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 5 of 10)
3-19-2009 @ 10:35PM
Sharon said...
I absolutely love wearing Crocs, I have many of the styles, but currently I must wear the non skid type with no holes on top as its all we are allowed to wear at this time in our work place. The management of the health care facility I work at in Williamsville & owners of several others in the area, are in the process of banning them from being worn. Its acceptable for a blood spill to soak into a canvas sneaker but not ok to wear a washable croc.
3-20-2009 @ 2:29AM
Debra Blair said...
Lisa M... shame on you! Ignorance, intolerance and bigotry ie homophobic, is deplorable! Achey breaky feet happen to many after trying to be a "FASHIONISTA"... comfort, simplicity and common sense.... Go get some girl friend!
3-19-2009 @ 10:42PM
adk2277 said...
Crocs were really popular with nurses, but alot of hospitals are now requiring that shoes have closed toes and heels to control the spread of germs.
3-19-2009 @ 10:58PM
Deb said...
Crocs are crap. My daughter and I have always laughed about them!
3-19-2009 @ 11:15PM
Amymidlo said...
The problem lie in their Managment team, The CEO is Richard Sharp the same CEO that took Circut City down. This guy is problem
3-19-2009 @ 11:31PM
lele said...
I agree that crocs are ugly, but..... after years of swollen feet and aching legs, I bought a pair and I my feet have never swelled again.... I too, am on my feet all day and I would rather go for comfort than looks any day. If you don't likre them, then don't buy them, but for us that crocs make a hard days work alot more tolerable, they are well worth the 30 or so dollars.. I have paid a whole hell of alot more for sneakers that did'nt make a difference at all. I guess I will be one of the MANY that will be buying all the Crocs I can get my hands on if they go under.......
3-19-2009 @ 11:32PM
Beverly said...
I just had gall bladder surgery. The wonderful doctor who did the surgical procedure wore crocs. He could afford any shoe available. He chose crocs. I worked over 20 years at a graphics industry job standing on my feet. I wish crocs would have been available then. WHY? Because they feel great, they wear well and they don't cost $120 plus a pair like other "comfort" shoes. For my sister who is a diabetic, these shoes are saving her feet from possible amputation. Check the health benefits of the medical line of crocs. Don't knock them - someday you may need them.
3-20-2009 @ 12:01AM
Shelly said...
You know your product is in trouble when Facebook has over 1,400,000 members on a group website called "I Know You Think Crocs Are Comfortable, But You Look Like A DumbA___."
3-20-2009 @ 12:39AM
Mirna said...
The very first time I bought Crocs, I was in Hawaii, I bought 1 pair. They were so COMFORTABLE that my aching feet felt like having a massage, they didn't even sweat, or smell. I had to come back to the store and I bought a 2nd pair. They are the only ones who make my size. I don't mind the price, it is very affordable for the quality. I had tried also the FAKE ones and boy my feet STUNK...I LOVE CROCS, I hope they stay.
3-20-2009 @ 12:20AM
Jenny said...
I bought some Croc-like shoes(before there were Crocs) for my sister when she graduated from med school. When CROCS came out with sandals I decided to get a pair and try them. One of the sandals was uncomfortable, so I took it back to the outdoor sporting goods store that I had shopped at MANY times in the past.
The owner explained that they were not allowed to return merchandise to the Croc company, even if it was a problem that was a manufacture defect. That shoes could ONLY be returned directly to CROCS by the customers. I called CROCS and found that they would not refund money under any circumstances. Even in the case of a manufacturing defect, the only option I had was to return them to Croc at my expense for repair and return which could take up to 12 weeks.
I threw the sandals away and hoped for the demise of a remarkably anticustomer corporate wannabe company.
3-20-2009 @ 12:35AM
Ruth Baker said...
I LUV crocs. I don't care how they look...that's just vanity. Shoes should be comfortable and they are the most comfortable shoe I have ever worn.
I can't imagine having such a small , petty, boring, nothing life that I would even notice someone elses shoes. I dress for comfort, not to please other people. What an awful life that would be...always worried about what other people think and wondering if they approve of what I am wearing. That's no way to live.
I hope Crocs never goes out of business. I own several pairs and I buy them for everyone in my family... so I'm doing my part to keep them in buisiness.
3-20-2009 @ 12:40AM
Tabbie said...
everyone bitches and complains.. Of how NOTHING is made in the U.S.A. anymore.. well them shoes that they are slamming.. Are made here.. by hard working people in the State of CO and LA.. so what.. you do not like the shoe.. don't buy them.. Go but a pair of Nike. or jump on over to Wal Mart. but yourself a $10.00 pair of shoes.. then sit back and wonder why America is in the toilet?? well there you go..
I live in Boulder Colorado.. I see what this company does for the community, the workers, the environment. But, To some. they are just ugly.. Ask a nurse.. or a Doctor.. That is saving your ass.. in the Emergency Room. because you have not walked 3 miles in 3 years.. look down while he is saving your worthless life. what kind of show is he or she wearing?? humm. I am sure. it is not a $10.00 pair of shoes from the local Wal-China..
3-20-2009 @ 1:21AM
Freida said...
I also wear the Crocs and would not be without. I am senior citizen and have diabetes and some other physical problems. To take care of the smelly problem, I use foot powder and light weight low socks. I guess that the fashion police will be after me for that.
3-20-2009 @ 1:24AM
Tootsie said...
I have never seen the real thing at a Wal-mart
3-20-2009 @ 4:30PM
undrgrndgirl said...
too bad...i never liked them, but i know nurses and doctors who swear by them...and crocs was giving shoes to poor folks all over the world...guess that's what happens to a company that tries to do good !!
3-20-2009 @ 2:33AM
TinaBna said...
I am a CROC convert. I absolutely love them after goofing on them for years. They are the absolute most comfortable shoe I have ever worn. And for someone like me with lumbar spine issues, they are a Godsend. Since last Spring I have acquired 5 pairs in different styles and colors. I just ordered 2 more pairs and I vow to singlehandedly keep the CROCS Co. afloat for years to come. Pleaseeeeemdon't knock them until you have walked in them. As for style..I will take comofrt over style anyday. Love me..love my CROCS!
3-20-2009 @ 2:58AM
keith591 said...
Try Allheart.com croc like clogs. They are actually more comfortable and they cost way less. I work on my feet all day. They are the best shoes I have found.
3-20-2009 @ 3:38AM
craftyangel43 said...
I usually don't comment here only just read them, but after reading what some people have wrote about the Crocs I felt that I had to. I used to be one of those people that always said I would never wear those ugly shoes and didn't until this past fall after I was diagnosed with a pain disease called CRPS (complex regional pain syndrome). I have this disease in my arms and in one foot so far. My foot is so tender that I can hardy stand to touch it. So wearing my normal shoes is out of the question. A friend of mine who has the same disease told me about wearing the Crocs so I gave them a try and yes they have been a lifesaver. So to those of you that say you wouldn't wear them because they are ugly that is your choice. Just remember some of us don't always have the same choices as you do for if it werent for these shoes we wouldnt be walking right now. We would be being pushed around in wheelchairs. And I dont know about the others, but I'm not ready for that quite yet. So don't knock things until you try them. The best thing to do is to just keep your mouth shut...lol. Have a blessed day and keep the Crocs coming.
3-20-2009 @ 4:37AM
katysmom said...
I'm a nurse of 18 years traveling around the country and in every hospital I have worked in ,the shoe of choice has been the Croc.( Never heard of any injuries if you wear them correctly). About 5 years ago I had such severe foot and ankle problems that my orthopedist and neurologist were recommending surgery to correct nerve and muscle damage from standing for 12 hour shifts 4 or 5 days a week. (yes ,all us critical care nurses are overworked). I had been spending upwards of $500.00 a year trying to find shoes that would stand up to the workout I was giving them and not leave me in agony by the end of my shift. My MD recommended the Crocs (not the cheap knockoffs at Walmart) because some of his other patients had had success in correcting foot and ankle problems. I was very skeptical but was willing to try anything to keep from having surgery. Halleluha!! Within 6 months a repeat MRI of my feet showed almost complete reversal of the previous damage and I was working with almost no pain. Who cares what they look like. I now own 6 pairs including sandels and recommend them to all the hard working nurses I know!!!
3-20-2009 @ 9:06AM
Greg said...
Oh no! Gotta run out and buy as many pairs that I can get. Yes, they may not be the prettiest shoes in the world. However they have to be the most comfortable in the world. I love them and have since I bought my first pair. Not only did they help my foot and ankle pain but my lower back pain as well. And let's not forget convenience. They are perfect for slipping on quickly to take the dog out etc. I seriously would be lost without mine.