Crocs amended its revolving credit facility and suspended share repurchases to preserve maximum liquidity and flexibility amid the COVID-19 pandemic. The company also said its retail stores in North America will remain closed until further notice.
Andrew Rees, president and chief executive officer, shared, “These are unprecedented times that are impacting not only Crocs but our whole society. 2019 was a record year for the Crocs brand and as we started 2020 we were looking forward to another tremendous year of growth. Today, while we are still in a strong position, we are taking precautionary measures for the near term to ensure the health and well-being of our consumers, our employees, our communities and our business. We are confident that these actions will ensure we are in a good position to manage through this crisis and will emerge a strong, vibrant brand.”
Business Outlook
All company-operated retail stores in North America will remain closed until further notice. Many retail stores in Europe are also currently closed in compliance with local regulations. While many stores remain closed, customers may continue to enjoy shopping on Crocs.com. Given the continued disruption and uncertainty globally related to COVID-19, Crocs is withdrawing its first quarter and full-year 2020 outlook provided on February 27, 2020. Crocs will provide a business update during its first-quarter fiscal 2020 earnings call.
Financial Flexibility
As a precautionary measure, the company has amended its revolving credit facility and has suspended share repurchases to preserve maximum liquidity and flexibility during these unprecedented times. The company’s revolving credit facility with PNC Bank, National Association, and a consortium of other lenders was increased to $500 million from $450 million. In addition, the amended credit facility has a modified leverage ratio of 4.00x for the second and third quarters of fiscal 2020, after which the leverage ratio decreases to 3.50x through fourth quarter 2021 and 3.25x thereafter. The credit facility maturity date of July 2024 remains unchanged.
The company maintains ample access to liquidity and expects a first-quarter fiscal 2020 ending cash and cash equivalents balance between $90 million and $100 million with borrowings outstanding on the credit facility of up to $355 million, leaving remaining capacity of approximately $145 million on the $500 million credit facility. During the first quarter of fiscal 2020, the company repurchased 1.6 million shares of our common stock for $39.2 million, at an average price of $25.13 per share.
“Our balance sheet remains strong, but during these times of uncertainty, we feel it is prudent to shore up liquidity and maintain flexibility. We thank our partners for their continued support as we all work through these challenging times,” said Anne Mehlman, executive vice president and chief financial officer.
Photo courtesy Crocs
