卡洛馳 (CROX) 2014 Q4 法說會逐字稿

Welcome to the Q4 2014 Crocs Incorporated Earnings Conference Call.

(Operator Instructions)

I would like to remind everyone that this conference is being recorded.

It is my pleasure to turn the conference over to Brendan Frey.

Mr. Frey, please go ahead.

Thank you, and thank you, everyone, for joining us today for the Crocs fourth quarter and full-year 2014 earnings conference call.

After the close of the market we announced our fourth quarter and full-year 2014 financial results.

A copy of the press release can be found on our website at www.crocs.com.

We would like to remind everyone that some information provided in this call will be forward-looking and accordingly are subject to the Safe Harbor Provisions of the federal securities law.

These statements include but are not limited to, statements regarding future revenue and earnings, prospects and product pipeline.

We caution you that these statement are subject to a number of risks and uncertainties described in the risk factors section on the Company's 2013 report on Form 10-K filed on February 25, 2014 with the Securities and Exchange Commission.

Accordingly, all actual results could differ materially from those described on this call.

Those listening to the call are advised to refer to Crocs' annual report on Form 10-K, as well as other documents filed with the SEC for additional discussions of these risk factors.

Crocs is not obligated to update these forward-looking statements to reflect the impact of future events.

The Company may refer to certain non-GAAP metrics on this call.

Explanation of these metrics can be found on the earnings release filed earlier today and on our investor website, once again, at crocs.com.

Joining on the call today are Gregg Ribatt, Chief Executive Officer; Andrews Rees, President; and Jeff Lasher, Senior Vice President and Chief Financial Officer.

Following their prepared remarks we will open the call for your questions.

I will now turn the call over to Gregg.

Thank you, Brendon.

Good afternoon, everyone, and thank you for joining us today.

As you know this is my first earnings call with Crocs having joined company in late January.

I'm very excited to be here and look forward to working with our shareholders, our dedicated employees and our many important constituents.

This is a dynamic time at Crocs, and, despite some of the challenges we face today, we are confident about our future and the opportunity to transform Crocs into one of the leading casual lifestyle footwear companies in the world.

This afternoon, we announced our fourth quarter and full-year 2014 financial results.

2014 revenues were $1.2 billion, and non-GAAP adjusted net income attributable to common stockholders was $50 million.

We delivered fourth quarter sales of $206.5 million, in-line with expectations.

Revenue was essentially flat to last year on a constant currency basis across all regions, including the Americas, Europe, Japan and Asia with the exception of Latin America and China.

We expect to see material progress in both of these markets in Q2, based on actions already taken.

Net loss for the quarter was $56.9 million.

We had one time and special items totaling $26.8 million resulting in a non-GAAP adjusted net loss attributable to common stockholders of $30 million.

Jeff will go into our results in greater detail later in this call.

We continue to execute the turnaround strategy we laid out in July.

These efforts are critical to our plan to position Crocs for sustained future success and include strengthening the Crocs brand; elevating our product stories while eliminating non-core categories; evolving our international business model to focus on our six most important markets, while at the same time, leveraging best-in-class partners in the rest of the world; strengthening our relationships with key wholesale partners, improving are direct to consumer capabilities and performance; simplifying our operations and processes and building a best-in-class [theme].

We've made significant progress on all of these initiatives.

Having said that, we do face a number of challenges as we enter 2015.

Some of which we can't influence such as the strong US dollar and the speed recovery from the slowdown at the West Coast ports.

Others we can most definitely improve upon such as the ongoing challenges in our China business.

In a few moments, Andrew will review the progress we're making across our strategic initiatives while Jeff will review our financials including the impact of currency.

Before I hand things over to Andrew, I'm particularly excited about two new initiatives which represent some of the future opportunity and direction we see at Crocs.

First, in April, we are launching our largest marketing initiative in the Company's history.

Our new brand platform, find your fun, will launch in early April.

The concept was enthusiastically received by our wholesale accounts at platform last week.

And, second, one of our new product launches, the [free sale] an update to one of our women's clogs featuring a more tapered [lift] is showing an extremely positive initial response, albeit based on only one month of selling.

We've made great progress over the last six months in repositioning Crocs for the future.

While there is still much to do, the opportunity is enormous, and I'm excited about and confident in our strategy, our team and our ability to transform the Crocs' brand and business to reach its full potential.

And now Andrew will highlight some of the details of our turnaround efforts.

Thank you, Gregg.

Gregg outlined our strategy for repositioning Crocs which is well underway.

Let me highlight the major initiatives, the progress we have made, and our plans going forward.

Elevating the brand, we are finalizing our new global marketing campaign, find your fun, which will build on what consumers have identified as our key brand attributes.

The campaign is designed to reignite excitement and relevance for Crocs celebrating our core clog silhouette while showcasing our broader range of casual lifestyle footwear.

The campaign will roll out during spring 2015, supported by an overall increase in marketing spend of more than $10 million and a 50% increase in working media directed at our end consumers.

Focusing on our core products, having exited our non-core businesses, Crocs Golf, Ocean Minded and apparel, we are focused on core molded and casual lifestyle footwear.

The impact of Michelle Poole and her team who joined as Senior Vice President of Global merchandising in July, will be fully seen in spring 2016 product line.

We have made changes to our future merchandising calendar extending our spring season from six to eight months, flowing product more frequently within the season to provide continual freshness on the sales floor.

Focusing on our six key markets.

We are focusing our efforts and investment on our sixth largest markets which represent roughly 70% of overall revenues and profits, the US, Japan, China, Korea, Germany and the United Kingdom.

As Gregg noted, we continue to address our challenges in China.

We are focused on driving sales per door and profitability of the business.

We have closed stores, cleaned up distribution and put in programs to move through excess inventory.

We have new leadership in place and a new promotional plan for spring 2016 to drive sell-through.

While we will see substantial declines in Q1, the declines will moderate in Q2, and we expect a return to growth in the second half.

In accordance with our strategy, we're evolving our business model in a number of the rest of world markets to reduce our direct investment and improve our profitability, the most significant of these thus far being Brazil and Taiwan.

We will continue this transition process during 2015 and ensure we build a network of best-in-class business partners.

Building stronger relationships with key wholesale accounts, we are implementing a series of top to top meetings with our key wholesale accounts, allocating some of our increased marketing funds to core programs, enhancing our line building and product creation process to incorporate feedback from accounts earlier in the process, This will have the impact of strengthening relationships, product sell in and eventually, and most importantly, sell-through.

Improving our direct-to-consumer capabilities and performance, we have made great progress in trimming our direct-to-consumer operations.

In 2014, we closed 114 retail stores which, while, adding to top-line sales contributed little to overall earnings.

We will continue this process in 2015, expecting to close another 65 stores while only opening 35 new ones.

We streamlined our e-commerce business with the closure of nine smaller international sites.

We will capture some portion of these sales in markets within Europe through our .EU pan-european site, while in other markets we have made Crocs available within leading multi-brand retailer sites.

Having reduced our direct to consumer network for greater efficiency, we will focus on improving comparable store sales in 2015.

Under a new retail leadership team, a number of initiatives are underway to improve the performance of our stores, including, new retail management systems, closer management of inventory and in-stock position, creation of a continuous flow of new merchandise in stores to keep them fresh and drive return customer visits, centralizing and streamlining operations while building a best-in-class team.

We have made great progress in centralizing and streamlining key processes.

Global marketing has been centralized to provide clear and consistent brand positioning and messaging.

Similarly, centralized product creation will deliver a streamlined product portfolio, creating supply chain efficiencies, saving both cost and time.

As we centralized and streamline processes, we are able to eliminate approximately 8% of non-retail workforce.

Perhaps most important are the improvements we have made and continue to make in our team, during the past eight months we have added key talent including: Gregg Ribatt as Chief Executive Officer in January of 2015; myself as President in June of 2014; Michelle Poole as Senior Vice President of Global Product and Merchandising in August; Bob Munroe as General Manager of our Americas region in October; Claire Conley as Vice President of North American retail in July.

Finally, on Monday, we announced that David Thomson will join us as the newly created position of Senior Vice President and General Manager for Asia, Africa and Middle East, bringing over 20 years of international footwear apparel and consumer experience to the [rell].

Reporting to me, David will oversee a consolidated region which incorporates several of our key markets including, China, Japan and Korea.

One other item to note, in January we launched our new global ERP system, SAP.

While this has been a significant asset, and we still have more work to do, the team has made incredible progress over the last several months, and we feel confident the system will provide both process efficiencies and improved information for decision-making.

While there is still much to be done in 2015, I am very proud of the progress the team has made thus far and confident in our ability to execute the balance of our plans.

Now I will turn it over to Jeff to go into the details of our performance.

Thank you, Andrew.

Today, I will cover our fourth quarter 2014 results and then briefly review the full-year financials including the impact from changes in foreign currency.

I will also spend a few minutes talking about our China business.

Finally, I will walk through some perspectives on 2015.

Revenue in the fourth quarter was in line with our expectations at $206.5 million down 5% from a year ago on a constant currency basis.

We sold 10.6 million pairs in the quarter, a slight reduction from prior year.

The average selling price of our footwear in fourth quarter was $18.87, an 8% reduction from the prior year, primarily, the result of currency and China.

Americas revenue was $103.8 million for the quarter, down 1% in constant currency, caused mostly by a continuation of the slowdown in Latin American volume as discussed earlier in the year.

Retail sales in the Americas increased 3% for the quarter, while e-commerce declined 1% in constant currency.

In Europe, revenues were $36.1 million for the quarter, down 12% but flat on a constant currency basis.

Growth in Europe was driven by wholesale volume increases and higher retail sales partially offset by a reduction in e-commerce revenue, which was down as a result of lower traffic.

Asia revenues for the quarter were $48.8 million.

With the exception of China, our Asia business was flat to prior year on a constant currency basis.

While we saw strong growth in e-commerce volume in China, up double-digits compared to last year, our China wholesale business was down $16 million.

In China, the core issue that we had been addressing is that our distributor partners collectively overestimated sales demand purchasing too much product from us in the first half of 2014.

In the second half of 2014 we worked closely with our partners to address excess inventory in the marketplace.

In addition, we reviewed our distributor partner network and the number of stores they operate to ensure their long term fit and viability.

We expect revenue declines of $25 million in Q1, moderating declines in Q2 in the range of $5 million, and we expect to see growth in the second half in comparison to 2014.

Japan revenues were $17.7 million for the quarter in line with prior year on a constant currency basis.

With the hiring of David Thomson, Japan results will be consolidated into the Asia region going forward.

Turning to our retail operations during the fourth quarter, we reduced our global store count by 25 stores.

In total for 2014, we closed 104 stores and reduced our global store count by 34.

We ended the year with 585 locations.

The stores that we closed in 2014 generated $19 million of revenue on an annual basis but did not contribute significantly to operating income.

We plan on closing 65 more locations in 2015 while opening only 30.

We expect this will further reduce 2015 revenue by $8 million.

This will reduce our global store count by an additional 35 for our year-end 2015 total of 550 locations.

During the quarter, we have made significant progress on our strategic objectives announced in 2014.

The major one-time items associated with these changes include, inventory write-off of discontinued product lines including our Golf, Ocean Minded and apparel; costs associated with the development and launch of our new SAP system that Andrew discussed earlier; asset impairments for retail stores that were closed in the quarter or will be closed in the future.

Specific costs of closing Brazil direct-to-consumer channels; and, finally, restructuring charges associated with staff eliminations and store closures.

As a result the Company took several nonrecurring or special charges that are included in the results for the quarter totaling $26.8 million.

Excluding these items non-GAAP adjusted gross margin for the quarter was 42.6% down 390 basis points from prior year.

The gross margin decline was driven by two key issues.

Approximately one-third of our decline, or 190 basis points, was driven by the impact of the stronger US dollar, and roughly 220 basis points of the decline was related to our issues in China.

In our core adjusted selling and administrative structure, expenses were $124 million, down from $127 million in the prior year including a 2% reduction in direct channel SG&A representing the positive impact of the store closures.

Excluding China, we reduced our quarterly expense structure by $5 million in the quarter on a constant currency basis, consistent with our initiative to increase the efficiency and effectiveness of our global operations.

For the full-year 2014, we experienced revenue growth of approximately 1%.

Unfavorable exchange rates driven by a stronger US dollar reduced revenue by $16 million.

Revenue growth on a constant currency basis was 2%.

Overall strategic changes to our distribution model as we transition to new partners in key countries impacted wholesale revenue by $15 million, including decreases of $10 million in Latin America and $5 million in Southeast Asia.

Turning to the balance sheet at the end of the year, while the Company had an operating loss in the quarter, the improvements in the balance sheet resulted in only a modest use of cash in global operational activities.

Global cash ended the year at $267.5 million.

While the Company had nonrecurring or special charges of $26.8 million in the quarter, cash was impacted by approximately $11.5 million, as the remainder of these charges were from non-cash items.

We used $55.7 million of cash to repurchase 4.5 million shares in the quarter bringing the total shares repurchased in 2014 to 10.6 million.

Inventory at the end of the year was $171 million, slightly higher than 2013 but down substantially from Q3 ending inventory of $203 million.

Accounts Payable were lower than the prior year at $42.9 million as we prepared for the conversion to SAP in Q1.

Accounts Receivable of $101 million decreased from prior quarter and was flat to last year.

One final note on the financials, the weighted average share count used to calculate the loss per share attributable to common stockholders disclosed in the earnings release was $80.9 million.

As a reminder, basic and diluted share counts are the same in a quarter that generates a net loss.

As we enter 2015, while we continue to make great progress on our strategic initiatives, there are three external factors that will impact our global results.

First currency, our cost for footwear products are primarily denominated in US dollars.

We expect he revenue impact of currency in the first half to be about 7%.

As a side note, about 70% of our expense structure is denominated in US dollars while only 35% of revenue is generated in US dollars.

While lower oil prices will impact our product costs in the future, much of it will offset prices increases in our factory.

We do expect to see some margin benefit in the back half of the year in our molded footwear.

The near term benefits of lower oil surcharges will mitigate global shipping inflationary pressures driven by capacity constraints.

Finally, uncertainty around the speed of resolution of the labor issues at the West Coast ports, the delays it has created, has the potential to shift some revenue from Q1 to Q2 and causes extra shipping costs.

In addition, revenue in Q1 will be impacted by several strategic decisions we have made to improve the long-term financial performance of the business.

First, our retail footprint is lower by 34 stores, and we plan on closing an additional 35 stores.

Second, we exited several non-core product lines.

Third, as we mentioned, we anticipate that our China business will be down in the first quarter $25 million.

We expect first quarter revenue to be between $260 million and $265 million, down 12% to 14% on a constant currency basis but essentially flat to last year excluding China, exited product lines and store closings.

We continue to be very confident in our future and expect to show material progress on our results in the coming quarters.

Now, I will turn it back to Gregg for closing thoughts.

Thanks, Jeff, and thank you, Andrew.

As I mentioned at the opening of the call, the transformation of Crocs is progressing well and is on track and will set us up for long term sustained success.

Despite some headwinds in the business we are making great progress on focusing the business, on core products in markets, elevating our product and marketing stories and evolving our organizational structure and talent.

Over the last six months, we have made significant changes in our business model that better positions Crocs to the future.

Over the course of 2015, particularly in the back half of the year, we expect to see some of the benefits of this work.

In 2016 we will see the real value of these strategic changes.

I am confident in the direction in which we are headed and our ability to execute successfully against our plans.

I want to thank the Crocs team across the globe for all their hard work, their dedication and commitment.

We have a very talented team at Crocs, and I look forward to working with all of them as we strive to create one of the leading casual lifestyle footwear companies in the world.

Now, operator, we will open the call up for questions.

(Operator Instructions)

Scott Krasik, Buckingham Research.

Hi, everyone.

Thanks.

Welcome, Gregg.

Thanks, Scott.

Just as you frame the full year view, you are alluding to second half revenues being up.

Maybe help me understand what gives you the confidence around that?

And then, secondly, can you give some idea, Jeff, of the basis point impact from currency on gross margin in 2015?

Thanks.

Sure.

Thanks, Scott.

I'm very excited to be here.

It's obvious with only my fourth week on the job, but I given the benefit for having been on the Board for the last year.

Probably the first thing worth noting is the turnaround strategy that Andrew outlined this past July is on track, and it's going very well.

As you think about the year, we're very excited about our new initiatives, our spring 2015 marketing campaign, the biggest in the Company's history, our new product launches, which we really don't see until late in the year and in a material way, they really don't hit until 2016.

The reaction to the these both internally and with folks we have spoken to have been really, really positive.

They'll both have a meaningful impact on the business.

If you take a step back, outside of currency and China, our business is stabilizing across the globe.

We are addressing the China issue.

We've been after that one for a while.

And we've shifted, as a company, across the board.

We shifted our orientation to profitable growth rather than top-line sales.

That's a big change for the Company.

At the same time, we're simplifying and focusing our business where we can.

When we kind of take a look at 2015 and excluding store closures and discontinued brands and businesses, we expect to grow our business across all regions on a constant currency basis.

The one exception is China, which we've talked a lot about where we see a large decline in the first quarter, and much smaller decline in the second quarter, and then we'll return back to growth in the back half of the year.

I know Jeff will talk about currency in a second, but, as we look at currency, our overall margins in 2015 are expected to be in line with 2014, even with the impact of the strengthening dollar.

We expect gross margins to improve in the second half versus LY and mostly mitigate any declines we see in the first half.

Okay, that's interesting.

And then so gross margin flat for the year.

Then maybe just help me understand why you've gone away from talking about backlog.

Having covered the Company for a while it seemed like it was a pretty good predictor of your wholesale sales?

As we said on the third quarter call, Scott, we've made a decision not to provide backlog at this time, given the challenges that we have had in accumulating those numbers in the past.

We decided not to move forward with those numbers at this time.

Is it safe to say, though, that you're confident about improvement in the back half is supported by some sort of data?

Yes.

Obviously, our backlog information at this point -- Scott, this is Andrew -- is clear for the -- our view on the business close to the first half where we're confident on the guidance that we've provided.

We're currently in the process of selling in and presenting our four holiday products, and we anticipate two things.

One is we're getting good reaction to some of the product we are presenting.

We've got some stabilization improvements in some of our distribution partners around the world as we think about the global business.

And we're also anticipating pulling forward, I think we've highlighted extending our Spring/Summer season to eight months.

We're anticipating pulling forward and making some substantial deliveries against Spring/Summer goods in the back end of the year.

The combination of product reception, strengthening of our partner base and early deliveries of 2016 product gives us some confidence.

And the customers are excited for some of that Spring 2016 product in the fourth quarter of this year.

Interesting.

Thanks very much and good luck.

Thank you.

Thanks, Scott.

Jim Duffy, with Stifel.

Gregg, welcome to you.

Gregg, a question for you.

Could you speak at a high level about the focus for product and merchandising going forward and how that translates to better momentum in both the wholesale business and your own retail locations?

Sure, thanks.

A key part of our strategy going forward, as we look at product is continuing to focus on our molded product.

It's a core part of our strategy going forward.

We are elevating our focus on adding style and innovation to that product as you go forward.

You would not see our marketing campaign as we hit Spring 2015.

You will see that celebrate kind of our core classic silhouette.

That's a big part of helping us to kind of re-invigorate what we think such a critical part of the business going forward.

At the same time we are focused, as I just mentioned, on adding more style and making -- having trend right product that is brand right.

We mentioned -- I mentioned earlier, the free sale which is a small introduction for us, but it's a great new shoe that represents where the brand has been.

And it has tapered lath that is styled differently then we've style things in the past.

The initial reaction is fantastic.

The reason we called that out is not that it is this massive, but it is indicative of when we understand kind of our consumer, when we understand the core components of what the Crocs brand represent, and we build trend right products, we have a huge opportunity to grow our business.

Yes, and, Jim, from a financial perspective if you think about strategy to build around are core molded products, it is the most profitable line that we carry.

And it's really going to help us to offset the currency impacts that we talked about in the script.

So we are really excited about our product line.

Okay.

Great.

And then, I was surprised in the script, I did not hear a mention of the longer-term margin objectives.

Jeff, is the reason we should be rethinking those which you communicated low 50s gross margin and a 12% operating objective?

I think at this time on the gross margin basis, we talked a little bit about it and then, obviously, Gregg answered the question on 2015.

As we get more data for 2016 and 2017, we have a little more information later in the year about future margin perspective.

And I would add, we feel confident we can achieve that 10% to 12% operating margin that we've talked about.

Our focus is achieving that in the intermediate future.

We intend to share more with you, with everyone, later in the year.

Very helpful.

Thanks.

Thank you.

Sam Poser, Sterne Agee.

Thanks for taking my call.

Welcome, Gregg.

Thanks, Sam.

A couple of things.

You said it was sort of in passing that the port disruption may still cause more trouble to the first quarter.

I would assume you know what the port's going to do and then you said later that the port distractions or whatever is going on is reflected at the guidance.

Could it be worse because of the port?

Do you think you have the port problems now that the strike is over -- with you sort of know the flow now?

Sam, this is Andrew Rees.

A great question.

Thank you.

I'd the core situation is still changing day by day.

We're monitoring extremely closely.

We know where all of our product is.

It's sitting boats or on the port, and we're starting to receive deliveries.

I think we factored into the guidance what we anticipate the impact will be, which is a modest slippage of revenue from Q1 to Q2, but it really is changing pretty dynamically.

The only -- Sam, I would add one thing.

We have been working on mitigating this and certainly using Vancouver, and the East Coast and our Mexico operation and air freight where necessary and appropriate.

We've as Andrew mentioned, we've been on this, but it continues to evolve daily.

We've seen a lot more product get released in the last few days, which is a big positive side.

Literally in the last 24 hours we have seen significant changes.

Just to clarify, this guidance regarding the ports impact, when did you last adjust just the commentary regarding the port in your prepared remarks?

Our guidance includes an estimates of the impacts in the delay we're seeing at the ports as of this week.

Okay.

Within the Q1 guidance, are there more write-downs in that number I would assume especially in China?

I think you had $6 million or so in the fourth quarter?

As you know, we only gave guidance for the revenue piece for the quarter.

At this point in time, we feel like our fourth quarter accounting issues are behind us for that particular issue that you referred too.

Okay and then, when do you think your inventories will be in line with sales?

Well, as you know, Sam, it came down on a quarter-over-quarter basis and ended the year at about the same level of inventory that we ended at last year.

We made a number of strategic changes, including SAP and centralization of some of our processes.

We have added some new talent.

We think all of that will help us manage our inventory more effectively in the future, allow us to flow our product in the future and really get a good handle on our inventory throughout the course of the year.

And -- thank you.

And lastly, Gregg, I know you been on the Board for a year.

You just started.

You talked about later in the year.

When do you foresee yourself really addressing the longer-term?

I know it was sort of answered, but when you really see -- can we expect that after the Q1 call?

Do we expect that in the Q2?

When are you really going to sit there and say, okay, here's what I've learned.

Here's where we are so people can really feel comfortable or not as to what potentially what 2016 -- the rest of 2015 looks like, 2016, 2017, so on and that longer-term outlook for the brand.

You've given us a very good general look at it, but when are you going to be able to I guess get a little more specific on it?

Yes, I think are intent is the summer time frame, probably after Q2 to have a more robust conversation about where we are heading and how we are going to get there.

Thank you, good luck.

Thanks so much.

Steve Marotta, CL King & Associates.

Good evening, everyone.

Gregg, I believe you mentioned Brazil and Taiwan, or maybe it was Andrew, and partners in those markets or endeavoring to find partners in the markets.

Have those been found, and have those markets transitioned?

Or are you still actively looking while you endeavor to wind-down operations there?

Thanks, Steve, this is Andrew.

Yes, in both of those markets we have transitioned to distribution partners.

In Taiwan, we had a combination, historically, of our own retail stores and distribution partners.

For wholesale we have closed a number of the retail stores and transferred the rest to our distribution partners.

That will be completed in Q1 of this year.

There is still one or two stores.

In Brazil, the business model was similar.

We had our own direct wholesale business.

We had distribution partners, and we had retail and e-com.

The e-commerce is being transitioned to Netshoes.

And the wholesale business has been transitioned to a number of our partners.

So those -- and that transition is complete.

What are the next two biggest markets slated?

We -- there is a number of markets we have on our radar screen.

They are relatively small, hence, we're looking for distribution partners versus direct business.

I would be hesitant to disclose those, because we are in active disclosures discussions with parties involved in that.

Fair enough.

I have just a couple of housekeeping questions.

There's $200 million remaining on the share repurchase program, correct?

That's correct.

Of the $268 million in cash, how much is overseas?

The vast majority is overseas.

It's reinvested in our International businesses, but we have the ability to bring it back.

And we still maintain an approach on our share buybacks to be patient and methodical in our approach to share repurchases.

Okay.

I guess another way of asking is, do you have the capacity to execute the entire share?

When would you have the capacity to execute the entire share repurchase program without necessitating or patriating a material amount of cash?

Yes.

I will be more specific.

We continue to have the liquidity available to do the share repurchases that we desire to do at the pace we're looking forward to doing it.

That's not a challenge to us.

The approach that we take on the share repurchase is to be patient and to buy back the shares over time.

Okay.

We bought 10.6 million shares in the course of the year, totaled $147 million, including a large amount in fourth quarter for 4.5 million shares.

Okay.

Lastly I know there's a lot of talk about Spring/Summer product.

Obviously Crocs has more of a Spring/Summer flair to it.

Based on when the team transitioned, that the biggest impact of course would be Spring/Summer 2016.

Is there any needle moving event on Fall/Winter product for 2015?

The team in other words had the opportunity to come in and touch that product.

I know that it is seasonally slower.

It's seasonally smaller, but is there anything to potentially be a unit driver in the back half of the year?

Yes, thank you Steve.

There's a couple of things.

One is we are anticipating an impact of our marketing.

We've got a significant marketing program going into the market in the Spring that will also have a follow-up in Fall in North America.

We think there's a traffic impact from reawakening and re-engaging the consumer.

Secondly, I would say there are a number of discrete projects and -- that we have focused on for the Fall/Holiday 2015 season where we see some improvement in the product both in some of our molded product and also some of our casual product.

It's discrete SKUs or elements of the range versus the wholesale renovation of the range.

That's helpful.

Thank you, again.

Danielle McCoy, Wunderlich Securities.

Hi, guys.

Thank you for taking my question.

And welcome on board.

I guess, just going back to the port issues again, is there any -- I don't know how to frame this-- so the product that is over there, since you guys are expanding your Spring/Summer seasons, can we assume that those products might have a little bit longer shelf life and that they would not have to necessarily be marked down compared to some of your peers?

And a little bit more fashion forward and the products have strict lifecycle per a season?

Yes.

I mean, I think the way I would answer that, Danielle is, we think the extension of the Spring/Summer season is a really important strategic initiative that's going to make a big difference.

The way it's going to make a difference is we've artificially probably cut off our seasons historically.

So it'll allow us to make the pre-year end deliveries for Spring/Summer product to us -- to our warmer climates.

And we do a lot of business in warmer Asian climates that can sell our product in a more extended period of time.

So it extends it in the front end.

Probably the biggest actual benefit is on the back-end.

Historically, we made our last delivery of fresh merchandise in May/early June.

And when you think about the wearing occasion for our product, you have got July and August as your biggest wearing occasions or your biggest periods where you are going to be at the beach, at the pool, out and about in Summer product.

Extending towards the back-end of the season allows us to make significant -- allows us to bring newness into those time periods.

We think that extends our season.

And I think a component of it is exactly as you said, we have a longer shelf life on our product so we don't have to be as conservative about the quantities that we introduce.

All right, great.

Thank you guys.

Good luck.

Thank you.

Jim Chartier, Monness.

Thank you for taking my questions.

Andrew, last quarter you talked about the wholesale bookings for Spring by region.

Have there been any material changes over the last three months?

There have been no material -- the only material change that we would highlight is the one we've already talked about, which is some potential slippage from Q1 to Q2 in North America based largely upon delivery and slowdown in the West Coast ports.

Okay.

And then, Jeff, any way you can quantify what the impact of FX if worries remain where they are today on 2015 sales and earnings?

Yes, thanks, Jim.

As we said on the call, we anticipated that FX will have an impact of about 6% in the first quarter, about 7% in the second quarter.

And then, in the back half of the year it will moderate as we start to lap the declines we saw in the end of the year in the latter part of 2014.

Just a reminder, Jim, a 1% movement in both currencies at the end of the year is about $1 million of operating income on an annualized basis if it sustains at that level.

Okay.

And then you had some bad debt expense in the second or third quarter.

Are those behind you?

Any other issues you might have going forward?

Yes.

Thanks, Jim.

When we look at our balance sheets for the end of the year, we are quite happy with the way we have improved our balance sheet materially and reduced our accounts receivable.

In part, we have taken some allowances for doubtful accounts.

We continue to work those very aggressively to work with those partners to collect that, but we think we are appropriately reserved at this point.

And then, any thoughts on pricing to offset some of the currency headwinds?

Yes, what I would say is -- this is Gregg.

We evaluate that on an ongoing basis.

Where we see the opportunity and where it makes sense and in some countries we are doing that on a regular basis.

We are taking prices up.

Great.

Thanks and best of luck.

Thank you.

Erinn Murphy, Piper Jaffray.

Good afternoon.

I apologize, I had a little bit of technical difficulty, so this may have been asked.

One of the questions from your prepared just want to clarify, when you talk about return to growth in the second half, is that on a constant currency excluding any FX headwinds?

And then can you -- I know you're not giving backlog, but if you could provide some context for kind of the building blocks (technical difficulty).

Sure, Erinn, this is Gregg.

When you take a step back and look and look at the business, we're confident where we are headed.

Outside of our China business, our business is growing on a constant currency basis across all regions.

So we feel very good about the direction that we are heading.

While we are not sharing detailed guidance, we do feel the business is making significant progress, and we are confident with the work that the team has done over the last six months.

We're heading in the right direction.

That will get amplified by great marketing and by new product initiatives, which, as each season progresses, that will have bigger and bigger impact on the business.

Operator, I think we've lost Erinn, so I think we go to the next question.

Mitch Kummetz, Robert Baird.

Thanks for taking my questions.

A few things, one I wanted to clarify.

I think when Scott was asking his question, I think it was -- someone said the margins, sort of flat margins for the year.

I don't know if I heard that correctly.

I think maybe, Gregg, you'd made that comment.

If that were the case was that a comment around gross margins or operating margin?

Can you clarify?

Yes, thanks, Mitch.

For 2015, we think there will be margin pressure in the first half of the year as we've talked about.

And the second half of the year we think there's some upside opportunity.

At the end of the year those will balance out.

We are anticipating that gross margins for the year will be roundabout equalized over the course of the year.

We didn't talk to operating margin, specifically.

We just talked to gross margins.

Okay.

Thanks for that.

Maybe just back to Erinn's question about the growth.

I guess, I'm not clear yet still as to whether -- it sounds like your expecting growth in constant currency and not in terms of reported dollars.

Is that fair?

No.

In the back half of the year, we are anticipating that we will see some growth in actual real reported dollars.

Okay.

You guys seem pretty bullish on the marketing to drive that, but it seems like you would still have some headwinds from currency, even though more moderate than the first half maybe in a low too single-digit range.

You would still be seeing some negative impact from closed stores.

You might still be seeing some impact from eliminated non-core products.

I don't know how much of a headwind those -- it sounds like those items are like $50 million -- I'm sorry -- of the $50 million that you are kind of guiding to down in the first quarter, it sounds like China is $25 million.

So the other half or just kind of those items -- do those items become a lot less significant in the back half to get reported dollar growth?

I'm just trying to reconcile that.

Yes.

I think you are thinking about it the right way.

If you take currency to start with, that starts to moderate in the back -- back half of the year because we've obviously started to see those declines in the back portion of the year, so that is a much smaller impact.

And you are absolutely right, look, we've closed a significant number of stores, so we think that will be down, and we're going to lose some revenue there but no profitability.

We have selected -- we have improved our distribution partners in some parts of the world, and we are optimistic that they will continue -- they will grow the business.

We've got in the marketing which we think will drive business in some of the key markets where we own the business and where we are the direct distributor.

We are lapping China in the back half of the business, which because of the issues we've talked about at length, on a wholesale basis actually did relatively little business in the back half of the year.

So we think that's a pick-up.

We've got, I think, some clear line-of-sight to some growth opportunities in the back portion of the year, which offset a moderation of FX, and some of the strategic decisions we've made to shrink the business around stores and some product lines.

Maybe the last question, it sounds like you're going to end the year with 550 stores.

That's down maybe 75 stores from the peak.

Is that the number you are comfortable with, or is there more work to be done there in terms of working through some stores that maybe come off leases?

And also on eliminating non-core products.

You talked a lot about Golf and Ocean Minded.

I'm wondering within the Crocs brand, how much work have you done in terms of reducing SKU count?

Does more of that work still need to be done kind of beyond 2015?

Okay, great.

Let me take those questions in the reverse order.

On a SKU count basis we feel great about where our Spring/Summer 2016 line is in terms of SKU count.

And that's a significant reduction in overall SKU count, but in a given location or given region, so let's take North America, it's not nearly such a dramatic reduction.

Because what was driving a lot of our SKU proliferation was derivatives of the same SKU or different SKUs selling in different regions.

So we've aligned around a coherent global line which will be much more efficient in terms of a SKU count perspective.

So we really think we are kind of set on that as we look at our pipeline in terms of development, and the majority assets that we've undertaken has been - is behind us.

From a store perspective, you are right.

We will be down about 75 stores by the end of the year.

I would say, yes, there are a number of stores that we would like to close still where we are waiting for the leases, or we are waiting for the right opportunity to work with the landlords.

But it's probably -- it's a number that's certainly less than 100, but it's sort of 50 to 75 stores that we would probably target over time.

And we will do that on what is a sensible economic basis.

Great.

That's very helpful.

Thanks, guys.

Thank you.

Scott Krasik, Buckingham Research.

Thank you for taking my follow-up.

Just a couple -- one, Jeff, what is the CapEx planned for 2015?

Yes, so it's also importantly on a housekeeping note, depreciation and amortization as we change over, as Andrew mentioned, when w launched our SAP.

So depreciation and amortization should be in line, 2015 versus 2014.

We anticipated that our CapEx expenditures will be a little bit less than our depreciation this calendar year, as our main focus is getting SAP efficient in our systems.

Okay.

And then just on SAP, you sort of referred to it's in, but there is still work to be done.

Just wanted to make sure you are seeing all of your orders, and it is working as you expected it to.

Yes, yes.

I would describe it as being in the middle of our go live.

It's up and running.

It's working.

We are shipping all of our channels of distribution, wholesale, retail internet in all regions, and it is working.

Okay.

And then just last and randomly, if I go on your website and I at the busy day canvas skimmer, or your A-Leigh wedge which you've had for a couple of years, they are basically sold-out in all colors and sizes ahead of the season.

Is that because of the port delay?

Yes, it is impacted by the port delay.

What I will add is the strategy going forward is to get behind our biggest ideas in a more meaningful way.

That has been a problem with the Company in the past.

One of the benefits of evolving the product creation process that we have in a number of ways, and as Andrew mentioned, the SKU proliferation, often there were multiple SKUs in different regions and hard to tell the differences between the products, but from an inventory management standpoint it became very difficult.

Our focus on these bigger ideas will enable us to have better in stock positions throughout the season and to drive sell-through on an ongoing basis.

Okay.

Thank you.

Sam Poser, Sterne Agee.

Three things.

Jeff, you talk about being patient with the buyback.

The stock is at $10.

What's the -- are you restricted by the number of shares you can buy back at all right now?

What is a good price, because $10 seems like a pretty good price?

I think as we have always said can't we will be patient in buying back.

There are some restrictions on a daily volume, but, we've always said we're going to be patient in the buyback of share repurchases.

We've bought back 4.5 million shares in Q4.

And, Sam, our plan is to continue to maintain a disciplined approach going forward.

That's kind of our orientation.

Okay.

And then secondly, the question regarding the Fall product, between the eight month or expanding Spring to eight months to be able to properly help the Southern United States, Asia and Latin America, I mean, does that -- as you see it, will that -- does that more than offset all of the prior attempts to come up with a really strong Fall-type business?

It mitigates a good deal of that I would imagine.

Yes, it absolutely has a significant mitigating effect, Sam.

I would say that's step one.

And you are right, there have been significant prior attempts to come up with Fall product.

We think we can do an awful lot better.

Step one is expanding Spring and really investing where we are strong and capitalizing on the heritage of the brand and the connectivity we have in our consumers.

Step two is going to be to really do a much better job at developing Fall product that is right for the brand, that's right for our talented distribution and can be successful.

And Sam, I would build on that, Andrew and the team have done a great job of building out the organization and setting us up for success.

As you know, it's not just talent but it's also shorting -- decreasing the product creation calendar so we get closer to market.

It's a whole series of initiatives that we've got going on to enable us to have better product and styles right.

I think you will see a very big impact next year, throughout the year with the right styles at the right time.

Both in the Spring and then in the Fall as well.

You talked about the store closures, the big store -- 34th Street comes to mind as something that's going to be hard to pay for.

Is that something you're working on?

And lastly going back to the buyback for one second.

Jeff, have you bought back any stock since the end of the quarter?

I will let Jeff go first with the buyback.

Yes, we have bought some back since the beginning of the quarter.

And we will give you that first quarter activity in the next call in six weeks, eight weeks.

And on 34th Street, I don't want to comment specifically on any given store but, obviously, it's a very prominent location.

It's a tremendous billboard for the brand, and we do a lot of volume.

Are you making money there?

We're not making as much as we'd like.

All right, thank you.

Thanks, again.

Thanks, Sam.

Now I'll turn the call back to Gregg for final remarks.

I just want to thank everyone for joining us today.

And I want to share with you I look forward to working with everyone in the future.

Thanks, everyone.

Thank you ladies and gentlemen, this concludes today's conference.

Thank you for participating, and you may now disconnect.