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.











Reader Comments (Page 1 of 10)
3-19-2009 @ 7:35AM
Kerry said...
How this company accquired that amount of money is beyond me. Don't like Crocs never liked Crocs.
3-19-2009 @ 12:53PM
Iridium said...
Crocs were the biggest rippoff product of all time. They are $1.99 shower sandals from China.
When we looked into bringing them to the US market a few years before Crocs took off we could buy a pair for $.78 landed.
What is amazing is that Crocs could blow that mouch money when the profit margins are that high. The people running Crocs have to be greedy bastards that overvalued themselves and spent too much of the profit on themselves.
Really $35 for a $.79 shower sandal and you go bankrupt.
3-19-2009 @ 4:27PM
dfpfwau said...
We love Crocs. They are comfortable and assist with foot issues. If the product was made in the USA and priced reasonably, it would still be viable. Going offshore to manufacture and greedily hording the revenue is putting the company in dire straits. Shame, shame.
3-19-2009 @ 2:38PM
Sharon said...
I don't believe the person that calls Crocs a 'shower sandal' has a true concept of what the Crocs shoe is. Until someone has been in an occupation they work on their feet, or have issues with their feet, they cannot truly appreciate what the Crocs shoe can do. I am a chef, I work on my feet on a hard commercial kitchen floor......I have Crocs, I have knock off Crocs. There is no doubt in my feet and legs when I have worn knock off brands instead of the real thing. That's how good the real Crocs are. I don't care how they look, I care about my comfort of being on my feet and making it through without pain at the end of the night.
what ever colors I bought in knock offs, I've slowly replaced with the real thing.
I hope Crocs maintains a long and healthy future.
3-19-2009 @ 2:27PM
Biancuh Cutiepie said...
This should have never been a fad. Ugliest shows i've ever seen in my life.
3-19-2009 @ 2:28PM
Blackdog said...
The biggest problem this company faced in 2008 was the media blizt about the "dangers" of crocs. It was all over AOL and the internet where people were getting their Crocs caught up the escallators. I believe many people stopped buying them because of this and also because they are just plastic shoes and feet sweat really bad in them. I don't think they were really good to begin with.
3-19-2009 @ 3:14PM
linda said...
let me add to the "misinformation"
first of all i am a retailer and have sold crocs.... thousands and thosands of them since they became popular. and i have first hand knowledge about the product , the company and what they did right and what they did wrong. it would make a great thesis for some entrepenurial business course.
3-19-2009 @ 2:35PM
Alison said...
At best, Crocs should have been one shoe offered in an entire shoe company's product line of many, many types of shoes. How an entire company can be based on a fleeting fad is beyond me. That it even lasted this long is impressive.
3-19-2009 @ 2:38PM
adam said...
A few years back during their boom time I tried getting Crocs in my small retail chain. They told me they weren't interersted, they were going after bigger accounts. I guess arrogance eventually has a way of catching up to you no matter how big you are at the time.
3-19-2009 @ 4:31PM
plake80 said...
crocs are the best!!!!! don't knock them till you try them. i have 12 pair and wear them just about everyday. they are the best thing for a bad back. may not be the best looking shoe, but they are the best for your body!!!!
3-19-2009 @ 3:37PM
Sheryl Cox said...
Hail Sharon! I totally agree that Crocs are the real deal when it comes to being on your peds all day. I have a permanent back injury that makes standing for any length of time unbearable. But when I have my Crocs on, my stamina is far greater.
And as for "fashion", what normal, self-respecting person cares anyway! We're fine in whatever we wear. And in my opinion, comfort ranks higher than most any other factor in my wardrobe. You can always look nice without being "chic".
3-19-2009 @ 3:15PM
linda said...
...see prev comment. to say crocs is a 2.00 shower shoe just shows the ignorance of the commentor. yea a hundai and a mercedes are both cars but
hardly the same quality...the flip flops were fabulous, comfortable, anti-microbe
(no athletes foot!) you cheapos wish all that knock off crap was "the same" but its not... and i saw hundreds of bleeding, blistered feet coming in wearing the knockoffs who learned the hard way...you get what you pay for... crocs was a quality, comfortable, evolving product. in 25 years of retail i have NEVER had a product with universal appeal to men, women, children, teens...last jazz fest in new orleans i sold 15000 pair... no darling it wasn't just another 2.00 shower shoe....demand/production and corporate sell -offs and incompetant management did them in but it was a fascinating ride to the top that started with a few guys doing business at a sportsgear show
right here in the good ol usa ( slidell louisiana and boulder colorado) hooray for the american entrepeneur!
3-19-2009 @ 3:16PM
gorjing said...
The truest statement was made in the second paragraph of this article, it was a fad. Fads on last a short time ie disco
3-19-2009 @ 3:20PM
Just C said...
I agree with the Chef who commented about comfort over style. I am young, but I had diabetes that went undiagnosed resulting in nerve damage in my feet. Regular shoes leave my feet and legs acheing after extending time walking or standing. After discovering Crocs I found that I could stand and walk for long periods of time because of the cushion and 'bounce' that the Crocs give that other shoes and knock off brands of crocs do not give. I gave a pair of Crocs to my elderly father. At first he looked at me like I was out of my mind. I know he had thought my Crocs were ugly shoes and totally ridiculous. Then at my urging he hesitantly tried them on. I could instantly see on his face that he finally realized WHY I wore those gosh ugly shoes. lol! He wears his pair all the time now. In fact, I need to replace them. I hope I can still find them!
3-19-2009 @ 3:23PM
cher said...
Well, is anyone surprised crocs are no longer trendy? I know a man who wore these dopey things & could not understand why he could not pick up women. I have a knock off pair I keep outside at the back door to get the mail, paper, or take the garbage out. They are ok for that, but men please...don't wear those silly things anywhere anytime.
3-19-2009 @ 3:38PM
angel said...
I went to WAL-MART to buy a new set of crocs for summer. A must for running out the door.The pool. ect... They do not have them this year!!! I'll keep looking, the faux ones are not nearly as good.
3-19-2009 @ 3:40PM
linda said...
we still sell crocs and will continue to sell them to doctors nurses waiters waitresses, chefs and anyone else on their feet all day. we are in new orleans but we ship...call 1-800-352-3206 if you can't find your crocs and we will try to get them for you!
3-19-2009 @ 3:44PM
wyckedwonderful said...
I wear Crocs to work because I am also on my feet all day. Sharon is right--you CAN tell the BIG difference between real Crocs and .78 cent shower sandal knock-offs.Yes, they are ugly. Yes they look cheap, but I know one thing--I wouldn't give mine up for anything. Sneakers leave me with back-aches and leg cramps after 12 hours on my feet. Crocs are like walking on homely little clouds. I too hope they stay around for quite awhile. In case they don't--I am ordering 5 pairs as soon as I finish this entry.
3-19-2009 @ 3:51PM
katiepeavy80 said...
Thank goodness! I don't care how comfortable they are, they're ugly and look stupid. Other than gardening or picking up dog crap in the yard, I would never wear them out of the house. Well, you know what they say about opinions, everyone has one.
3-19-2009 @ 3:52PM
maggie said...
angel, if you were buying them at Wal=mart, you were buying the knock offs and not real Crocs.
I love my Croc flip flops, most comfortable footwear that I own.