Sunday, December 29, 2013

Crocs Announces Financial Partnership with Blackstone


Crocs, Inc. Announces Financial Partnership with
Blackstone, Expands Share Repurchase Plan, Announces CEO

Dec 29 at 22:00

Blackstone agrees to purchase $200 million of Convertible Preferred Stock

Share Repurchase Authorization Increased to $350 Million

John McCarvel Announces Retirement

Company Reaffirms Low End of Prior Fourth Quarter Guidance

Expects Revenue of Approximately $220 million and Loss of 23 cents per
Diluted Share

      NIWOT, Colo., Dec. 29, 2013 /PRNewswire/ -- Crocs, Inc. (NASDAQ: CROX)
today announced that an investment fund affiliated with Blackstone has agreed to
purchase $200 million of newly issued series A convertible preferred stock
(the "Preferred Stock").
      In connection with the investment, Crocs intends to revise its capital
structure to accommodate a $350 million stock repurchase program approved by
its board of directors. This includes using the net proceeds of approximately
$180 million from the Preferred Stock as well as excess cash to fund the
repurchase plan.  "We will add $200 million of long-term non-publicly traded
preferred equity and the stock repurchase program, when completed, will reduce
our publicly traded common stock float by approximately 30% (at today's market
price), while maintaining a strong net cash position on our balance sheet.  We
expect these initiatives to reduce volatility in both our common stock price and
our shareholder base and provide a strong foundation to unlock long-term value
for our shareholders," said Jeff Lasher, Crocs chief financial officer.  "We've
been unable to repurchase stock while negotiating this transaction, but we now
expect to do so beginning in the first quarter of 2014.  We intend to be
patient, methodical and opportunistic as we execute this expanded buyback plan."

      The Preferred Stock will have a 6.0% cash dividend rate and is convertible
into shares of common stock at a conversion price of $14.50 per share.  This
conversion price represents a 9% premium to the closing price of $13.33 per
share on December 27, 2013, and a 10% premium to the 30-day average closing
price of $13.19 per share.  On an as-converted basis, the Preferred Stock will
represent 13.8 million common shares, or approximately 13% of the fully-diluted
common shares outstanding after giving effect to the issuance.
      At any time after three years from the issuance date, if the closing price
of Crocs common stock equals or exceeds $29.00 (i.e., 200% of the conversion
price) for a period of 20 consecutive trading days, then the shares of Preferred
Stock will, upon notice from Crocs, convert into shares of common stock.  At any
time after eight years from the issuance date, Crocs will have the right to
redeem, and the holders of the Preferred Stock will have the right to require
Crocs to repurchase, all or any portion of the Preferred Stock at 100% of the
stated value plus any accrued but unpaid dividends.
      Consummation of the investment is subject to the satisfaction of customary
closing conditions, including expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act, and is expected to close in
January 2014.
      John McCarvel also announced his intention to retire as president, chief
executive officer and board member on or about April 30, 2014.  "It has been an
honor to be part of the Crocs global team for the past decade and to lead it
since 2010," Mr. McCarvel said.  "We've made tremendous progress as a company
over these past 10 years - from a one-season, one-shoe, and one-country brand to
a diversified, four-season global footwear leader that is on solid financial
footing.  The investment by Blackstone is a vote of confidence in our company
and our brand, and Crocs will benefit from Blackstone's financial, consumer,
retail and brand experience and relationships."  The board has begun an outside
search for Mr. McCarvel's replacement.
      "John's contributions to this company are immeasurable," said Thomas J.
Smach, Crocs chairman of the board.  "As our CEO, he led a turnaround of Crocs
and established it as a profitable, diversified company with more than $1
billion in annual revenue, strong cash flows, and a robust balance sheet with
more than $300 million in net cash.  Under his leadership, Crocs has grown
into a global branded company that employs 4,500 people and sells over 55
million shoes per year in more than 90 different countries.  On behalf of the
company's employees and directors, I would like to extend our appreciation and
gratitude to John and wish him and his family continued success as he pursues
his personal endeavors."
      With its investment, Blackstone will be entitled to two seats on the Crocs
board of directors.  "We expect Blackstone to contribute a great deal of value
to our board through its financial, consumer, retail and brand experience and
its global footprint," Mr. Smach said.  "While Blackstone's investment will
represent only 13% as-converted ownership at closing, we believe our company,
shareholders, and employees will benefit from 100% of the firm's focus,
resources, expertise and efforts to create shareholder value.  We believe this
transaction provides a fantastic opportunity for our shareholders to participate
alongside Blackstone and benefit from its efforts to realize very attractive
future returns."
      Prakash Melwani, Senior Managing Director and Chief Investment Officer of
Blackstone's Private Equity Group said, "Blackstone sees tremendous opportunity
in the Crocs brand and global franchise. The company has the infrastructure and
products to enable continued growth across the wide range of geographies and
channels through which it operates.  We believe our consumer and retail
investing experience coupled with the network of value-added resources within
Blackstone will make us a strong partner for Crocs.  We look forward to working
with the Crocs Board to deliver compelling long-term value to the company's
      "The partnership with Blackstone provides access to new resources and
additional experience that we believe will positively and meaningfully impact
the company's future performance," Mr. Smach added.  "As we look forward, 2014
will be a significant transition period for the company.  We will recruit a new
CEO who will work with the reconstituted board to refine our short-term and
long-term strategic plans, which will include a sharper focus on earnings growth
with less emphasis on top-line growth.  We will focus on improving financial
performance, particularly in the Americas and Japan, as well as enhancing our
global retail execution.  As we increasingly focus on profitable growth and
retail excellence, we may moderate the pace of our investments in new retail
stores; however, we remain focused on creating long-term value for Crocs
shareholders.  Over time, we intend to further elevate our brand positioning by
enhancing our consumer-driven marketing and distribution strategies and
      Fourth Quarter Guidance
      Crocs also updated its fourth quarter 2013 outlook and currently expects
revenue to be at the low end of the previously provided guidance range of $220
million and $225 million, and diluted loss per share to be at the low end
(meaning the higher loss) of the previously provided guidance range of ($0.20)
and ($0.23). Excluded from this outlook are all costs and expenses associated
with the Blackstone transaction, the tax expense associated with the
repatriation of excess foreign cash, charges associated with separation
agreements, retail store impairments, other asset impairments and legal
reserves.  We expect these aggregate charges in the fourth quarter to be in a
range of $47 million to $52 million, which is an additional loss per diluted
share of $0.45 to $0.50.  The cash portion of the aggregate charges in the
fourth quarter is estimated to be in a range of $20 million to $25 million.
While not currently estimable, we expect additional restructuring charges may be
necessary in 2014 as we refine our strategic plan.
      Moelis & Company LLC is acting as financial advisor and Perkins Coie LLP
is acting as legal counsel for Crocs.  Piper Jaffray & Co. is acting as
financial advisor and Simpson Thacher & Bartlett LLP is acting as legal counsel
for Blackstone in connection with the investment.
      About Crocs, Inc. Crocs, Inc. is a world leader in innovative casual
footwear for men, women and children. Crocs offers several distinct shoe
collections with more than 300 four-season footwear styles. All Crocs(TM) shoes
feature Croslite(TM) material, a proprietary, revolutionary technology that
gives each pair of shoes the soft, comfortable, lightweight, non-marking and
odor-resistant qualities that Crocs fans know and love. Crocs fans "Get Crocs
Inside" every pair of shoes, from the iconic clog to new sneakers, sandals,
boots and heels. Since its inception in 2002, Crocs has sold more than 200
million pairs of shoes in more than 90 countries around the world. Visit for additional information.
      About Blackstone Blackstone (NYSE:BX) is one of the world's leading
investment and advisory firms. Blackstone seeks to create positive economic
impact and long-term value for its investors, the companies they invest in, the
companies they advise and the broader global economy. Blackstone does this
through the commitment of their extraordinary people and flexible capital. Their
alternative asset management businesses include the management of private equity
funds, real estate funds, hedge fund solutions, credit-oriented funds and
closed-end mutual funds. Blackstone also provides various financial advisory
services, including financial and strategic advisory, restructuring and
reorganization advisory and fund placement services. Further information is
available at
      Special Note Regarding Forward-Looking Statements The matters regarding
the future discussed in this news release include "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements include, but are not limited to, statements regarding the
investment by Blackstone, its expected closing date and benefits and future
revenue, earnings, charges and outlook. These statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performances, or achievements expressed or implied by the
forward-looking statements. These risks and uncertainties include, but are not
limited to, the following: successful closing of the investment by Blackstone
and achievement of its potential benefits, macroeconomic issues, including, but
not limited to, the current global financial conditions; the effect of
competition in our industry; our ability to effectively manage our future growth
or declines in revenue; changing fashion trends; our ability to maintain and
expand revenues and gross margin; our ability to  accurately forecast consumer
demand for our products; our ability to develop and sell new products; our
ability to obtain and protect intellectual property rights;  the effect of
potential adverse currency exchange rate fluctuations and other international
operating risks; our ability to open and operate additional retail locations;
and other factors described in our most recent annual report on Form 10-K under
the heading "Risk Factors" and our subsequent filings with the Securities and
Exchange Commission. Readers are encouraged to review that section and all other
disclosures appearing in our filings with the Securities and Exchange
      We do not undertake any obligation to update publicly any forward-looking
statements, including, without limitation, any estimate regarding revenues or
earnings, whether as a result of the receipt of new information, future events,
or otherwise.
      SOURCE Crocs, Inc.

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