Crocs inks financial partnership with Blackstone

Crocs has announced that an investment fund affiliated with

Blackstone has agreed to purchase 200 million dollars of newly issued series A convertible preferred stock. In connection with the investment, Crocs intends to revise its capital structure to accommodate a 350 million dollars stock repurchase program approved by its board of directors. This includes using the net proceeds of approximately 180 million dollars from the Preferred Stock as well as excess cash to fund the repurchase plan.

“We will add 200 million dollars 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 percent (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.

The Preferred Stock will have a 6.0 percent cash dividend rate and is convertible into shares of common stock at a conversion price of 14.50 dollars per share. This conversion price represents a 9 percent premium to the closing price of 13.33 dollars per share on December 27, 2013, and a 10 percent premium to the 30-day average closing price of 13.19 dollars per share. On an as-converted basis, the Preferred Stock will represent 13.8 million common shares, or approximately 13 percent of the fully-diluted common shares outstanding after giving effect to the issuance.

In a separate development, John McCarvel 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,” McCarvel said, adding, “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 McCarvel's replacement.

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 dollars and 225 million dollars, and diluted loss per share to be at the low end (meaning the higher loss) of the previously provided guidance range of (0.20 dollars) and (0.23 dollars). 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. Company expects these aggregate charges in the fourth quarter to be in a range of 47 million dollars to 52 million dollars, which is an additional loss per diluted share of 0.45 dollars to 0.50 dollars. The cash portion of the aggregate charges in the fourth quarter is estimated to be in a range of 20 million dollars to 25 million dollars.