,030

5. FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

All of our derivative instruments are classified as Level 2 of the fair value hierarchy and are reported in the condensed consolidated balance sheets within either ‘Prepaid expenses and other assets’ or ‘Accrued expenses and other liabilities’ at June 30, 2024 and December 31, 2023. The fair values of our derivative instruments were an insignificant asset and insignificant liability at June 30, 2024 and an insignificant asset and insignificant liability at December 31, 2023. See Note 6 — Derivative Financial Instruments for more information.

The carrying amounts of our cash, cash equivalents, and restricted cash, accounts receivable, accounts payable, current accrued expenses and other liabilities, and our Citibank Facility (as defined below) approximate their fair value as recorded due to the short-term maturity of these instruments.

Our borrowing instruments are recorded at their carrying values in the condensed consolidated balance sheets, which may differ from their respective fair values. The Term Loan B Facility (as defined below) and the Notes (as defined below) are classified as Level 1 of the fair value hierarchy and are reported in our condensed consolidated balance sheet at face value, less unamortized issuance costs. The fair value of our Revolving Facility (as defined below) approximates its carrying value at June 30, 2024 and December 31, 2023 based on interest rates currently available to us for similar borrowings. The carrying value and fair value of our borrowing instruments as of June 30, 2024 and December 31, 2023 were:


	June 30, 2024				December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Term Loan B Facility	$	685,000	$	690,994	$	820,000	$	824,100
2029 Notes	350,000		318,682		350,000		313,987
2031 Notes	350,000		304,518		350,000		296,742
Revolving Facility	190,000		190,000		190,000		190,000

Non-Financial Assets and Liabilities

Our non-financial assets, which primarily consist of property and equipment, right-of-use assets, goodwill, and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value.

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The fair values of these assets are determined, as required, based on Level 3 measurements, including estimates of the amount and timing of future cash flows based upon historical experience, expected market conditions, and management’s plans. We recorded impairments within ‘Selling, general and administrative expenses’ in our condensed consolidated statements of income as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Information technology systems impairment (1)	$	—	$	—	$	18,172	$	—
Right-of-use assets impairment (2)	—		—		5,909		—
Total asset impairments	$	—	$	—	$	24,081	$	—

(1) During the six months ended June 30, 2024, we recognized an impairment charge for information technology systems related to the HEYDUDE integration of $17.4 million to prepaid assets and $0.8 million to intangible assets.

(2) During the six months ended June 30, 2024, we recognized an impairment of $5.5 million for our former HEYDUDE Brand warehouses in Las Vegas, Nevada and $0.4 million for our former Crocs Brand warehouse in Oudenbosch, the Netherlands.

6. DERIVATIVE FINANCIAL INSTRUMENTS

We transact business in various foreign entities and are therefore exposed to foreign currency exchange rate risk that impacts the reported U.S. Dollar (“USD”) amounts of revenues, expenses, and certain foreign currency monetary assets and liabilities. In order to manage exposure to fluctuations in foreign currency and to reduce the volatility in earnings caused by fluctuations in foreign exchange rates, we may enter into forward contracts to buy and sell foreign currency. By policy, we do not enter into these contracts for trading purposes or speculation.

Counterparty default risk is considered low because the forward contracts we enter into are over-the-counter instruments transacted with highly-rated financial institutions. We were not required to and did not post collateral as of June 30, 2024 or December 31, 2023.

Our derivative instruments are recorded at fair value as a derivative asset or liability in the condensed consolidated balance sheets within either ‘Prepaid expenses and other assets’ or ‘Accrued expenses and other liabilities’ at June 30, 2024 and December 31, 2023. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain components of its risk, even though hedge accounting does not apply, or we elect not to apply hedge accounting.

We report derivative instruments with the same counterparty on a net basis when a master netting arrangement is in place. For the condensed consolidated statements of cash flows, we classify cash flows from derivative instruments at settlement in the same category as the cash flows from the related hedged items within ‘Cash provided by operating activities.’

As of June 30, 2024, we have derivatives not designated as hedging instruments (“non-hedged derivatives”), which consist of foreign currency forward contracts primarily used to hedge monetary assets and liabilities denominated in non-functional currencies. For our non-hedged derivatives, changes in fair value are recognized within ‘Foreign currency gains (losses), net’ in the condensed consolidated statements of income.

We also have cash flow hedges (“hedged derivatives”) as of June 30, 2024. We are exposed to fluctuations in various foreign currencies against our functional currency, the U.S. Dollar. Specifically, we have subsidiaries that transact in currencies other than their functional currency. We use cash flow hedges to minimize the variability in cash flows caused by fluctuations in foreign currency exchange rates related to our external sales and external purchases of inventory. Currency forward agreements involve fixing the exchange rates for delivery of a specified amount of foreign currency on a specified date. The currency forward agreements are typically cash settled in USD for their fair value at or close to their settlement date. We may also use currency option contracts under which we will pay a premium for the right to sell a specified amount of a foreign currency prior to the maturity date of the option.

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For derivatives designated and that qualify as cash flow hedges of foreign exchange risk, the gain or loss on the derivative is recorded in ‘Accumulated other comprehensive loss’ in the condensed consolidated balance sheets. In the period during which the hedged transaction affects earnings, the related gain or loss is subsequently reclassified to ‘Revenues’ or ‘Cost of sales’ in the condensed consolidated statements of income, which is consistent with the nature of the hedged transaction. During the three and six months ended June 30, 2024, there was a gain of $0.3 million and $0.6 million, respectively, recognized due to reclassification from ‘Accumulated other comprehensive loss’ to ‘Revenues’ or ‘Cost of sales’ related to our hedged derivatives. During the next twelve months, we estimate that a gain of $0.3 million will be reclassified to our condensed consolidated statements of income.

The fair values of derivative assets and liabilities, net, all of which are classified as Level 2, reported within either ‘Accrued expenses and other liabilities’ or ‘Prepaid expenses and other assets’ in the condensed consolidated balance sheets, were:


	June 30, 2024				December 31, 2023
	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
	(in thousands)
Non-hedged derivatives:
Forward foreign currency exchange contracts	$	922	$	(665)	$	2,850	$	(1,333)
Hedged derivatives:
Cash flow foreign currency contracts	572		(301)		142		(229)
Total derivatives	1,494		(966)		2,992		(1,562)
Netting of counterparty contracts	(502)		502		(1,547)		1,547
Total derivatives, net of counterparty contracts	$	992	$	(464)	$	1,445	$	(15)

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The notional amounts of outstanding foreign currency forward exchange contracts presented below report the total U.S. Dollar equivalent position and the net contract fair values for each foreign currency position.


	June 30, 2024				December 31, 2023
	Notional		Fair Value		Notional		Fair Value
	(in thousands)
Non-hedged derivatives:
Singapore Dollar	$	37,742	$	101	$	41,441	$	1,507
Euro	17,770		102		30,757		1,343
British Pound Sterling	10,182		(172)		17,662		(835)
South Korean Won	21,308		(92)		9,759		(428)
Indian Rupee	14,537		(60)		5,291		(23)
Japanese Yen	13,604		667		969		(47)
Other currencies	36,869		(289)		—		—
Total non-hedged derivatives	152,012		257		105,879		1,517
Hedged derivatives:
Euro	19,843		402		40,014		(186)
British Pound Sterling	20,649		78		22,320		135
South Korean Won	5,398		92		11,093		(42)
Indian Rupee	3,786		(9)		5,703		6
Chinese Yuan	32,779		(292)		—		—
Total hedged derivatives	82,455		271		79,130		(87)
Total derivatives	$	234,467	$	528	$	185,009	$	1,430

Latest maturity date, non-hedged derivatives	July 2024				January 2024
Latest maturity date, hedged derivatives	March 2025				December 2024

Amounts reported in ‘Foreign currency gains (losses), net’ in the condensed consolidated statements of income include both realized and unrealized gains (losses) from foreign currency transactions and derivative contracts and were:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Foreign currency transaction gains (losses)	$	(1,513)	$	402	$	(2,933)	$	(369)
Foreign currency forward exchange contracts gains (losses)	190		149		(663)		517
Foreign currency gains (losses), net	$	(1,323)	$	551	$	(3,596)	$	148

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7. BORROWINGS

Our long-term borrowings were as follows:


	Maturity	Stated Interest Rate		Effective Interest Rate		June 30, 2024		December 31, 2023
						(in thousands)
Notes issuance of $350.0 million	2029	4.250	%	4.64	%	$	350,000	$	350,000
Notes issuance of $350.0 million	2031	4.125	%	4.35	%	350,000		350,000
Term Loan B Facility	2029					685,000		820,000
Revolving Facility						190,000		190,000
Total face value of long-term borrowings						1,575,000		1,710,000
Less:
Unamortized issuance costs						45,434		49,004
Current portion of long-term borrowings (1)						—		20,000
Total long-term borrowings						$	1,529,566	$	1,640,996

(1) Represents the current portion of the borrowings under the Term Loan B facility.

At June 30, 2024 and December 31, 2023, $10.6 million and $10.7 million, respectively, of accrued interest related to our borrowings was reported in ‘Accounts payable’ in the condensed consolidated balance sheets.

Senior Revolving Credit Facility

In July 2019, the Company and certain of its subsidiaries (the “Borrowers”) entered into a Second Amended and Restated Credit Agreement (as amended, the “Credit Agreement”), with the lenders named therein and PNC Bank, National Association, as a lender and administrative agent for the lenders. Since that time, we have amended the Credit Agreement, which, as amended to date, provides for a revolving credit facility of $750.0 million, which can be increased by an additional $250.0 million subject to certain conditions (the “Revolving Facility”). Borrowings under the Credit Agreement bear interest at a variable interest rate based on (A) a Base Rate (defined as the highest of (i) the Overnight Bank Funding Rate (as defined in the Credit Agreement), plus 0.25%, (ii) the Prime Rate (as defined in the Credit Agreement), and (iii) the Daily Simple SOFR (as defined in the Credit Agreement), plus 1.00%), plus an applicable margin ranging from 0.25% to 0.875% based on our leverage ratio or 1.35% to 1.975% for the Daily Simple SOFR based on the leverage ratio, or (B) the Term SOFR Rate (as defined in the Credit Agreement), plus an applicable margin ranging from 1.35% to 1.975% based on our leverage ratio for one-month interest periods and 1.40% to 2.025% based on our leverage ratio for three month interest periods. Borrowings under the Credit Agreement are secured by all of the assets of the Borrowers and guaranteed by certain other subsidiaries of the Borrowers.

The Credit Agreement requires or required, as applicable, us to maintain a minimum interest coverage ratio of 3.00 to 1.00, and a maximum leverage ratio of (i) 4.00 to 1.00 from the quarter ended March 31, 2022 through, and including, the quarter ended December 31, 2023, (ii) 3.75 to 1.00 for the quarter ended March 31, 2024, (iii) 3.50 to 1.00 for the quarter ended June 30, 2024, and (iv) 3.25 to 1.00 for the quarter ending September 30, 2024 and thereafter (subject to adjustment in certain circumstances). The Credit Agreement permits, among other things, (i) stock repurchases subject to certain restrictions, including after giving effect to such stock repurchases, the maximum leverage ratio does not exceed certain levels; and (ii) certain acquisitions so long as there is borrowing availability under the Credit Agreement of at least $40.0 million. As of June 30, 2024, we were in compliance with all financial covenants under the Credit Agreement.

As of June 30, 2024, the total commitments available from the lenders under the Revolving Facility were $750.0 million. At June 30, 2024, we had $190.0 million in outstanding borrowings and $1.3 million in outstanding letters of credit under the Revolving Facility, which reduces amounts available for borrowing under the Revolving Facility. As of June 30, 2024 and December 31, 2023, we had $558.7 million of available borrowing capacity under the Revolving Facility, which matures in November 2027.

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Term Loan B Facility

On February 17, 2022, the Company entered into a credit agreement (the “Original Term Loan B Credit Agreement”) with Citibank, N.A., as administrative agent and lender, to among other things, finance a portion of the cash consideration for the Acquisition, which was amended on August 8, 2023 (the “August 2023 Amendment”) and on February 13, 2024 (the “February 2024 Amendment”). The Original Term Loan B Credit Agreement, as amended by the August 2023 Amendment and the February 2024 Amendment is referred to herein as the “Term Loan B Credit Agreement.”

The Original Term Loan B Credit Agreement provided for an aggregate term loan B facility in the principal amount of $2.0 billion. Prior to the February 2024 Amendment, the outstanding balance was $820.0 million. Among other things, the February 2024 Amendment provided for a new $820.0 million tranche of term loans (the “2024 Refinancing Term Loans” and, such facility, the "Term Loan B Facility"), to refinance the then-outstanding principal balance. The 2024 Refinancing Term Loans are secured by substantially all of the Company’s and each subsidiary guarantor’s assets on a pari passu basis with their obligations arising from the Term Loan B Credit Agreement and is scheduled to mature on February 17, 2029, subject to certain exceptions set forth in the Term Loan B Credit Agreement. Additionally, subject to certain conditions, including, without limitation, satisfying certain leverage ratios, the Company may, at any time, on one or more occasions, add one or more new classes of term facilities and/or increase the principal amount of the loans of any existing class by requesting one or more incremental term facilities.

Pursuant to the reduced interest rate margins applicable to the 2024 Refinancing Term Loans, each term loan borrowing which is an alternate base rate borrowing bears interest at a rate per annum equal to the Alternate Base Rate (as defined in the Term Loan B Credit Agreement), plus 1.25%. Each term loan borrowing which is a term SOFR borrowing bears interest at a rate per annum equal to the Adjusted Term SOFR Rate (as defined in the Term Loan B Credit Agreement) plus 2.25%.

As of June 30, 2024, the Term Loan B Facility was fully drawn with no remaining borrowing capacity, and we had $685.0 million in outstanding principal on the Term Loan B Facility, which matures on February 17, 2029.

The Term Loan B Credit Agreement also contains customary affirmative and negative covenants, incurrence financial covenants, representations and warranties, events of default and other provisions. As of June 30, 2024, we were in compliance with all financial covenants under the Term Loan B Credit Agreement.

Asia Revolving Credit Facility

During the six months ended June 30, 2024, we had one revolving credit facility in Asia with Citibank (China) Company Limited, Shanghai Branch (the “Citibank Facility”), which, as amended, provides up to an equivalent of $15.0 million.

As of June 30, 2024, we had no borrowings outstanding on the Citibank Facility. As of December 31, 2023, we had borrowings outstanding of $3.3 million on the Citibank Facility.

Senior Notes Issuances

In March 2021, the Company completed the issuance and sale of $350.0 million aggregate principal amount of 4.250% Senior Notes due March 15, 2029 (the “2029 Notes”), pursuant to the indenture related thereto (as amended and/or supplemented to date, the “2029 Notes Indenture”). Additionally, in August 2021, the Company completed the issuance and sale of $350.0 million aggregate principal amount of 4.125% Senior Notes due August 15, 2031 (the “2031 Notes”), pursuant to the indenture related thereto (as amended and/or supplemented to date, “the 2031 Notes Indenture” and, together with the 2029 Notes Indenture, the “Indentures” and, each, an “Indenture”). Interest on each of the 2029 Notes and the 2031 Notes (collectively, the “Notes”) is payable semi-annually.

The Company had or will have, as applicable, the option to redeem all or any portion of the 2029 Notes, at once or over time, at any time on or after March 15, 2024, at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably on an annual basis to par and accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company also had the option to redeem some or all of the 2029 Notes at any time before March 15, 2024 at a redemption price of 100% of the principal amount to be redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. In addition, at any time before March 15, 2024, the Company could have redeemed up to 40% of the aggregate principal amount of the 2029 Notes at a redemption price of 104.250% of the principal amount with the proceeds from certain equity issuances, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

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The Company will have the option to redeem all or any portion of the 2031 Notes, at once or over time, at any time on or after August 15, 2026, at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably on an annual basis to par and accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company will also have the option to redeem some or all of the 2031 Notes at any time before August 15, 2026 at a redemption price of 100% of the principal amount to be redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. In addition, at any time before August 15, 2024, the Company may redeem up to 40% of the aggregate principal amount of the 2031 Notes at a redemption price of 104.125% of the principal amount with the proceeds from certain equity issuances, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

The Notes rank pari passu in right of payment with all of the Company’s existing and future senior debt, including the Credit Agreement, and are senior in right of payment to any of the Company’s future debt that is, by its term, expressly subordinated in right of payment to the Notes. The Notes are unconditionally guaranteed by each of the Company’s restricted subsidiaries that is a borrower or guarantor under the Credit Agreement and by each of the Company’s wholly-owned restricted subsidiaries that guarantees any debt of the Company or any guarantor under any syndicated credit facility or capital markets debt in an aggregate principal amount in excess of $25.0 million.

The Indentures contain covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to incur additional debt or issue certain preferred stock; pay dividends or repurchase or redeem capital stock or make other restricted payments; declare or pay dividends or other payments; incur liens; enter into certain types of transactions with the Company’s affiliates; and consolidate or merge with or into other companies. As of June 30, 2024, we were in compliance with all financial covenants under the Notes.

8. COMMON STOCK REPURCHASE PROGRAM

During the three and six months ended June 30, 2024, we repurchased 1.2 million shares of our common stock at a cost of $175.0 million, including commissions. As of June 30, 2024, we also have recorded an accrual for the stock repurchase excise tax, which is reported in ‘Accrued expenses and other liabilities’ and ‘Treasury stock’ in our condensed consolidated balance sheet. During the three and six months ended June 30, 2023, we did not repurchase any shares of our common stock.

As of June 30, 2024, we had remaining authorization to repurchase $700.0 million of our common stock, subject to restrictions under our Indentures, Credit Agreement, and Term Loan B Credit Agreement.

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9. REVENUES

Revenues by reportable operating segment and by channel were:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Crocs Brand:
North America:
Wholesale	$	173,987	$	181,085	$	354,325	$	353,140
Direct-to-consumer	314,728		293,473		517,304		472,727
Total North America (1)	488,715		474,558		871,629		825,867
International:
Wholesale	261,294		226,257		542,959		464,765
Direct-to-consumer	163,980		132,135		243,218		191,096
Total International	425,274		358,392		786,177		655,861
Total Crocs Brand	$	913,989	$	832,950	$	1,657,806	$	1,481,728

Crocs Brand:
Wholesale	$	435,281	$	407,342	$	897,284	$	817,905
Direct-to-consumer	478,708		425,608		760,522		663,823
Total Crocs Brand	913,989		832,950		1,657,806		1,481,728
HEYDUDE Brand:
Wholesale	113,829		148,825		248,582		316,688
Direct-to-consumer	83,684		90,592		143,747		158,117
Total HEYDUDE Brand (2)	197,513		239,417		392,329		474,805
Total consolidated revenues	$	1,111,502	$	1,072,367	$	2,050,135	$	1,956,533

(1) North America includes the United States and Canada.

(2) The vast majority of HEYDUDE Brand revenues are derived from North America.

10. INCOME TAXES

Income tax expense and effective tax rates were:


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
	(in thousands, except effective tax rate)
Income before income taxes	$	296,425		$	277,242		$	490,454		$	469,008
Income tax expense	67,518			64,830			109,093			107,053
Effective tax rate	22.8		%	23.4		%	22.2		%	22.8		%

During the three months ended June 30, 2024, income tax expense increased $2.7 million compared to the same period in 2023. The effective tax rate for the three months ended June 30, 2024 was 22.8% compared to an effective tax rate of 23.4% for the same period in 2023, a 0.6% decrease. This decrease in the effective tax rate was primarily driven by a shift in the mix of the Company's domestic and foreign earnings. Our effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate due to differences in income tax rates between U.S. and foreign jurisdictions. We had unrecognized tax benefits of $547.2 million and $556.5 million at June 30, 2024 and December 31, 2023, respectively, and we do not expect any significant changes in tax benefits in the next twelve months.

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Company’s domestic and foreign earnings. Our effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate due to differences in income tax rates between U.S. and foreign jurisdictions.

11. EARNINGS PER SHARE

Basic and diluted earnings per common share (“EPS”) for the three and six months ended June 30, 2024 and 2023 were:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands, except per share data)
Numerator:
Net income	$	228,907	$	212,412	$	381,361	$	361,955
Denominator:
Weighted average common shares outstanding - basic	60,320		62,037		60,442		61,937
Plus: Dilutive effect of stock options and unvested restricted stock units	446		566		468		679
Weighted average common shares outstanding - diluted	60,766		62,603		60,910		62,616

Net income per common share:
Basic	$	3.79	$	3.42	$	6.31	$	5.84
Diluted	$	3.77	$	3.39	$	6.26	$	5.78

In the three and six months ended June 30, 2024 and 2023, an insignificant number of outstanding shares issued under share-based compensation awards were anti-dilutive and, therefore, excluded from the calculation of diluted EPS.

12. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

As of June 30, 2024, we had purchase commitments to third-party manufacturers, primarily for materials and supplies used in the manufacture of our products, for an aggregate of $234.9 million. We expect to fulfill our commitments under these agreements in the normal course of business, and as such, no liability has been recorded.

Other

We are regularly subject to, and are currently undergoing, audits by various tax authorities in the United States and several foreign jurisdictions, including customs duties, import, and other taxes for prior tax years.

During our normal course of business, we may make certain indemnities, commitments, and guarantees under which we may be required to make payments. We cannot determine a range of estimated future payments and have not recorded any liability for indemnities, commitments, and guarantees in the accompanying condensed consolidated balance sheets.

We are also subject to 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 significant pending legal proceedings that we believe would reasonably have a material adverse impact on our business, financial results, and cash flows. For all legal claims and disputes, we have accrued estimated losses of $2.3 million within ‘Accrued expenses and other liabilities’ in the condensed consolidated balance sheet as of June 30, 2024. As we are able, we estimate reasonably possible losses or a range of reasonably possible losses. As of June 30, 2024, we estimated that reasonably possible losses associated with these legal claims and other disputes could potentially exceed amounts accrued by an insignificant amount.

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13. OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION

We have two reportable operating segments: the Crocs Brand and the HEYDUDE Brand. Each of the reportable operating segments derives its revenues from the sale of footwear and accessories to external customers.

Additionally, ‘Enterprise corporate’ costs include global corporate costs associated with both brands, including legal, information technology, human resources, and finance.

Each segment’s performance is evaluated based on segment results without allocating Enterprise corporate expenses. Segment profits or losses include adjustments to eliminate inter-segment sales. Reconciling items between segment income from operations and income from operations consist of unallocated enterprise corporate expenses.

We do not report asset information by segment because that information is not used to evaluate performance or allocate resources between segments.

The following tables set forth information related to reportable operating segments:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
	(in thousands)
Revenues:
Crocs Brand (1)	$	913,989	$	832,950	$	1,657,806	$	1,481,728
HEYDUDE Brand	197,513		239,417		392,329		474,805
Total consolidated revenues	$	1,111,502	$	1,072,367	$	2,050,135	$	1,956,533
Income from operations:
Crocs Brand (1)(2)	$	355,532	$	317,684	$	619,657	$	535,691
HEYDUDE Brand (2)	42,367		65,509		82,513		142,129
Reconciliation of total segment income from operations to income before income taxes:

Enterprise corporate (2)	(72,161)		(64,704)		(150,003)		(124,403)
Income from operations	325,738		318,489		552,167		553,417
Foreign currency gains (losses), net	(1,323)		551		(3,596)		148
Interest income	1,126		548		1,542		719
Interest expense	(29,161)		(43,063)		(59,724)		(85,700)
Other income, net	45		717		65		424
Income before income taxes	$	296,425	$	277,242	$	490,454	$	469,008

Depreciation and amortization:
Crocs Brand (1)	$	8,861	$	7,099	$	17,397	$	14,536
HEYDUDE Brand	4,542		3,562		8,758		7,068
Enterprise corporate	4,141		1,983		7,550		4,176
Total consolidated depreciation and amortization	$	17,544	$	12,644	$	33,705	$	25,780

(1) Our business has continued to evolve in the period following the consummation of the HEYDUDE acquisition, as we have grown the brand and staffed and developed our leadership team at HEYDUDE. In the fourth quarter of 2023, to reflect changes in the way management evaluates performance, makes operating decisions, and allocates resources, we updated our reportable operating segments to be (i) Crocs Brand and (ii) HEYDUDE Brand. Our ‘North America,’ ‘Asia Pacific,’ and ‘EMEALA’ segments as well as revenues and expenses related to Crocs ‘Brand corporate’ have been consolidated to the ‘Crocs Brand.’ As a result of these changes, the previously reported amounts for revenues, income from operations, and depreciation and amortization for the three and six months ended June 30, 2023 have been recast to conform to current period presentation.

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(2) In the first quarter of 2024, to reflect a change in the way management evaluates segment performance, makes operating decisions, and allocates resources, we made changes to segment profitability related to certain foreign currency amounts impacting cost of sales. These amounts have shifted costs or benefits that were previously presented in each of our reportable segments to ‘Enterprise corporate.’ We believe that the impact of these changes on prior periods is insignificant to each segment and thus have not recast prior periods.

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

Business Overview

Crocs, Inc. and our consolidated subsidiaries (collectively the “Company,” “we,” “us,” or “our”) are engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for all. We strive to be the world leader in innovative casual footwear for women, men, and children, combining comfort and style with a value that consumers want.

Known or Anticipated Trends

Based on our recent operating results and current perspectives on our operating environment, we anticipate certain trends will continue to impact our operating results:

•We continue to operate in an environment where consumers are feeling the effects of elevated interest rates and inflation, and as a result, they are spending more cautiously. In addition, geopolitical tensions remain across the globe. We remain focused on making the right decisions for the health of our brands, maintaining tight inventory control, and investing in strategic initiatives to support durable long-term growth.

•We continue to invest in our strategic pillars, including marketing globally for both brands, China and sandal market penetration for the Crocs Brand, product innovation, and various initiatives supporting our global digital business. Specific to the HEYDUDE Brand, we remain focused on our strategy of investing in marketing, including expected acceleration in our investment in the second half of 2024, maintaining price integrity, and improving channel inventories.

•Our liquidity position remains strong with approximately $167.7 million in cash and cash equivalents and $573.7 million in available borrowing capacity as of June 30, 2024. Our total borrowings were $1.53 billion as of June 30, 2024. We resumed our share repurchase program in May 2024, repurchasing $175.0 million of our common stock during the quarter.

Use of Non-GAAP Financial Measures

In addition to financial measures presented on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”), we present certain information related to our results of operations through “constant currency,” which is a non-GAAP financial measure and should be viewed as a supplement to our results of operations and presentation of reportable segments under U.S. GAAP. Constant currency represents current period results that have been retranslated using prior year average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends, excluding the impact of foreign currency exchange rates on reported amounts.

Management uses constant currency to assist in comparing business trends from period to period on a consistent basis in communications with the Board, stockholders, analysts, and investors concerning our financial performance. We believe constant currency is useful to investors and other users of our condensed consolidated financial statements as an additional tool to evaluate operating performance and trends. Investors should not consider constant currency in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP.

Second Quarter 2024 Financial and Operational Highlights

Revenues were $1,111.5 million for the second quarter of 2024, a 3.6% increase compared to the second quarter of 2023. The increase was due to the net effects of: (i) higher average selling price on a constant currency basis (“ASP”), which increased revenues by $59.5 million, or 5.5%; (ii) lower unit sales volume in the HEYDUDE Brand, partially offset by higher unit sales volume in the Crocs Brand, which resulted in a net decrease in revenues of $7.5 million, or 0.7%; and (iii) net unfavorable changes in exchange rates, which decreased revenues by $12.8 million, or 1.2%.

The following were significant developments affecting our businesses and capital structure during the three months ended June 30, 2024:

•We grew revenues in the Crocs Brand by 9.7% compared to the same period in 2023.

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•Gross margin was 61.4%, an increase of 350 basis points from last year’s second quarter. This was primarily due to lower product and freight costs, as well as favorable brand mix.

•Selling, general and administrative expenses (“SG&A”) were $356.2 million compared to $302.8 million in the second quarter of 2023, as a result of increased investment in talent and marketing. As a percent of revenues, SG&A increased to 32.0% of revenues compared to 28.2% of revenues in the second quarter of 2023.

•Income from operations increased to $325.7 million from $318.5 million in last year’s second quarter. Net income was $228.9 million, or $3.77 per diluted share, compared to $212.4 million, or $3.39 per diluted share, in last year’s second quarter.

Results of Operations


	Three Months Ended June 30,						Six Months Ended June 30,							% Change Favorable (Unfavorable)

	2024			2023			2024				2023			Q2 2024-2023		YTD 2024-2023
	(in thousands, except per share, margin, and average selling price data)
Revenues	$	1,111,502		$	1,072,367		$	2,050,135			$	1,956,533		3.6	%	4.8	%
Cost of sales	429,586			451,060			846,142				858,856			4.8	%	1.5	%
Gross profit	681,916			621,307			1,203,993				1,097,677			9.8	%	9.7	%
Selling, general and administrative expenses	356,178			302,818			651,826				544,260			(17.6)	%	(19.8)	%
Income from operations	325,738			318,489			552,167				553,417			2.3	%	(0.2)	%
Foreign currency gains (losses), net	(1,323)			551			(3,596)				148			340.1	%	2,529.7	%
Interest income	1,126			548			1,542			0	719			105.5	%	114.5	%
Interest expense	(29,161)			(43,063)			(59,724)				(85,700)			32.3	%	30.3	%
Other income, net	45			717			65				424			(93.7)	%	(84.7)	%
Income before income taxes	296,425			277,242			490,454				469,008			6.9	%	4.6	%
Income tax expense	67,518			64,830			109,093				107,053			(4.1)	%	(1.9)	%
Net income	$	228,907		$	212,412		$	381,361			$	361,955		7.8	%	5.4	%
Net income per common share:
Basic	$	3.79		$	3.42		$	6.31			$	5.84		10.8	%	8.0	%
Diluted	$	3.77		$	3.39		$	6.26			$	5.78		11.2	%	8.3	%

Gross margin (1)	61.4		%	57.9		%	58.7		%		56.1		%	350	bp	260	bp
Operating margin (1)	29.3		%	29.7		%	26.9		%		28.3		%	(40)	bp	(140)	bp
Footwear unit sales:
Crocs Brand	34,814			32,975			66,418				63,627			5.6	%	4.4	%
HEYDUDE Brand	6,421			8,290			13,477				17,220			(22.5)	%	(21.7)	%
Average footwear selling price - nominal basis (2):
Crocs Brand	$	25.96		$	25.01		$	24.72			$	23.08		3.8	%	7.1	%
HEYDUDE Brand	$	30.76		$	28.88		$	29.11			$	27.57		6.5	%	5.6	%

(1) Changes for gross margin and operating margin are shown in basis points (“bp”).

(2) Average footwear selling price is calculated as footwear and charms revenues divided by footwear units, as applicable.

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Revenues By Channel


	Three Months Ended June 30,				Six Months Ended June 30,				% Change				Constant Currency % Change (1)
									Favorable (Unfavorable)
	2024		2023		2024		2023		Q2 2024-2023		YTD 2024-2023		Q2 2024-2023		YTD 2024-2023
	(in thousands)
Crocs Brand:
Wholesale	$	435,281	$	407,342	$	897,284	$	817,905	6.9	%	9.7	%	8.6	%	11.2	%
Direct-to-consumer	478,708		425,608		760,522		663,823		12.5	%	14.6	%	13.8	%	15.7	%
Total Crocs Brand	913,989		832,950		1,657,806		1,481,728		9.7	%	11.9	%	11.2	%	13.2	%
HEYDUDE Brand:
Wholesale	113,829		148,825		248,582		316,688		(23.5)	%	(21.5)	%	(23.5)	%	(21.5)	%
Direct-to-consumer	83,684		90,592		143,747		158,117		(7.6)	%	(9.1)	%	(7.5)	%	(9.0)	%
Total HEYDUDE Brand	197,513		239,417		392,329		474,805		(17.5)	%	(17.4)	%	(17.4)	%	(17.4)	%
Total consolidated revenues	$	1,111,502	$	1,072,367	$	2,050,135	$	1,956,533	3.6	%	4.8	%	4.8	%	5.8	%

(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” above for more information.

Revenues. In the three months ended June 30, 2024, revenues increased compared to the same period in 2023, driven by Crocs Brand international revenues, particularly in China. Overall, revenues increased $59.5 million, or 5.5%, from higher ASP, driven mostly by increased pricing, less discounting, and favorable channel mix in both brands and favorable product mix in the Crocs Brand. This was offset in part by lower volume of $7.5 million, or 0.7%, as a result of lower HEYDUDE Brand volumes, mostly offset by higher Crocs Brand volumes. Net unfavorable foreign currency fluctuations of $12.8 million, or 1.2%, primarily in the Korean Won, Chinese Yuan, and Japanese Yen, also decreased revenues.

Revenues also increased in the six months ended June 30, 2024, primarily due to higher ASP of $151.2 million, or 7.7%, driven by increased pricing and favorable channel mix in both brands and favorable product mix in the Crocs Brand. This was offset in part by lower volume of $38.2 million, or 2.0%, as a result of lower HEYDUDE Brand volumes, partially offset by higher Crocs Brand volumes. Net unfavorable foreign currency fluctuations of $19.4 million, or 1.0%, also decreased revenues.

Gross margin. Gross margin increased in the three months ended June 30, 2024 to 61.4% compared to 57.9% in the same period in 2023. This was primarily driven by lower product costs in both brands of approximately 90 basis points, lower freight costs for both brands of approximately 80 basis points, and favorable brand mix of 60 basis points.

Gross margin in the six months ended June 30, 2024 was 58.7% compared to 56.1% in 2023. This was primarily driven by lower freight costs in both brands of approximately 110 basis points, lower product costs for both brands of approximately 50 basis points, and favorable brand mix of 60 basis points.

Selling, general and administrative expenses. SG&A increased $53.4 million, or 17.6%, in the three months ended June 30, 2024 compared to the same period in 2023. This increase was primarily driven by increased investments in talent and marketing of $20.8 million and $18.0 million, respectively.

SG&A expenses increased $107.6 million, or 19.8%, during the six months ended June 30, 2024 compared to the same period in 2023, driven by increased investments in talent and marketing of $37.2 million and $26.5 million, respectively. This increase was also due to an $18.2 million impairment charge for information technology systems related to the HEYDUDE integration and impairment charges of $5.9 million related to our former warehouses in Las Vegas, Nevada and the Netherlands. Additionally, facilities costs increased $8.8 million and depreciation and amortization expense increased $6.7 million. Other net costs increased SG&A by $4.3 million.

Foreign currency gains (losses), net. Foreign currency gains (losses), net, consist of realized and unrealized foreign currency gains and losses from the remeasurement and settlement of monetary assets and liabilities denominated in non-functional currencies as well as realized and unrealized gains and losses on foreign currency derivative instruments. During the three

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months ended June 30, 2024, we recognized realized and unrealized net foreign currency losses of $1.3 million compared to gains of $0.6 million during the three months ended June 30, 2023.

During the six months ended June 30, 2024, we recognized realized and unrealized net foreign currency losses of $3.6 million compared to gains of $0.1 million during the six months ended June 30, 2023.

Interest expense. Interest expense during the three months ended June 30, 2024 decreased $13.9 million, or 32.3%, compared to the three months ended June 30, 2023. Interest expense during the six months ended June 30, 2024 decreased $26.0 million, or 30.3%, compared to the six months ended June 30, 2023. The decrease in interest expense for both the three and six months ended June 30, 2024 was due to lower outstanding borrowings and lower weighted average interest rates on the Term Loan B Facility (as defined herein) in the current year.

Income tax expense. During the three months ended June 30, 2024, income tax expense increased $2.7 million compared to the same period in 2023. The effective tax rate for the three months ended June 30, 2024 was 22.8% compared to an effective tax rate of 23.4% for the same period in 2023, a 0.6% decrease. This decrease in the effective tax rate was primarily driven by a shift in the mix of the Company's domestic and foreign earnings. Our effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate due to differences in income tax rates between U.S. and foreign jurisdictions.

During the six months ended June 30, 2024, income tax expense increased $2.0 million compared to the same period in 2023. The effective tax rate for the six months ended June 30, 2024 was 22.2% compared to an effective tax rate of 22.8% for the same period in 2023, a 0.6% decrease. This decrease in the effective rate was primarily driven by a shift in the mix of the Company’s domestic and foreign earnings. Our effective income tax rate, for each period presented, also differs from the federal U.S. statutory rate primarily due to differences in income tax rates between U.S. and foreign jurisdictions.

Reportable Operating Segments

The following table sets forth information related to our reportable operating segments, including a comparison of revenues and operating income by segment:


	Three Months Ended June 30,				Six Months Ended June 30,				% Change				Constant Currency % Change (1)
									Favorable (Unfavorable)
	2024		2023		2024		2023		Q2 2024-2023		YTD 2024-2023		Q2 2024-2023		YTD 2024-2023
	(in thousands)
Revenues:
Crocs Brand revenues (2)	$	913,989	$	832,950	$	1,657,806	$	1,481,728	9.7	%	11.9	%	11.2	%	13.2	%
HEYDUDE Brand revenues	197,513		239,417		392,329		474,805		(17.5)	%	(17.4)	%	(17.4)	%	(17.4)	%
Total consolidated revenues	$	1,111,502	$	1,072,367	$	2,050,135	$	1,956,533	3.6	%	4.8	%	4.8	%	5.8	%

Income from operations:
Crocs Brand income from operations (2)(3)	$	355,532	$	317,684	$	619,657	$	535,691	11.9	%	15.7	%	15.2	%	19.4	%
HEYDUDE Brand income from operations (3)	42,367		65,509		82,513		142,129		(35.3)	%	(41.9)	%	(35.1)	%	(41.9)	%
Enterprise corporate (3)	(72,161)		(64,704)		(150,003)		(124,403)		11.5	%	20.6	%	11.6	%	20.6	%
Total consolidated income from operations	$	325,738	$	318,489	$	552,167	$	553,417	2.3	%	(0.2)	%	5.6	%	3.3	%

(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for more information.

(2) Our business has continued to evolve in the period following the consummation of the HEYDUDE acquisition, as we have grown the brand and staffed and developed our leadership team at HEYDUDE. In the fourth quarter of 2023, to reflect changes in the way management evaluates performance, makes operating decisions, and allocates resources, we updated our reportable operating segments to be (i) Crocs Brand and (ii) HEYDUDE Brand. Our ‘North America,’ ‘Asia Pacific,’ and ‘EMEALA’ segments as well as revenues and expenses related to Crocs ‘Brand corporate’ have been consolidated to the ‘Crocs Brand.’ As a result of these changes, the previously reported amounts for revenues and income from operations for the three and six months ended June 30, 2023 have been recast to conform to current period presentation.

(3) In the first quarter of 2024, to reflect a change in the way management evaluates segment performance, makes operating decisions, and allocates resources,

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we made changes to segment profitability related to certain foreign currency amounts impacting cost of sales. These amounts have shifted costs or benefits that were previously presented in each of our reportable segments to ‘Enterprise corporate.’ We believe that the impact of these changes on prior periods is insignificant to each segment and thus have not recast prior periods.

Crocs Brand

Revenues. Crocs Brand revenues increased in the three months ended June 30, 2024 compared to the same period in 2023. This increase was due in part to higher ASP, primarily as a result of price increases in international markets, favorable channel mix and product mix, and less discounting than the prior year. Higher volume in both channels also drove the increase in revenues while net unfavorable foreign currency fluctuations partially offset the overall increase to revenues.

The increase in Crocs Brand revenues in the six months ended June 30, 2024 compared to the same period in 2023 is primarily due to higher ASP, due to favorable product mix, less discounting, favorable channel mix, and price increases in international markets, and increased volume. Partially offsetting these increases was unfavorable foreign currency fluctuations.

Income from Operations. Income from operations for our Crocs Brand segment was $355.5 million for the three months ended June 30, 2024, an increase of $37.8 million, or 11.9%, compared to the same period in 2023. Gross margin was 64.1%, an increase of 230 basis points compared to prior year, driven primarily by lower product costs, favorable duties as a result of shifts in country mix, and lower freight costs.

SG&A for our Crocs Brand segment increased $33.1 million, or 16.8%, during the three months ended June 30, 2024 compared to the same period in 2023. This increase was primarily due to higher marketing costs and higher variable expenses related to higher revenues in the DTC channel.

During the six months ended June 30, 2024, income from operations for our Crocs Brand was $619.7 million, an increase of $84.0 million, or 15.7%, compared to the same period in 2023. Gross margin was 61.4%, an increase of 220 basis points, primarily due to favorable customer mix, which was largely driven by the termination of our relationship with a significant distributor in the second quarter of 2023 following evidence that it was selling goods outside of its approved territories, price increases in international markets, and lower freight costs. The overall increase in gross margin was partially offset by higher royalty expense as we continue to expand into licensed product.

SG&A for our Crocs Brand increased $57 million, or 16.8%, during the six months ended June 30, 2024 compared to the same period in 2023, primarily due to higher marketing costs and higher variable expenses related to higher revenues in the DTC channel.

HEYDUDE Brand

Revenues. For the three months ended June 30, 2024, revenues decreased compared to 2023. This decrease was primarily due to lower volume in both channels. Higher ASP, primarily due to increased pricing, favorable channel mix as we grow our retail business, and less discounting, partially offset the overall decrease to revenues.

During the six months ended June 30, 2024, revenues decreased compared to the same period in 2023, primarily due to lower volume. Higher ASPs, driven by increased pricing, favorable channel mix, and less discounting, partially offset this decrease.

Income from Operations. Income from operations for the HEYDUDE segment was $42.4 million for the three months ended June 30, 2024, a decrease of $23.1 million, or 35.3%, compared to 2023. Gross margin was 49.1%, an increase of 200 basis points, primarily due to lower freight costs, favorable channel mix, and increased pricing. This was offset in part by transition costs and infrastructure investments associated with the move to our new HEYDUDE distribution center in Las Vegas, Nevada in the current year, as well as unfavorable product mix.

SG&A for the HEYDUDE Brand segment increased $7.4 million, or 15.7%, during the three months ended June 30, 2024 compared to the same period in 2023. This increase was primarily due to an increased investment in talent.

Income from operations for the HEYDUDE segment was $82.5 million for the six months ended June 30, 2024, a decrease of $59.6 million, or 41.9%, compared to the same period in 2023. Gross margin was 47.6%, a decrease of 70 basis points basis points, driven in part by transition costs and infrastructure investments associated with the move to our new HEYDUDE distribution center in Las Vegas, Nevada in the current year, offset in part by lower freight costs.

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SG&A for the HEYDUDE Brand segment increased $17.2 million, or 19.7%, during the six months ended June 30, 2024 compared to the same period in 2023. This is primarily due to an increased in investment talent and impairment costs of the right-of-use assets for our former HEYDUDE Brand warehouses in Las Vegas, Nevada in the current year.

Enterprise Corporate

During the three months ended June 30, 2024, total net costs within ‘Enterprise corporate’ increased $7.5 million, or 11.5%, compared to the same period in 2023. This increase was primarily due to an increased investment in talent.

During the six months ended June 30, 2024, total net costs within ‘Enterprise corporate’ increased $25.6 million, or 20.6%, compared to the same period in 2023. This was primarily due to an impairment charge for information technology systems related to the HEYDUDE integration and an increased investment in talent.

Store Locations and Direct-to-Consumer Comparable Sales

As of June 30, 2024, we had 363 company-operated retail locations for the Crocs Brand, inclusive of 172 retail locations in North America and 191 retail locations internationally. As of June 30, 2024, we had 32 company-operated retail locations for the HEYDUDE Brand, inclusive of 9 temporary clearance stores. As of June 30, 2023, we had 346 company-operated retail locations for the Crocs Brand, inclusive of 175 retail locations in North America and 171 retail locations internationally. As of June 30, 2023, we had 9 company-operated retail locations for the HEYDUDE Brand, all of which were temporary clearance stores.

Direct-to-consumer (“DTC”) comparable sales were as follows:


	Constant Currency (1)
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Direct-to-consumer comparable sales: (2)



Crocs Brand	11.7	%	19.5	%	13.2	%	20.5	%
HEYDUDE Brand	(17.5)	%	20.2	%	(17.7)	%	24.7	%

(1) Reflects period over period change on a constant currency basis, which is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for more information.

(2) Comparable store status, as included in the DTC comparable sales figures above, is determined on a monthly basis. Comparable store sales include the revenues of stores that have been in operation for more than twelve months. Stores in which selling square footage has changed more than 15% as a result of a remodel, expansion, or reduction are excluded until the thirteenth month in which they have comparable prior year sales. Temporarily closed stores are excluded from the comparable store sales calculation during the month of closure and in the same month in the following year. Location closures in excess of three months are excluded until the thirteenth month post re-opening. E-commerce comparable revenues are based on same site sales period over period. E-commerce sites that are temporarily offline or unable to transact or fulfill orders (“site disruption”) are excluded from the comparable sales calculation during the month of site disruption and in the same month in the following year. E-commerce site disruptions in excess of three months are excluded until the thirteenth month after the site has re-opened. Additionally, comparable sales do not include leap days in leap years.

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Financial Condition, Capital Resources, and Liquidity

Liquidity

Our liquidity position as of June 30, 2024 was:


	June 30, 2024
	(in thousands)
Cash and cash equivalents	$	167,734
Available borrowings	573,689

As of June 30, 2024, we had $167.7 million in cash and cash equivalents and up to $573.7 million of available borrowings, including $558.7 million of remaining borrowing availability under the Revolving Facility (as defined below) and $15.0 million of remaining borrowing availability under the Citibank Facility (as defined below). As of June 30, 2024, the Term Loan B Facility (as defined below) was fully drawn and there was no available borrowing capacity. We believe that cash flows from operations, our cash and cash equivalents on hand, and available borrowings under our Revolving Facility will be sufficient to meet our ongoing liquidity needs and capital expenditure requirements for at least the next twelve months. In May 2024, we resumed our share repurchase program.

Additional future financing may be necessary to fund our operations and 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. Although we believe we have adequate sources of liquidity over the long term, the success of our operations, global economic conditions, and the pace of sustainable growth in our markets, among other things, could each impact our business and liquidity.

Repatriation of Cash

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

All of the cash held outside of the U.S. could be repatriated to the U.S. as of June 30, 2024 without incurring additional U.S. federal income taxes. In some countries, repatriation of certain foreign balances is restricted by local laws. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. or other countries and could adversely affect our liquidity. As of June 30, 2024, we held $112.6 million of our total $167.7 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 $112.6 million, $2.8 million could potentially be restricted by local laws.

Senior Revolving Credit Facility

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circumstances). The Credit Agreement permits, among other things, (i) stock repurchases subject to certain restrictions, including after giving effect to such stock repurchases, the maximum leverage ratio does not exceed certain levels; and (ii) certain acquisitions so long as there is borrowing availability under the Credit Agreement of at least $40.0 million. As of June 30, 2024, we were in compliance with all financial covenants under the Credit Agreement.

Term Loan B Facility

Asia Revolving Credit Facility

As of June 30, 2024, we had no borrowings outstanding on the Citibank Facility. As of December 31, 2023, we had borrowings outstanding of $3.3 million on the Citibank Facility.

Senior Notes Issuances

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Cash Flows


	Six Months Ended June 30,				$ Change		% Change
	2024		2023		Favorable (Unfavorable)
	(in thousands)
Cash provided by operating activities	$	373,662	$	330,613	$	43,049	13.0	%
Cash used in investing activities	(32,806)		(51,645)		18,839		36.5	%
Cash used in financing activities	(320,178)		(311,317)		(8,861)		(2.8)	%
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(2,747)		7,049		(9,796)		(139.0)	%
Net change in cash, cash equivalents, and restricted cash	$	17,931	$	(25,300)	$	43,231	170.9	%

Operating Activities. Cash provided by operating activities consists of net income adjusted for noncash items and changes in working capital. Cash provided by operating activities increased $43.0 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, driven by higher net income, adjusted for non-cash items, of $75.1 million, partially offset by decreases in operating assets and liabilities of $32.1 million, primarily due to the change in accounts payable, accrued expenses and other liabilities.

Investing Activities. There was a $18.8 million decrease in cash used in investing activities for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This was due to a decrease in purchases of property, equipment, and software.

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Financing Activities. Cash used in financing activities increased by $8.9 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase in cash used in financing activities was primarily due to a decrease in proceeds from borrowings of $136.5 million and an increase of $175.0 million in repurchases of common stock. The overall decrease in cash used in financing activities was partially offset by a decrease in repayments of borrowings of $297.3 million and a decrease of $5.7 million in repurchases of common stock for tax withholding.

Contractual Obligations

There have been no significant changes to the contractual obligations reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, other than borrowings and repayments on the Term Loan B Facility, Revolving Facility, and Citibank Facility.

Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of June 30, 2024, other than certain purchase commitments, which are described in Note 12 — Commitments and Contingencies in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, sales, and expenses, and related disclosure of contingent assets and liabilities. We evaluate our assumptions and estimates on an on-going basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

For a complete discussion of our critical accounting policies and estimates, please refer to our Annual Report on Form 10-K for the year ended December 31, 2023 and Note 1 — Basis of Presentation and Summary of Significant Accounting Policies in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q. There have been no other significant changes in our critical accounting policies or their application since December 31, 2023.

Recent Accounting Pronouncements

See Note 2 — Recent Accounting Pronouncements in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q for a description of recently adopted accounting pronouncements and issued accounting pronouncements that we believe may have an impact on our condensed consolidated financial statements when adopted.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences, and overall financing strategies. Our exposure to market risk includes interest rate fluctuations in connection with our Revolving Facility and certain financial instruments.

Borrowings under our Term Loan B Facility and Revolving Facility bear interest at a variable rate and are therefore subject to risk based upon prevailing market interest rates. Interest rates fluctuate as a result of many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors that are beyond our control.

As of June 30, 2024, we had borrowings with a face value of $1,575.0 million, comprised of the Notes, which carry a fixed rate, the Term Loan B Facility, and borrowings under our Revolving Facility. We also had $1.3 million in outstanding letters of credit under our Revolving Facility as of June 30, 2024. As of December 31, 2023, we had long-term borrowings with a face value of $1,713.3 million and $1.3 million in outstanding letters of credit under our Revolving Facility.

A hypothetical increase of 1% in the interest rate on the variable rate borrowings under our Term Loan B Facility and Revolving Facility would increase our interest expense over the next twelve months by $8.8 million based on the balances outstanding for these borrowings as of June 30, 2024.

Foreign Currency Exchange Risk

Changes in exchange rates have a direct effect on our reported U.S. Dollar condensed consolidated financial statements because we translate the operating results and financial position of our international subsidiaries to U.S. Dollars using current period exchange rates. Specifically, we translate the statements of income of our foreign subsidiaries into the U.S. Dollar reporting currency using exchange rates in effect during each reporting period. As a result, comparisons of reported results between reporting periods may be impacted significantly due to differences in the exchange rates in effect at the time such exchange rates are used to translate the operating results of our international subsidiaries.

An increase of 1% of the value of the U.S. Dollar relative to foreign currencies when translating our financial results would have decreased our revenues and income before taxes during the three months ended June 30, 2024 by $4.7 million and $0.6 million, respectively. During the six months ended June 30, 2024, an increase of 1% of the value of the U.S. Dollar relative to foreign currencies would have decreased our revenues and income before taxes by $8.7 million and $1.9 million, respectively. This analysis does not account for transactional fluctuations in accounts, such as those driven by purchasing power, which is defined as purchasing foreign goods in the U.S. Dollar but recognizing the cost in foreign currencies. The volatility of the exchange rates is dependent on many factors that cannot be forecasted with reliable accuracy.

In order to manage exposure to fluctuations in foreign currency and to reduce the volatility in earnings caused by fluctuations in foreign exchange rates, we may enter into forward foreign exchange contracts to buy or sell various foreign currencies. Changes in the fair value of these forward contracts are recognized in earnings in the period that the changes occur or in the period in which the hedged transaction affects earnings for derivatives classified as non-hedged or hedged, respectively, as defined in Note 6 — Derivative Financial Instruments in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q. As of June 30, 2024, the U.S. Dollar notional value of our outstanding foreign currency forward exchange contracts was approximately $234.5 million. The fair value of these contracts at June 30, 2024 was an insignificant asset.

We perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our foreign currency forward exchange contracts. To perform the sensitivity analysis, we assess the risk of changes in fair values from the effect of hypothetical changes in foreign currency exchange rates. This analysis assumes a like movement by the foreign currencies in our hedge portfolio against the U.S. Dollar. As of June 30, 2024, a 10% appreciation in the value of the U.S. Dollar would result in a net decrease in the fair value of our derivative portfolio of approximately $0.1 million.

See Part I - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q for a discussion of the impact of the change in foreign exchange rates on our U.S. Dollar condensed consolidated statements of income for the six months ended June 30, 2024 and 2023.

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ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures as such item is defined under Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of June 30, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2024, to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that such information 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. Management necessarily applies its judgment in assessing the costs and benefits of such controls and procedures that, by their nature, can only provide reasonable assurance regarding management’s control objectives.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — Other Information

ITEM 1. Legal Proceedings

A discussion of legal matters is found in Note 12 — Commitments and Contingencies in the accompanying notes to the condensed consolidated financial statements included in Part I - Item 1. Financial Statements of this Quarterly Report on Form 10-Q.

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, 2023.

ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities


Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1)
April 1 - 30, 2024	—	$	—	—	$	875,015,198
May 1 - 31, 2024	553,329	144.54		553,329	795,047,202
June 1 - 30, 2024	617,059	154.01		617,059	700,027,533
Total	1,170,388	$	149.53	1,170,388	$	700,027,533

(1) On April 23, 2021, the Board approved and authorized a program to repurchase up to $1.0 billion of our common stock. Additionally, on September 23, 2021, the Board approved an increase of $1.0 billion to our share repurchase authorization. As of June 30, 2024, approximately $700.0 million remained available for repurchase under our share repurchase authorization. The number, price, structure and timing of the repurchases, if any, will be at our sole discretion and future repurchases will be evaluated by us depending on market conditions, liquidity needs, restrictions under our debt arrangements, and other factors. Share repurchases may be made in the open market or in privately negotiated transactions. The repurchase authorization does not have an expiration date and does not oblige us to acquire any particular amount of our common stock. The Board may suspend, modify, or terminate the repurchase program at any time without prior notice.

ITEM 5. Other Information

The following table shows all directors or officers who adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K, during the three months ended June 30, 2024. Except as shown below, during the three months ended June 30, 2024, no other directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Trading Arrangement

Name and Position

Action

Date

Rule 10b5-1*

Non-Rule 10b5-1**

Total Number of Shares to be Sold

Expiration Date

Andrew Rees,

Chief Executive Officer

Adopt

5/24/2024

100,000

3/23/2026

* Intended to satisfy the affirmative defense of Rule 10b5-1(c).

** Not intended to satisfy the affirmative defense of Rule 10b5-1(c).

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ITEM 6. Exhibits


Exhibit Number						Description
3.1						Restated Certificate of Incorporation of Crocs, Inc. (incorporated herein by reference to Exhibit 4.1 to Crocs, Inc.’s Registration Statement on Form S-8, filed on March 9, 2006).

3.2						Certificate of Amendment to Restated Certificate of Incorporation 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).

3.4						Certificate of Designations of Series A Convertible Preferred Stock of Crocs, Inc. (incorporated herein by reference to Exhibit 3.1 to Crocs, Inc.’s Current Report on Form 8-K, filed on January 27, 2014).

4.1						Specimen Common Stock Certificate (incorporated herein by reference to Exhibit 4.2 to Crocs, Inc.’s Registration Statement on Form S-1/A, filed on January 19, 2006).

10.1*†						Employment Offer Letter dated December 22, 2021 between Crocs, Inc. and Rick Blackshaw.

10.2*†						Settlement Agreement and General Release dated May 23, 2024, between Rick Blackshaw and HEY DUDE inc.

10.3*#						Employment Offer Letter, dated April 30, 2024, between Crocs, Inc. and Susan Healy (incorporated herein by reference to Exhibit 10.1 to Crocs, Inc.’s Current Report on Form 8-K, filed on May 7, 2024).

31.1†						Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act.

31.2†						Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes- Oxley Act.

32+						Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act.

101.INS†						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH†						XBRL Taxonomy Extension Schema Document.

101.CAL†						XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF†						XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB†						XBRL Taxonomy Extension Label Linkbase Document.

101.PRE†						XBRL Taxonomy Extension Presentation Linkbase Document.

104						Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

* Compensatory plan or arrangement.

# Certain exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to supplementally furnish copies of any omitted schedules and exhibits to the Securities and Exchange Commission upon request.

† Filed herewith.

+ Furnished 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: August 1, 2024

By:

/s/ Susan Healy

Name:

Susan Healy

Title:

Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

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Date	Price Target	Rating	Analyst
10/30/2024	$170.00 → $140.00	Buy	Monness Crespi & Hardt
10/30/2024		Outperform → Mkt Perform	Raymond James
10/9/2024	$182.00	Buy	Guggenheim
8/23/2024	$170.00	Overweight	Piper Sandler
8/2/2024	$164.00	Strong Buy → Outperform	Raymond James
5/8/2024	$140.00 → $170.00	Buy	Monness Crespi & Hardt
4/1/2024	$167.00	Overweight	Barclays
2/7/2024	$130.00	Overweight	KeyBanc Capital Markets

SEC Form 10-Q filed by Crocs Inc.

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