Not so long ago, Crocs Inc. (NASDAQ: CROX) was riding high as its rubberized clog-like sandal shoes were the hottest thing in retail.Now the fad has died, sales have fallen through the floor, the economy has tanked and worst of all, the company's auditors have "expressed substantial doubt" about the "company's ability to continue as a going concern." Here's the full-text from the company's newly filed 10-K:
The accompanying consolidated financial statements for the year ended December 31, 2008 were prepared under the assumption that we will continue to operate as a going concern. The report of our registered independent public accounting firm on our consolidated financial statements for the year ended December 31, 2008 includes an explanatory paragraph concerning conditions that raise substantial doubt about our ability to continue as a going concern. We incurred losses of $185.1 million in the year ended December 31, 2008 and experienced a decline in revenues from $847.4 million for the year ended December 31, 2007 to $721.6 million for the year ended December 31, 2008. Continued operations are dependent on our ability to secure adequate financing and maintain a reasonable level of liquidity such that we can timely pay our obligations when due. As of December 31, 2008, we had $22.4 million in borrowings under our loan agreement with the Union Bank of California, N.A. ("Revolving Credit Facility"), which currently has a maturity date of April 2, 2009, and we had $51.6 million in cash and cash equivalents.
The stock tanked on the news yesterday and it's hard to see Crocs' operating results rebounding anytime soon. But here's the thing: Even after the huge loss, Crocs has a book value of $287 million. The current assets are $279 million with total liabilities of $169 million, giving the company a net current asset value of $110 million. The market cap is just $95 million -- and you also get the company's brand and property, plant and equipment.
The issue for Crocs is liquidity in a tight debt market, not solvency. Given that, Crocs appears to be a very strong acquisition target for a strategic buyer who could cut overhead dramatically. But with the company bleeding cash, there is a certain urgency to getting a deal done. The company's board of directors needs to act quickly to find a bigger, better-financed white knight and preserve what's left of Crocs' shareholder value.
The company's days as a hot growth stock that was destined to be the next blue chip are over, but there may be some upside here, if the company will do the right thing. The auditor's "going concern" notice may be just what's needed.
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Reader Comments (Page 10 of 10)
3-21-2009 @ 6:48PM
CC said...
Anyone who works on their feet - chefs, healthcare etc try MBT shoes. Much better for your feet and back than CROCS! Safer in the kitchen as well.
3-21-2009 @ 6:56PM
ron said...
For all you shoe experts, what do you think the cost price on your Nike shoes are?
3-21-2009 @ 6:58PM
CeeCoop said...
I received my first pair of CROCS as a gift from my son a few years ago. The hip pain that I had been suffering went away almost as soon as I put them on. And the back pain is now tolerable most days. I seldom wear anything but CROCS. So PLEASE, don't knock 'em. They may not be the prettiest shoe around but they are a life saver for a lot of people.
3-21-2009 @ 6:58PM
Randall said...
Crocs are O.K. for $30.00 or so, but they wear out too fast. Birkenstocks are just as comfortable and while they'll run you about $120.00 mine have lasted six years and still going strong.
3-21-2009 @ 7:26PM
Parton said...
Now if Uggs could just follow suit!!!! What are you thinking wearing Uggs big ol' boots with the fur like trim and a mini skirt?????? Fashion gods PLEASE don't fail us now!
4-19-2009 @ 4:40PM
Alan said...
Okay Okay with all you Crocs haters out there who keep making the same annoying speech that Crocs only cost 78 cents to produce and that they are so so ugly...blah blah blah! If you can make em so cheap then try. Go out and buy the machines...make the shoe molds in 19 kids-adults sizes which costs thousands...hire sales reps, customer service agents, buy warehouses, hire designers, print catalogues, attend all the wholesale shoe shows, build a show booth, make sample products for reps, and a multitude of other things....and you let me know when you get that production cost down to 78 cents! Bottom line...it cost more to produce a shoe than just the "crocslite" rubber that dumps into a mold...not to mention the shipping from china to boulder...to the distribution center and then to retailers. YES...THE SHOES ARE UGLY...but so are most people IMHO. Most of the prople complaining about how ugly Crocs are might want to look in the mirror. PS-Womens business suits, most American brand tennis shoes, white athletic socks, and turtleneck shirts are ugly too but nobody is complaining about them. And PS-to all the people who think that Crocs have saved your feet you need to look into some local businesses near you who sell actual "comfort" footwear and buy some real shoes! Crocs are glorified "crocslite" rubber. Despite what you think...they have ZERO arch support and they are not the most comfortable thing you have ever worn. If they are then you have never bought a pair of decent shoes in your entire life! Go buy some Merrells, Eccos, Clarks Unstructured Collection, or anything...but for gosh sakes buy some real shoes! I am not a Crocs lover. I admit that I own a store that sells Crocs and I think that they are great CHILDRENS shoes only! Adults look like children in them unless they are strictly buying them for garden shoes. Bottom line...brand name items cost more that nonbrand name items. It is the story of production, greed, desire, and the world! You can buy a Coach handbag for $350 or an off brand leather purse for $85. Same quality just one has the right label on it. It is time to shut up and move on all you Crocs haters. I don't love them either but they are not the first company to produce something in order to make money. All in all...it's time to move on. Kids...keep on wearing Crocs and Jibbitz they are cute, waterproof, and perfect for children. Adults...leave them in the garden and we will all be okay.
5-19-2009 @ 3:06PM
Melissa said...
They may be ugly to some people. However, any shoe that my daughter and I can wear throughout Disney World for 7 LONG days and not have our feet in agony is a blessing. Not to mention they are anitimicrobial (sp?). So, whatever sweating you may do will not makle them stink. I am an avid supporter of Crocs and am saddened that they are in financial trouble. I don't care if they're ugly, they allow me to shop, play all day and remain pain free all at the same time. People who make fun of them obviously have never tried them!