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What changed in Crocs, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Crocs, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+355 added−419 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-16)

Top changes in Crocs, Inc.'s 2023 10-K

355 paragraphs added · 419 removed · 283 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+6 added−8 removed38 unchanged
Biggest changeThe following table illustrates the net change during 2022 in the number of our Crocs Brand company-operated retail stores by reportable operating segment and country: December 31, 2021 Opened Closed December 31, 2022 North America United States 162 9 11 160 Canada 8 — — 8 Puerto Rico 3 — — 3 Total North America 173 9 11 171 Asia Pacific Korea 89 1 1 89 China 34 3 4 33 Japan 13 1 1 13 Singapore 17 — 1 16 Total Asia Pacific 153 5 7 151 EMEALA Russia 26 2 28 — Germany 14 — 3 11 France 2 — — 2 Austria 3 1 1 3 The Netherlands 2 — — 2 Total EMEALA 47 3 32 18 Total 373 17 50 340 During the year ended December 31, 2022, we opened 5 HEYDUDE Brand company-operated temporary clearance stores in the United States, all of which remained open as of December 31, 2022.
Biggest changeThe following table illustrates the net change during 2023 in the number of our company-operated retail stores (inclusive of full-price retail stores, outlet stores, kiosks, and store-in-store locations) by reportable operating segment and country: December 31, 2022 Opened Closed December 31, 2023 Crocs Brand United States 160 7 4 163 Korea 89 3 1 91 China 33 5 2 36 Singapore 16 1 — 17 Japan 13 2 1 14 Germany 11 1 1 11 Canada 8 — — 8 Austria 3 — — 3 Puerto Rico 3 — — 3 France 2 1 1 2 The Netherlands 2 — 1 1 Total Crocs Brand 340 20 11 349 HEYDUDE Brand United States 5 9 — 14 Total HEYDUDE Brand 5 9 — 14 Total 345 29 11 363 Business Segments and Geographic Information We have two reportable operating segments: the Crocs Brand and the HEYDUDE Brand.
We also maintain a global ethics hotline, which is monitored by our Legal department, should any of our stakeholders identify concerns or have grievances. Distribution Channels The broad appeal of our footwear has allowed us to market our products in more than 85 countries through two distribution channels: wholesale and direct-to-consumer (“DTC”).
We also maintain a global ethics hotline, which is monitored by our Legal department, should any of our stakeholders identify concerns or have grievances. Distribution Channels The broad appeal of our footwear has allowed us to market our products in more than 80 countries through two distribution channels: wholesale and direct-to-consumer (“DTC”).
The shoes are known for being lightweight, flexible, and soft, with design and functional flexibility for convenience. Marketing Each season, we focus on presenting compelling brand stories and experiences for our new product introductions as well as our on-going core products.
The shoes are known for being lightweight, flexible, and soft, with design and functional flexibility for convenience. Marketing Each season, we focus on presenting compelling brand stories and experiences for our new product introductions as well as our ongoing core products.
In addition, we maintain numerous measures to ensure our supply chain complies with our Social Compliance Code of Conduct and Restricted Substances Policy, as well as with all local laws and customs regarding hiring practices, wages, and working conditions.
In addition, we maintain numerous measures to ensure our supply chain complies with our Social Compliance Code of Conduct, Restricted Substances Policy, and Human Rights Policy, as well as with all local laws and customs regarding hiring practices, wages, and working conditions.
Specifically, the ESG Committee assists the Board in (i) carrying out the responsibilities delegated by the Board regarding the review and oversight of our goals, policies, procedures and disclosures related to sustainability and ESG matters and (ii) its oversight of the sustainability and ESG matters material to us, our employees, our communities, and the planet.
Specifically, the ESG Committee assisted the Board in (i) carrying out the responsibilities delegated by the Board regarding the review and oversight of our goals, policies, procedures and disclosures related to sustainability and ESG matters and (ii) its oversight of the sustainability and ESG matters material to us, our employees, our communities, and the planet.
Our growth framework is driven by five strategic areas of focus: • Growing digital sales — Digital sales include sales directly to consumers through our company-owned websites, third-party marketplaces, and wholesale sales to our global e-tailers.
Our growth framework is driven by five strategic areas of focus: • Growing digital sales — Digital sales include sales directly to consumers through our company-owned websites and third-party marketplaces as well as wholesale sales to our global e-tailers.
From a marketing perspective, we continue to invest in globally integrated digital advertising campaigns, as well as designer, celebrity and influencer, and brand partnerships. Products Since we first introduced a single-style clog in six colors in 2002, we have grown to be a world leader of innovative, casual footwear for women, men, and children.
From a marketing perspective, we continue 2 Table of Contents to invest in globally integrated digital advertising campaigns, as well as designer, celebrity and influencer, and brand partnerships. Products Since we first introduced a single-style clog in six colors in 2002, we have grown to be a world leader of innovative, casual footwear for women, men, and children.
Our mission of “everyone comfortable in their own shoes” continued in 2022 as we repeatedly brought our consumers new silhouettes, compelling collaborations, trend-right colors and graphics, and increased personalization through our Jibbitz™ charms accessories.
Our mission of “everyone comfortable in their own shoes” continued in 2023 as we repeatedly brought our consumers new silhouettes, compelling collaborations, trend-right colors and graphics, and increased personalization through our Jibbitz™ charms accessories.
We believe we have among the most talented workforce in the footwear industry and continue to improve and implement new initiatives to remain an employer of choice across all of our businesses and geographies.
We believe we have one of the most talented workforce in the footwear industry and continue to improve and implement new initiatives to remain an employer of choice across all of our businesses and geographies.
We continue to leverage increasingly sophisticated digital marketing activities to enhance the consumer experience and drive sales, thereby benefiting from the continued migration of consumers to online shopping. Retail With the continued worldwide consumer shift toward e-commerce, we are carefully managing our retail fleet, especially full-priced retail stores.
We continue to leverage increasingly sophisticated digital marketing activities to enhance the consumer experience and drive sales, thereby benefiting from the continued migration of consumers to online shopping. Retail With the continued worldwide consumer shift toward e-commerce, we carefully manage our retail fleet, especially full-priced retail stores.
These initiatives include pay transparency in hiring, offering employee training and developing leadership capabilities, enabling meaningful professional experiences, offering a compelling employee value proposition and fair wages, and creating a collaborative culture that “celebrates one-of-a-kinds and stands together with all different kinds.” Crocs, Inc. strives to create a culture of inclusion through progressive people-practices that support and empower all employees regardless of gender, age, race, ethnicity, national origin, disability, religion, immigration status, or sexual orientation, gender identity, or expressions.
These initiatives include pay transparency in hiring, offering employee training and developing leadership capabilities, enabling meaningful professional experiences, offering a compelling employee value proposition and fair wages, and creating a collaborative culture that “celebrates one-of-a-kinds and stands together with all different kinds.” We strive to create a culture of inclusion through progressive people-practices that support and empower all employees regardless of gender, age, race, ethnicity, national origin, disability, religion, immigration status, or sexual orientation, gender identity, or expressions.
Direct-to-Consumer Channel Our DTC channel includes company-operated e-commerce sites, third-party marketplaces, company-operated full-price retail stores, outlet stores, and kiosks/store-in-store locations. During the years ended December 31, 2022, 2021, and 2020, 45.1%, 49.2%, and 50.0%, respectively, of our consolidated revenues were derived through our DTC channel.
Direct-to-Consumer Channel Our DTC channel includes company-operated e-commerce sites, third-party marketplaces, company-operated full-price retail stores, outlet stores, and kiosks/store-in-store locations. During the years ended December 31, 2023, 2022, and 2021, 48.0%, 45.1%, and 49.2%, respectively, of our consolidated revenues were derived through our DTC channel.
We continue to grow our clog silhouette with new colors, graphics, licensed images, embellishments, and accessories, such as Jibbitz™ charms, for personalization. The addition of the HEYDUDE Brand to our portfolio provides an innovative loafer concept that is differentiated through quality and comfort.
We continue to grow our clog silhouette with new designs, colors, graphics, licensed images, embellishments, and accessories, such as Jibbitz™ charms, for personalization. The addition of the HEYDUDE Brand to our portfolio provides an innovative loafer concept that is differentiated through easy on and off, quality, and comfort.
E-commerce As of December 31, 2022, we offered our products through 14 company-operated e-commerce sites worldwide and also on third-party marketplaces. Our e-commerce presence facilitates a greater connection with our consumers and provides us with an opportunity to educate them about our products and brand.
E-commerce As of December 31, 2023, we offered our products through 16 company-operated e-commerce sites worldwide and also on third-party marketplaces. Our e-commerce presence facilitates a greater connection with our consumers and provides us with an opportunity to educate them about our products and brand.
Our digital sales in 2022 were 37.8% of consolidated revenues, compared to 36.7% and 41.5% of consolidated revenues in 2021 and 2020, respectively. • Gaining sandals market share for the Crocs Brand — Sandals have long been a focus of the Crocs Brand as a large and accessible growth avenue for the brand.
Our digital sales in 2023 were 37.9% of consolidated revenues, compared to 37.8% and 36.7% of consolidated revenues in 2022 and 2021, respectively. • Gaining sandals market share for the Crocs Brand — Sandals have long been a focus of the Crocs Brand as a large and accessible growth avenue for the brand.
With efficient use of retail space and 5 Table of Contents limited fixed cost and capital investment, we believe kiosks and store-in-store locations can be effective vehicles for selling our products in certain geographic areas. As of December 31, 2022, we had 64 Crocs Brand kiosks and store-in-store locations.
With efficient use of retail space and limited fixed cost and capital investment, we believe kiosks and store-in-store locations can be effective vehicles for selling our products in certain geographic areas. As of December 31, 2023, we had 64 Crocs Brand kiosks and store-in-store locations.
During the years ended December 31, 2022, 2021, and 2020, approximately 53%, 56%, and 75%, respectively, of our Crocs Brand production was in Vietnam.
During the years ended December 31, 2023, 2022, and 2021, approximately 56%, 53%, and 56%, respectively, of our Crocs Brand production was in Vietnam.
Our largest third-party manufacturer for the Crocs Brand, with the vast majority of operations in Vietnam and China, produced approximately 42%, 34%, and 46% of our production during the years ended December 31, 2022, 2021, and 2020, respectively, and our second largest third-party manufacturer for the Crocs Brand, primarily operating in both Vietnam and China, produced approximately 27%, 30%, and 22% of our production during the years ended December 31, 2022, 2021, and 2020, respectively. • China for the HEYDUDE Brand.
Our largest third-party manufacturer for the Crocs Brand, with the vast majority of operations in Vietnam and China, produced approximately 47%, 42%, and 34% of our production during the years ended December 31, 2023, 2022, and 2021, respectively, and our second largest third-party manufacturer for the Crocs Brand, primarily operating in both Vietnam and China, produced approximately 26%, 27%, and 30% of our production during the years ended December 31, 2023, 2022, and 2021, respectively. • China for the HEYDUDE Brand.
As of December 31, 2022, we had 82 full-price Crocs Brand retail stores. Our company-operated outlet stores allow us to sell discontinued and overstocked merchandise directly to consumers at discounted prices. We also sell full-priced products in certain of our outlet stores as well as built-for-outlet products.
As of December 31, 2023, we had 84 full-price Crocs Brand retail stores. Our company-operated outlet stores allow us to sell discontinued and overstocked merchandise directly to consumers at discounted prices. We also sell full-priced products in our outlet stores as well as built-for-outlet products. As of December 31, 2023, we had 201 Crocs Brand outlet stores.
Our international sales in 2022 were 29.4% of consolidated revenues, compared to 32.8% and 39.9% of consolidated revenues in 2021 and 2020, respectively. This includes sales in 2022 for the HEYDUDE Brand, which operates primarily in the United States.
Our international sales in 2023 were 32.5% of consolidated revenues, compared to 29.4% and 32.8% of consolidated revenues in 2022 and 2021, respectively. This includes sales in 2023 and 2022 for the HEYDUDE Brand, which operates primarily in the United States.
As of December 31, 2022, our company-operated warehouse and distribution facilities provided us with 3.2 million square feet, and our third-party operated distribution facilities provided us with 0.3 million square feet, with additional area available based on inventory levels.
As of December 31, 2023, our company-operated warehouse and distribution facilities provided us with 3.4 million square feet, and our third-party operated distribution facilities provided us with 0.9 million square feet, with additional area available based on inventory levels.
Wholesale Channel During the years ended December 31, 2022, 2021, and 2020, 54.9%, 50.8%, and 50.0% of our consolidated revenues, respectively, were derived through our wholesale channel. Our wholesale channel includes domestic and international, multi-brand, brick-and-mortar retailers, e-tailers, and distributors in certain countries, including partner store operators.
Wholesale Channel During the years ended December 31, 2023, 2022, and 2021, 52.0%, 54.9%, and 50.8% of our consolidated revenues, respectively, were derived through our wholesale channel. Our wholesale channel includes domestic and international, multi-brand, brick-and-mortar retailers, e-tailers, partner store operators, and international distributors.
As of December 31, 2022, we had 340 and 5 company-operated stores for the Crocs Brand and HEYDUDE Brand, respectively. Our company-operated full-price retail stores allow us to effectively showcase the full extent of our product range to consumers and provide us with the opportunity to interact with those consumers directly.
As of December 31, 2023, we had 349 and 14 company-operated stores for the Crocs Brand and HEYDUDE Brand, respectively. 5 Table of Contents Our company-operated full-price retail stores allow us to effectively showcase the full extent of our product range to consumers and provide us with the opportunity to interact with those consumers directly.
Except where specified otherwise, all information in the forthcoming ESG report and below ESG discussion pertains to Crocs, Inc. as of December 31, 2022. The content provided in our ESG Report or accessible through our website is not incorporated by reference as part of this Annual Report on Form 10-K.
Except where specified otherwise, all information in the forthcoming Comfort Report and below environmental, social, and governance (“ESG”) discussion pertains to Crocs, Inc. as of December 31, 2023. The content provided in our Comfort Report or accessible through our website is not incorporated by reference as part of this Annual Report on Form 10-K.
We also seek to extend the reach of our social and environmental standards through our global “Crocs Cares” program, through which we focus on providing shoes, funds, and employee time to support social inclusion and equality, and respond to our communities’ needs in times of crises. This is an ever-evolving program, informed by key stakeholder priorities.
We also seek to extend the reach of our social and environmental standards through our global community giving program. We focus on providing shoes, funds, and employee time to support social inclusion and equality, and respond to our communities’ needs in times of crises. This program is informed by key stakeholder priorities.
These materials are obtained from a number of third-party sources, and we believe these materials are also broadly available. HEYDUDE Brand The primary raw materials for the HEYDUDE Brand are fabrics, including polyester and cotton, Ethylene-vinyl acetate (“EVA”) insoles and outsoles, and other materials such as leather.
HEYDUDE Brand The primary raw materials for the HEYDUDE Brand are fabrics, including polyester and cotton, Ethylene-vinyl acetate (“EVA”) insoles and outsoles, and other materials such as leather. We purchase this material from a select group of third-party sources, and we believe these materials are broadly available.
As of December 31, 2022, we had 194 Crocs Brand outlet stores and 5 HEYDUDE Brand temporary clearance stores. Our company-operated kiosks and store-in-store locations allow us to market specific product lines, with flexibility to tailor products to consumer preferences in shopping malls and other high foot-traffic areas.
We also had 5 HEYDUDE Brand outlet stores and 9 HEYDUDE Brand temporary clearance stores. Our company-operated kiosks and store-in-store locations allow us to market specific product lines, with flexibility to tailor products to consumer preferences in shopping malls and other high foot-traffic areas.
We believe sandals are a natural extension of the Crocs Brand and allow us to access new consumers by leveraging our signature molding technology to provide casual, comfortable footwear for a variety of wearing occasions. • Increasing awareness and distribution for the HEYDUDE Brand — We acquired HEYDUDE in February 2022 and have embarked, and plan to continue to embark, on various marketing activities to drive higher awareness.
We believe sandals are a natural extension of the Crocs Brand and allow us to access new consumers by leveraging our signature molding technology to provide casual, comfortable footwear for a variety of wearing occasions. • Increasing awareness and distribution for the HEYDUDE Brand — We have embarked, and plan to continue to embark, on various marketing activities to drive higher awareness including, but not limited to, developing a pipeline of collaborations and brand activations.
We believe the progress of our ESG efforts is 3 Table of Contents best understood by disclosing measurable and relevant goals and metrics, and, to this end, we continue to align our reporting with the Sustainability Accounting Standards Board (“SASB”) framework.
We believe the progress of our sustainability efforts is best understood by disclosing measurable and relevant goals and metrics, and, to this end, we continue to align our 3 Table of Contents reporting with the Sustainability Accounting Standards Board (“SASB”) and Taskforce on Climate-related Financial Disclosures (“TCFD”) frameworks.
Governance Strong corporate governance mechanisms, along with robust internal controls over our financial reporting framework, are the foundation for our ESG progress.
Governance Strong corporate governance mechanisms, along with robust internal controls over our financial reporting framework, are the foundation for our progress toward our environmental and social ambitions.
Additionally, we regularly review our Enterprise Risk Management and Ethics & Compliance program frameworks to account for our social and environmental risks and opportunities, specifically including those related to climate change.
Additionally, we regularly review our Enterprise Risk Management and Ethics & Compliance program frameworks to account for our social and environmental risks and opportunities, specifically including those related to climate change. All material findings and updates are elevated to and discussed with our Board.
LiteRide™ features comfort-focused, proprietary foam insoles which are soft, lightweight, and resilient. HEYDUDE Brand In 2022, we added HEYDUDE to our portfolio, whose shoes have a versatile silhouette with many wearing occasions that focus on casualization, comfort-led functionality, and personalization. HEYDUDE utilizes leading technologies including a flex-and-fold outsole and ergonomic insole.
Our products containing LiteRide™ feature comfort-focused, proprietary foam insoles which are soft, lightweight, and resilient. HEYDUDE Brand The HEYDUDE Brand offers shoes with a versatile silhouette with many wearing occasions that focus on casualization, comfort-led functionality, and personalization. The HEYDUDE Brand utilizes leading technologies including a flex-and-fold outsole and ergonomic insole.
An explanation of our progress toward more transparent, socially conscious, and sustainable business practices will be provided in our fiscal year 2022 ESG report, which is expected to be published in the first half of 2023. Our ESG report will be made available on the Investor Relations section of our website located at www.investors.crocs.com.
Our 2023 Comfort Report, which is expected to be published in the first half of 2024, is our third annual publication that provides an explanation of our progress towards more transparent, socially conscious, and sustainable business practices. Our Comfort Report will be made available on the Investor Relations section of our website located at www.investors.crocs.com.
More detail on these initiatives, as well as our ambitions, will be provided in our upcoming ESG report. Social As of December 31, 2022, we employed nearly 6,680 employees globally, including approximately 3,480 employees in our retail stores, 1,880 employees at our corporate/regional offices, and 1,320 employees at our distribution centers.
More detail on these initiatives, as well as our ambitions, will be provided in our upcoming Comfort Report. Social As of December 31, 2023, we employed nearly 7,030 employees globally, including approximately 3,650 employees in our retail stores, 2,040 employees at our corporate/regional offices, and 1,340 employees at our distribution centers.
Environmental We are committed to reducing our impact on the environment and are particularly focused on carbon reduction, sustainable operations, and product circularity. In 2022, we completed our first Greenhouse Gas inventory of the Crocs Brand based on 2021 data.
Environmental We are committed to reducing our impact on the environment and are particularly focused on carbon reduction, sustainable operations, and product circularity. In 2023, we completed a Greenhouse Gas inventory for the Crocs, Inc. enterprise, including both the Crocs and HEYDUDE brands, based on 2022 data.
We strive to be the world leader in innovative casual footwear, combining comfort and style with a value that consumers want. On February 17, 2022 (the “Acquisition Date”), we acquired (the “Acquisition”) 100% of the equity of a privately-owned casual footwear brand business (“HEYDUDE”), pursuant to a securities purchase agreement (the “SPA”) entered into on December 22, 2021.
On February 17, 2022 (the “Acquisition Date”), we acquired (the “Acquisition”) 100% of the equity of a privately-owned casual footwear brand business (“HEYDUDE”), pursuant to a securities purchase agreement entered into on December 22, 2021.
Financial Statements and Supplementary Data of this Annual Report on Form 10-K for information on total marketing costs for the year. Environmental, Social, and Governance (“ESG”) Initiatives As one of the world’s largest footwear companies, we strive to make a positive impact on the global footwear industry, for people, and for our planet.
Environmental, Social, and Governance Initiatives As one of the world’s largest footwear companies, we strive to make a positive impact on the global footwear industry, for people, and for our planet.
We purchase this material from a select group of third-party sources, and we believe these materials are broadly available. Sourcing Our sourcing strategy is to maintain a flexible, globally-diversified, cost-efficient third-party manufacturing base. We source our inventory production from multiple third-party manufacturers, primarily in: • Vietnam and China for the Crocs Brand.
Sourcing Our sourcing strategy is to maintain a flexible, globally-diversified, cost-efficient third-party manufacturing base. We source our inventory production from multiple third-party manufacturers, primarily in: • Vietnam for the Crocs Brand. We have additional third-party manufacturers in China and Indonesia, among other countries.
ITEM 1. Business The Company Crocs, Inc. and our consolidated subsidiaries (collectively, the “Company,” “we,” “us,” or “our”) are engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for women, men, and children.
ITEM 1. Business The Company Crocs, Inc. and our consolidated subsidiaries (collectively, the “Company,” “we,” “us,” or “our”) are engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for all. We strive to be the world leader in innovative casual footwear, combining comfort and style with a value that consumers want.
HEYDUDE is engaged in the business of distributing and selling casual footwear under the brand name “HEYDUDE.” The majority of HEYDUDE sales are currently in the United States.
HEYDUDE is engaged in the business of distributing and selling casual footwear under the brand name “HEYDUDE.” The majority of HEYDUDE sales are currently in the United States. Our business has continued to evolve in the period following the consummation of the Acquisition, as we have grown the brand and staffed and developed our leadership team at HEYDUDE.
Croslite™ is produced by compounding elastomer resins purchased from major chemical manufacturers, together with certain other production inputs such as color dyes. Multiple suppliers produce the elastomer resins used in the Croslite™ material. In the future, we may identify and utilize materials produced by other suppliers as an alternative to, or in addition to, those elastomer resins.
Multiple suppliers produce the elastomer resins used in the Croslite™ material. In the future, we may identify and utilize materials produced by other suppliers as an alternative to, or in addition to, those elastomer resins. All other raw materials that we use to produce the Croslite™ formulations are readily available for purchase from multiple suppliers.
As of December 31, 2022, we principally stored our finished goods inventory in company-operated warehouses and distribution and logistics facilities located in the U.S. and the Netherlands. During 2022, we further expanded our U.S. distribution centers in Ohio and Nevada for the Crocs Brand and HEYDUDE Brand, respectively, to increase distribution capacity.
Distribution and Logistics We strive to enhance our distribution and logistics network to further streamline our supply chain, increase our speed to market, and lower operating costs. As of December 31, 2023, we principally stored our finished goods inventory in company-operated warehouses and distribution and logistics facilities located in the U.S. and the Netherlands.
Additionally, we intend to further expand the HEYDUDE Brand in Europe beginning in 2023. 2 Table of Contents • Ongoing product and marketing innovation — At the heart of our Crocs Brand’s DNA are our clogs, sandals, and Jibbitz™ charms, which are key product pillars that we believe will drive long-term growth.
Our six core markets for the Crocs Brand include five international markets, and more specifically, four markets in Asia: China, India, Japan, and South Korea. • Ongoing product and marketing innovation — At the heart of our Crocs Brand’s DNA are our clogs, sandals, and Jibbitz™ charms, which are key product pillars that we believe will drive long-term growth.
In the past year, we continued the integration of a new, more sustainable bio-based alternative for our Croslite ™ materials in partnership with Dow Chemical’s new ECOLIBRIUM ™ Technology; renewed our membership with the Sustainable Apparel Coalition; and continued to enhance our tracking of our energy use, water use, and waste generation.
In the past year, we continued the integration of our sustainable bio-based alternative materials as part of our Croslite™ compound, renewed our membership with the Sustainable Apparel Coalition, joined the Footwear Collective as a founding member, continued to enhance tracking of our energy use, water use, and waste generation, and had three key suppliers complete the Footwear Distributors and Retailers of America (“FDRA”) Footwear Factory Zero Waste Program.
We continue to invest in globally integrated marketing campaigns, as well as designer, celebrity and influencer, and brand partnerships, ranging from popular artists like Luke Combs to a wide range of well-known brands such as 7-Eleven. Innovation is not only core to our brands’ values; it is at the forefront of how we drive consumer acquisition and engagement.
We continue to invest in globally integrated marketing campaigns, as well as designer, celebrity and influencer, and brand partnerships, ranging from popular designers like Salehe Bembury to a wide range of well-known brands such as Mossy Oak, Levi’s, and Taco Bell.
We believe any potential concentration risk is mitigated by the fact that the manufacturing capabilities required to produce our footwear are broadly available. See the risk factor under “Risks Related to our Supply Chain — We depend solely on third-party manufacturers located outside of the U.S.” included in Item 1A.
See the risk factor under “Risks Related to our Supply Chain — We depend solely on third-party manufacturers located outside of the U.S.” included in Item 1A. Risk Factors of this Annual Report on Form 10-K for more information on risks associated with sourcing.
All other raw materials that we use to produce the Croslite™ formulations are readily available for purchase from multiple suppliers. 6 Table of Contents Some of the products we offer are constructed using textile fabrics or other material formulations, such as those we brand LiteRide™.
Some of the products we offer are constructed using textile fabrics or other material formulations, such as those we brand LiteRide™. These materials are obtained from a number of third-party sources, and we believe these materials are also broadly available.
Additionally, in 2022, we entered into a lease not yet commenced related to a new HEYDUDE distribution center in Nevada, which we plan to open in late 2023 to help support future growth. We also utilized third-party operated distribution centers located in the United States, Japan, China, Australia, Korea, Singapore, India, Brazil, and the United Kingdom.
During 2023, we further expanded our U.S. distribution centers in Nevada for the HEYDUDE Brand to increase distribution capacity. We also utilized third-party operated distribution centers located in the United States, Japan, China, Australia, Korea, Singapore, India, Brazil, and the United Kingdom.
Our Croslite™ materials are formulated to create soft, comfortable, lightweight, non-marking, and odor-resistant footwear. We continue to invest in research and development to refine our materials to enhance these properties, develop new properties for specific applications, as well as reduce our environmental impact through various ESG initiatives described in the previous section.
We continue to invest in research and development to refine our materials to enhance these properties, develop new properties for specific applications, as well as reduce our environmental impact through various sustainability initiatives described in the previous section. 6 Table of Contents Croslite™ is produced by compounding elastomer resins purchased from major chemical manufacturers, together with certain other production inputs such as color dyes.
In 2022, we formed an Environmental, Social, and Governance Steering Committee (the “ESG Committee”) of our board of directors (the “Board”), comprised of three independent directors, overseeing our ESG efforts and receiving quarterly updates on the development of our ESG program.
The basis of this is our Board of Directors, which was comprised of 29% female and 14% historically underrepresented racial/ethnic members as of December 31, 2023. 4 Table of Contents In 2023, our Environmental, Social, and Governance Steering Committee (the “ESG Committee”) of our board of directors (the “Board”), comprised of three independent directors and our Chief Executive Officer, continued its oversight of our ESG efforts and received quarterly updates on the development of our ESG program.
We strive to listen and respond quickly to our customers to give them new and innovative reasons to continue to choose the Crocs Brand and HEYDUDE Brand. See Note 1 — Basis of Presentation and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included in Part II - Item 8.
See Note 1 — Basis of Presentation and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for information on total marketing costs for the year.
We are in the process of redefining our 2021 baseline to account for the HEYDUDE Brand and completing our 2022 Greenhouse Gas inventory for the full enterprise as we continue on our journey to Net Zero.
We also redefined our 2021 baseline to account for the HEYDUDE Brand as part of our continued journey to Net Zero by 2040.
In 2022, Crocs, Inc. supported school students in the communities impacted by the Marshall Fire in Colorado, Ukrainian refugees, and frontline healthcare workers. Thanks to the generosity of our consumers and employees, we continued to generate donations to Feeding America, providing meals to families in need.
In 2023, we donated to non-profits such as the United Nations Foundation and Soles4Souls and supported communities impacted by earthquakes in Türkiye, as well as those impacted by the wildfires on Maui. Thanks to the generosity of our consumers and employees, we continue to generate donations to Feeding America, providing meals to families in need.
We have also entered into a lease not yet commenced for a new HEYDUDE distribution center in Las Vegas, Nevada, to expand our distribution capabilities of the HEYDUDE Brand. • Growth opportunities internationally — As a company with a well-established global footprint, we believe we have a long-term sales growth opportunity internationally.
We have rightsized HEYDUDE’s wholesale distribution footprint and are evolving our channel diversification strategy through a thoughtful development of outlet retail. In 2023, we opened 5 HEYDUDE Brand outlet stores. • Growth opportunities internationally — As a company with a well-established global footprint, we believe we have a long-term sales growth opportunity internationally.
To that end, in 2022, we continued our message of “Come As You Are” in all regions and channels for the Crocs Brand. During the year, we added the HEYDUDE Brand to our portfolio, which we believe is an ideal fit with the Crocs Brand and long-term consumer trends given its focus on casualization, comfort-led functionality, sustainability, and personalization.
To that end, in 2023, we continued our message of “Come As You Are” for the Crocs Brand and the slogan “Good To Go-To” for the HEYDUDE Brand.
Removed
The consolidated results reported for the year ended December 31, 2022 represent the Crocs Brand and ‘Enterprise corporate’ for the full year and the HEYDUDE Brand for the partial period beginning on the Acquisition Date through December 31, 2022 (the “Partial Period”); for the years ended December 31, 2021 and 2020, the results represent the Crocs Brand and ‘Enterprise corporate’ only.
Added
In the fourth quarter of 2023, to reflect changes in the way management evaluates performance, makes operating decisions, and allocates resources, we updated our reportable operating segments to be (i) Crocs Brand and (ii) HEYDUDE Brand, which are discussed in more detail in “Business Segments and Geographic Information” below.
Removed
Our reportable operating segments include: (i) North America for the Crocs Brand, operating throughout the United States of America (the “United States” or the “U.S.”) and Canada, (ii) Asia Pacific for the Crocs Brand, operating throughout Asia, Australia, and New Zealand; (iii) Europe, Middle East, Africa, and Latin America (“EMEALA”) for the Crocs Brand; and (iv) the HEYDUDE Brand, which are discussed in more detail in “Business Segments and Geographic Information” below.
Added
Innovation is not only core to our brands’ values; it is at the forefront of how we drive consumer acquisition and engagement. We strive to listen and respond quickly to our customers to give them new and innovative reasons to continue to choose the Crocs Brand and HEYDUDE Brand.
Removed
Our six core markets for the Crocs Brand include five international markets, and more specifically, four markets in Asia: China, India, Japan, and South Korea.
Added
In 2023, we also introduced “Give Old Crocs New Life,” a pilot circularity program in the United States that allows our Crocs consumers to return their gently worn or well-loved Crocs shoes to retail stores in 10 states to be donated to communities in need or repurposed into something new.
Removed
All material findings and updates are elevated to and discussed with our Board, which includes 38% female and 13% historically underrepresented racial/ethnic members as of 4 Table of Contents December 31, 2022. In 2022, Crocs, Inc. formalized its ESG/Sustainability department with a newly created VP, Global Head of Sustainability position reporting directly to our Chief Executive Officer.
Added
In 2023, Crocs, Inc. expanded its ESG/Sustainability department led by our VP, Global Head of Sustainability, who reports directly to our Chief Executive Officer.
Removed
We did not close any HEYDUDE Brand retail stores. Business Segments and Geographic Information We have four reportable operating segments. For the Crocs Brand, we have three reportable operating segments based on the geographic nature of our operations: North America, Asia Pacific, and EMEALA. Our HEYDUDE Brand also became a reportable segment on the Acquisition Date.
Added
Our Croslite™ materials are formulated to create soft, comfortable, lightweight, non-marking, and odor-resistant footwear.
Removed
Risk Factors of this Annual Report on Form 10-K for more information on risks associated with sourcing. Distribution and Logistics We strive to enhance our distribution and logistics network to further streamline our supply chain, increase our speed to market, and lower operating costs.
Added
During the year ended December 31, 2023, approximately 83% of our HEYDUDE Brand production was in China. We believe any potential concentration risk is mitigated by the fact that the manufacturing capabilities required to produce our footwear are broadly available for both brands.
Removed
As a result of global industry-wide logistics challenges in 2021, we implemented several mitigating measures in 2022 including: (i) prioritizing top-selling products and narrowing product assortment, which has improved factory throughput, (ii) maintaining flexibility by leveraging air freight and reducing our dependency on congested West Coast ports in the United States by adding East Coast trans-shipment capabilities, and (iii) strategically allocating units and prioritizing our key growth initiatives.
Removed
With the actions taken to date and our future plans, we believe we are well-positioned to withstand these supply challenges.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

94 edited+31 added−33 removed183 unchanged
Biggest changeThe effects of climate change, natural disasters such as earthquakes, hurricanes, tsunamis, or other adverse weather and climate conditions, and public health issues like the COVID-19 pandemic, whether occurring in the U.S. or abroad, and the consequences and effects thereof, including damage to our supply chain, such as availability of raw materials, increased manufacturing costs and disruptions to productivity of our third-party manufacturers, manufacturing or distribution centers, or retail stores, changes in consumer preferences or spending priorities, and energy shortages, have in the past and could in the future harm or disrupt our operations or the operations of our vendors, other suppliers, or customers, or result in economic instability that may negatively impact our operating results and financial condition.
Biggest changeThe effects of climate change, natural disasters such as earthquakes, hurricanes, tsunamis, or other adverse weather and climate conditions, and public health issues like the COVID-19 pandemic, whether occurring in the U.S. or abroad, may disrupt our operations or the operations of our vendors, other suppliers, or customers.
Our financial success is sensitive to changes in general economic conditions, both globally and in specific markets, that may adversely affect the demand for our products including recessionary economic cycles, higher interest rates, higher fuel and other energy costs, increased labor costs, declines in asset values, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws, public health issues like the COVID-19 pandemic, or other economic factors, certain of which effects, including cost inflation, we experienced in 2022 and currently expect to continue to experience in 2023.
Our financial success is sensitive to changes in general economic conditions, both globally and in specific markets, that may adversely affect the demand for our products including recessionary economic cycles, higher interest rates, higher fuel and other energy costs, increased labor costs, declines in asset values, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws, public health issues like the COVID-19 pandemic, or other economic factors, certain of which effects, including cost inflation, we experienced in 2022 and 2023 and currently expect to continue to experience in 2024.
See the risk under “HEYDUDE Acquisition Risks — Our ability to realize the benefits from the Acquisition is substantially dependent on our ability to continue to grow HEYDUDE.” Successfully executing our long-term growth and profitability strategy will depend on many factors, including our ability to • strengthen and maintain our brands; • focus on relevant geographies and markets, product innovation, and profitable growth, while maintaining demand for our current offerings; • effectively manage our company-operated retail stores to meet operational and financial targets at the retail store level; • accurately forecast the global demand for our products, consolidate our distribution and supply chain network to leverage resources, simplify our fulfillment process, and deliver product around the globe efficiently; • use and protect the Crocs and HEYDUDE brands and our other intellectual property in new and existing markets and territories; • achieve and maintain a strong competitive position in new and existing markets; • attract and retain qualified wholesalers and distributors, including partner store operators; • maintain and enhance our digital marketing capabilities and digital commerce capabilities; and • execute multi-channel advertising, marketing, collaboration, and social media campaigns to effectively communicate our message directly to our consumers and employees.
See the risk under “— Our ability to realize the benefits from the Acquisition is substantially dependent on our ability to continue to grow HEYDUDE.” Successfully executing our long-term growth and profitability strategy will depend on many factors, including our ability to • strengthen and maintain our brands; • focus on relevant geographies and markets, product innovation, and profitable growth, while maintaining demand for our current offerings; • effectively manage our company-operated retail stores to meet operational and financial targets at the retail store level; • accurately forecast the global demand for our products, consolidate our distribution and supply chain network to leverage resources, simplify our fulfillment process, and deliver product around the globe efficiently; • use and protect the Crocs and HEYDUDE brands and our other intellectual property in new and existing markets and territories; • achieve and maintain a strong competitive position in new and existing markets; • attract and retain qualified wholesalers and distributors, including partner store operators; • maintain and enhance our digital marketing capabilities and digital commerce capabilities; and • execute multi-channel advertising, marketing, collaboration, and social media campaigns to effectively communicate our message directly to our consumers and employees.
Despite our current security and cybersecurity measures, our systems and those of our third-party service providers may be vulnerable to information security breaches, acts of vandalism, computer viruses, credit card fraud, phishing, ransomware attacks, and interruption or loss of valuable business data, and we have been subject to, and will continue to be subject to, various third-party attacks and phishing scams.
Furthermore, despite our current security and cybersecurity measures, our systems and those of our third-party service providers may be vulnerable to information security breaches, acts of vandalism, computer viruses, credit card fraud, phishing, ransomware attacks, and interruption or loss of valuable business data, and we have been subject to, and will continue to be subject to, various third-party attacks and phishing scams.
See the risk factor “Changes in foreign exchange rates, most significantly but not limited to the Euro and South Korean Won, or other global currencies could have a material adverse effect on our business and financial results” for more information. • Slower consumer spending may result in our inability to maintain or increase our sales to new and existing customers and cause reduced product orders or product order delays or cancellations from wholesale accounts that are directly impacted by fluctuations in the broader economy, difficulties managing inventories, higher discounts, and lower product margins. • If consumer demand for our products declines, we may not be able to profitably operate existing retail stores, due to higher fixed costs of the retail business. • A decrease in credit available to our wholesale or distributor customers, product suppliers, and other service providers, or financial institutions that are counterparties to our Revolving Facility (as defined herein) or derivative instruments may result in credit pressures, other financial difficulties, or insolvency for these parties, with a potential adverse impact on our business, our financial results, or our ability to obtain future financing. • If our wholesale customers experience diminished liquidity, we may experience a reduction in product orders, an increase in customer order cancellations, and/or the need to extend customer payment terms, which could lead to larger balances and delayed collection of our accounts receivable, reduced cash flows, greater expenses for collection efforts, and increased risk of nonpayment of our accounts receivable. • If our manufacturers or other parties in our supply chain experience diminished liquidity, and as a result are unable to fulfill their obligations to us, we may be unable to provide our customers with our products in a timely manner, resulting in lost sales opportunities or a deterioration in our customer relationships. 12 Table of Contents • If we are unable to mitigate the impact of supply chain constraints and inflationary pressure through price increases or other measures, our results of operations and financial condition could be negatively impacted.
See the risk factor “Changes in foreign exchange rates, most significantly but not limited to the Euro, South Korean Won, and Chinese Yuan or other global currencies could have a material adverse effect on our business and financial results” for more information. • Slower consumer spending may result in our inability to maintain or increase our sales to new and existing customers and cause reduced product orders or product order delays or cancellations from wholesale accounts that are directly 11 Table of Contents impacted by fluctuations in the broader economy, difficulties managing inventories, higher discounts, and lower product margins. • If consumer demand for our products declines, we may not be able to profitably operate existing retail stores, due to higher fixed costs of the retail business. • A decrease in credit available to our wholesale or distributor customers, product suppliers, and other service providers, or financial institutions that are counterparties to our Revolving Facility (as defined herein) or derivative instruments may result in credit pressures, other financial difficulties, or insolvency for these parties, with a potential adverse impact on our business, our financial results, or our ability to obtain future financing. • If our wholesale customers experience diminished liquidity, we may experience a reduction in product orders, an increase in customer order cancellations, and/or the need to extend customer payment terms, which could lead to larger balances and delayed collection of our accounts receivable, reduced cash flows, greater expenses for collection efforts, and increased risk of nonpayment of our accounts receivable. • If our manufacturers or other parties in our supply chain experience diminished liquidity, and as a result are unable to fulfill their obligations to us, we may be unable to provide our customers with our products in a timely manner, resulting in lost sales opportunities or a deterioration in our customer relationships. • If we are unable to mitigate the impact of supply chain constraints and inflationary pressure through price increases or other measures, our results of operations and financial condition could be negatively impacted.
Additionally, as a consequence of the COVID-19 pandemic, reductions in the number of ocean carrier voyages and capacity have delayed the arrival of imports and increased ocean transport costs globally. Ongoing ocean carrier consolidations, reduced capacity, congestion at major international gateways, and other economic factors are currently making ocean transportation increasingly difficult and unpredictable.
Additionally, as a consequence of the COVID-19 pandemic, reductions in the number of ocean carrier voyages and capacity delayed the arrival of imports and increased ocean transport costs globally. Ongoing ocean carrier consolidations, reduced capacity, congestion at major international gateways, and other economic factors are currently making ocean transportation increasingly difficult and unpredictable.
The future success and growth of our business depend on streamlined processes made available through information systems, global communications, internet activity, and other network processes. We rely on third-party information services providers worldwide for many of our information technology functions including network, hardware, and software configuration.
The future success and growth of our business depend on streamlined processes made available through information systems, global communications, internet activity, and other network processes. We also rely on third-party information services providers worldwide for many of our information technology functions including network, hardware, and software configuration.
To be successful in the future, particularly outside of the U.S., where our brands may be less well-known or perceived differently, we believe we must timely and appropriately respond to changing consumer demand and leverage the value of our brands across all sales channels.
To be successful in the future, particularly outside of the U.S., where our brands may be relatively less well-known or perceived differently, we believe we must timely and appropriately respond to changing consumer demand and leverage the value of our brands across all sales channels.
Maintaining, promoting, and growing our brands will depend on our design and marketing efforts, including product innovation and quality, advertising and consumer campaigns, as well as our ability to adapt to a rapidly changing media environment, including our reliance on social media and digital dissemination of advertising campaigns.
Maintaining, promoting, and growing our brands will depend on our design and marketing efforts, including product innovation and quality, advertising and consumer campaigns, as well as our ability to adapt to a rapidly changing media environment, including our continued reliance on social media and digital dissemination of advertising campaigns.
Our competitors’ greater financial resources and capabilities in these areas may enable them to better withstand periodic downturns in the footwear industry and general economic conditions, compete more effectively on the basis of price and production, price their products more aggressively in the face of inflationary pressures, launch more extensive or diverse product lines, and more quickly develop new and popular products.
Our competitors’ greater financial resources and capabilities in these areas may enable them to better withstand periodic downturns in the footwear industry and general economic conditions, compete more effectively on the basis of price and production, price their products more aggressively in the face of inflationary or other competitive pressures, launch more extensive or diverse product lines, and more quickly develop new and popular products.
Foreign manufacturing and sales activities are subject to numerous risks, including: • tariffs, anti-dumping fines, import and export controls, and other non-tariff barriers such as quotas and local content rules; • delays associated with the manufacture, transportation, and delivery of products, including related to global port backlog or congestion; • increased transportation costs due to distance, energy prices, inflation, or other factors; • delays in the transportation and delivery of goods due to increased security concerns; • restrictions on the transfer of funds; • restrictions and potential penalties due to privacy laws on the handling and transfer of consumer and other personal information; 17 Table of Contents • changes in governmental policies and regulations; • political unrest, such as the ongoing war between Russia and Ukraine, changes in law, terrorism, natural disasters, public health issues like the COVID-19 pandemic, or war, any of which can interrupt commerce; • potential violations of U.S. and foreign anti-corruption and anti-bribery laws by our employees, business partners or agents, despite our policies and procedures relating to compliance with these laws; • expropriation and nationalization; • difficulties in managing foreign operations effectively and efficiently from the U.S.; • difficulties in understanding and complying with local laws, regulations, and customs in foreign jurisdictions; • longer accounts receivable payment terms and difficulties in collecting foreign accounts receivables; • difficulties in enforcing contractual and intellectual property rights; • greater risk that our business partners do not comply with our policies and procedures relating to labor, health, and safety; • UFLPA detentions by U.S.
Foreign manufacturing and sales activities are subject to numerous risks, including: • tariffs, anti-dumping fines, import and export controls, and other non-tariff barriers such as quotas and local content rules; • delays associated with the manufacture, transportation, and delivery of products, including related to global port backlog or congestion; • increased transportation costs due to distance, energy prices, inflation, or other factors; • delays in the transportation and delivery of goods due to increased security concerns; • restrictions on the transfer of funds; • restrictions and potential penalties due to privacy laws on the handling and transfer of consumer and other personal information; • changes in governmental policies and regulations; • political unrest, such as the ongoing war between Israel and Hamas, changes in law, terrorism, natural disasters, public health issues like the COVID-19 pandemic, or war, any of which can interrupt commerce; • potential violations of U.S. and foreign anti-corruption and anti-bribery laws by our employees, business partners or agents, despite our policies and procedures relating to compliance with these laws; • expropriation and nationalization; • difficulties in managing foreign operations effectively and efficiently from the U.S.; • difficulties in understanding and complying with local laws, regulations, and customs in foreign jurisdictions; • longer accounts receivable payment terms and difficulties in collecting foreign accounts receivables; • difficulties in enforcing contractual and intellectual property rights; • greater risk that our business partners do not comply with our policies and procedures relating to labor, health, and safety; • UFLPA detentions by U.S.
Negative claims or publicity involving us, our products, or any of our key employees, endorsers, or business partners could materially damage our reputation and brands’ image, regardless of whether such claims are accurate. Social media, which accelerates and potentially amplifies the scope of negative publicity, can accelerate, and increase the impact of, negative claims.
Negative claims or publicity involving us, our products, or any of our key employees, endorsers, or business partners could materially damage our reputation and the image of our brands, regardless of whether such claims are accurate. Social media, which accelerates and potentially amplifies the scope of negative publicity, can accelerate, and increase the impact of, negative claims.
In addition, actions taken by celebrity endorsers and collaborators associated with our products that harm the public image and reputations of those endorsers and collaborators could also seriously harm our brands’ image with consumers and, as a result, could have an adverse effect on our sales and financial condition.
In addition, actions taken by celebrity endorsers and collaborators associated with our products that harm the public image and reputations of those endorsers and collaborators could also seriously harm the image of our brands with consumers and, as a result, could have an adverse effect on our sales and financial condition.
During the year ended December 31, 2022, our third-party manufacturers, distribution centers, where we manage our inventory, and our third-party partners experienced disruptions that impacted our supply chain and increased global lead-time for our products, including port congestion, temporary closures, and worker shortages.
During the year ended 2022, our third-party manufacturers, distribution centers, where we manage our inventory, and our third-party partners experienced disruptions that impacted our supply chain and increased global lead-time for our products, including port congestion, temporary closures, and worker shortages.
In connection with the Acquisition, we allocated approximately $713.3 million and $1,780.0 million to goodwill and indefinite-lived intangible assets, respectively. These assets are tested for impairment at least annually, using estimates and assumptions affected by factors such as economic and industry conditions and changes in operating performance. Additionally, in conjunction with the impairment tests, we also reassess the indefinite-life classification.
In connection with the Acquisition, we allocated approximately $710.0 million and $1,780.0 million to goodwill and indefinite-lived intangible assets, respectively. These assets are tested for impairment at least annually, using estimates and assumptions affected by factors such as economic and industry conditions and changes in operating performance. Additionally, in conjunction with the impairment tests, we also reassess the indefinite-life classification.
We have recorded material allowances for doubtful accounts in the past and could do so again in the future. Future problems with customers may have a material adverse effect on our product sales, financial condition, results of operations, and our ability to grow our product line. 20 Table of Contents Operating company-operated retail stores incurs substantial fixed costs.
We have recorded material allowances for doubtful accounts in the past and could do so again in the future. Future problems with customers may have a material adverse effect on our product sales, financial condition, results of operations, and our ability to grow our product line. Operating company-operated retail stores incurs substantial fixed costs.
See the risk factor under “Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs.” If we do not accurately forecast consumer demand, we may have excess inventory to liquidate or have greater difficulty filling our customers’ orders, either of which could adversely affect our business.
See the risk factor under “Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs.” 14 Table of Contents If we do not accurately forecast consumer demand, we may have excess inventory to liquidate or have greater difficulty filling our customers’ orders, either of which could adversely affect our business.
See the risk factor under “ Risks Related to International Operations — We conduct significant business activity outside the U.S., which exposes us to risks of international commerce. ” We depend on a number of suppliers for key production materials, and any disruption in the supply of such materials could interrupt product manufacturing and increase product costs.
See the risk factor under “ Risks Related to International Operations — We conduct significant business activity outside the U.S., which exposes us to risks of international commerce. ” 15 Table of Contents We depend on a number of suppliers for key production materials, and any disruption in the supply of such materials could interrupt product manufacturing and increase product costs.
The Revolving Credit Agreement, the Term Loan B Credit Agreement, and the Indentures also contain certain restrictive covenants that limit, and in some circumstances prohibit, our ability to, among other things: incur additional debt or issue 23 Table of Contents preferred stock; sell, lease or transfer our assets; pay dividends on, and make other distributions on, or redeem or repurchase, our common stock; make certain capital expenditures and investments; guarantee debt or obligations; create certain liens; repurchase our common stock; enter into transactions with our affiliates; and enter into certain merger, consolidation, or other reorganizations transactions.
The Revolving Credit Agreement, the Term Loan B Credit Agreement, and the Indentures also contain certain restrictive covenants that limit, and in some circumstances prohibit, our ability to, among other things: incur additional debt or issue preferred stock; sell, lease or transfer our assets; pay dividends on, and make other distributions on, or redeem or repurchase, our common stock; make certain capital expenditures and investments; guarantee debt or obligations; create certain liens; repurchase our common stock; enter into transactions with our affiliates; and enter into certain merger, consolidation, or other reorganizations transactions.
A significant disruption to our operational technology or those of our business partners, a privacy law violation, or a data security breach could harm our reputation and/or our ability to effectively operate our business, and our financial results” Furthermore, as a global company, we are subject to foreign and U.S. laws and regulations designed to combat governmental corruption, including the U.S.
A significant disruption to our operational technology or those of our business partners, a privacy law violation, or a data security breach could harm our reputation and/or our ability to effectively operate our business, and our financial results.” Furthermore, as a global company, we are subject to foreign and U.S. laws and regulations designed to combat governmental corruption, including the U.S.
Further, in the U.S., trucking costs have risen dramatically due to driver shortages, increased labor costs, and safety, environmental, and labor regulations. As supply chain disruptions continue and we manage product availability, the timing of sales to our wholesale partners and consumers may continue to be impacted, and we face increased 13 Table of Contents risk of order cancellations.
Further, in the U.S., trucking costs have risen dramatically due to driver shortages, increased labor costs, and safety, environmental, and labor regulations. As supply chain disruptions continue and we manage product availability, the timing of sales to our wholesale partners and consumers may continue to be impacted, and we face increased risk of order cancellations.
Moreover, we may determine that it is in the best interest of 22 Table of Contents our Company and our stockholders to prioritize other business, social, governance or sustainable investments over the achievement of our current commitments based on economic, technological developments, regulatory and social factors, business strategy or pressure from investors, activist groups or other stakeholders.
Moreover, we may determine that it is in the best interest of our Company and our stockholders to prioritize other business, social, governance or sustainable investments over the achievement of our current commitments based on economic, technological developments, regulatory and social factors, business strategy or pressure from investors, activist groups or other stakeholders.
For example, during the year ended December 31, 2022, we incurred approximately $67 million on an air freight program initiated as a result of partial COVID-19-related factory closures in Vietnam at the end of 2021. The cost of fuel is a 14 Table of Contents significant component in transportation costs.
For example, during the year ended December 31, 2022, we incurred approximately $67 million on an air freight program initiated as a result of partial COVID-19-related factory closures in Vietnam at the end of 2021. The cost of fuel is a significant component in transportation costs.
We use information systems for certain human resource activities and to process our employee benefits, as well as to process financial information for internal and external reporting purposes and to comply with various reporting, legal, and tax requirements.
In addition, we use information systems for certain human resource activities and to process our employee benefits, as well as to process financial information for internal and external reporting purposes and to comply with various reporting, legal, and tax requirements.
Our e-commerce business may be particularly vulnerable to cyber threats including unauthorized access and denial of service attacks. Sales in our e-commerce channel may also divert sales from our retail and wholesale channels. Our financial success depends in part on the strength of our relationships with, and the success of, our wholesale and distributor customers.
Our e-commerce business may be particularly vulnerable to cyber threats including unauthorized access and denial of service attacks. Sales in our e-commerce channel may also divert sales from our retail and wholesale channels. 20 Table of Contents Our financial success depends in part on the strength of our relationships with, and the success of, our wholesale and distributor customers.
Changes in global economic conditions, including, but not limited to, those driven by inflation, may adversely affect consumer spending and the financial health of our customers and others with whom we do business, which may adversely affect our financial condition, results of operations, and cash resources.
Risks Related to the Economy Changes in global economic conditions, including, but not limited to, those driven by inflation, may adversely affect consumer spending and the financial health of our customers and others with whom we do business, which may adversely affect our financial condition, results of operations, and cash resources.
Adverse publicity about regulatory or legal action against us, or by us, could also damage our reputation and brands’ image, undermine consumer confidence in us, and reduce long-term demand for our products, even if the regulatory or legal action is unfounded or not material to our operations.
Adverse publicity about regulatory or legal action against us, or by us, could also damage our reputation and the image of our brands, undermine consumer confidence in us, and reduce long-term demand for our products, even if the regulatory or legal action is unfounded or not material to our operations.
These and any other additional changes could adversely affect our effective tax rate or result in higher cash tax liabilities. We may fail to meet analyst and investor expectations, which could cause the price of our stock to decline.
These and any other additional changes could adversely affect our effective tax rate or result in higher cash tax liabilities. 26 Table of Contents We may fail to meet analyst and investor expectations, which could cause the price of our stock to decline.
See the risk factor under “ Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs” and “Our operations are dependent on the global supply chain and impacts of supply chain constraints and inflationary pressure could adversely impact our operating results.” Foreign manufacturing is subject to additional risks, including transportation delays and interruptions, including those caused by the COVID-19 pandemic, work stoppages, political instability, including the ongoing war between Russia and Ukraine, expropriation, nationalization, foreign currency fluctuations, changing economic conditions, cost inflation, changes in governmental policies or laws, and the imposition of tariffs, import and export controls, and other barriers.
See the risk factor under “ Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs” and “Our operations are dependent on the global supply chain and impacts of supply chain constraints and inflationary pressure could adversely impact our operating results.” 13 Table of Contents Foreign manufacturing is subject to additional risks, including transportation delays and interruptions, including those caused by the COVID-19 pandemic, work stoppages, political instability, including the ongoing war between Israel and Hamas, expropriation, nationalization, foreign currency fluctuations, changing economic conditions, cost inflation, changes in governmental policies or laws, and the imposition of tariffs, import and export controls, and other barriers.
We had no borrowings outstanding under the Revolving Facility, with total borrowing capacity of approximately $748.7 million thereunder (including $1.3 million of letters of credit outstanding as of such date). Financial and Accounting Risks We may be required to record impairments of long-lived assets or incur other charges relating to our company-operated retail operations.
We had borrowings outstanding of $190.0 million under the Revolving Facility, with total borrowing capacity of approximately $558.7 million thereunder (including $1.3 million of letters of credit outstanding as of such date). Financial and Accounting Risks We may be required to record impairments of long-lived assets or incur other charges relating to our company-operated retail operations.
Consumer demand for our products and our brands’ equity could also diminish significantly if we fail to preserve the quality of our products, are perceived to act in an unethical or socially irresponsible manner, fail to comply with laws and regulations, or fail to deliver a consistently positive consumer experience in each of our markets.
Consumer demand for our products and the equity of our brands could also diminish significantly if we, among other things, fail to preserve the quality of our products, are perceived to act in an unethical or socially irresponsible manner, fail to comply with laws and regulations, or fail to deliver a consistently positive consumer experience in each of our markets.
Any breach of our network may result in the loss of valuable business data, misappropriation of our consumers’ or employees’ personal information, including credit card information, or a disruption of our business.
Any breach of our network may result in the loss of 19 Table of Contents valuable business data, misappropriation of our consumers’ or employees’ personal information, including credit card information, or a disruption of our business.
Although the fair values of our HEYDUDE Brand reporting unit goodwill and indefinite-lived intangible assets are either equal to or in excess of their carrying values, the fair values are sensitive to the aforementioned potential unfavorable changes that could have an adverse impact on future analyses. See Part II - Item 7.
Although the fair values of our HEYDUDE Brand reporting unit goodwill and indefinite-lived intangible assets are either equal to or in excess of their carrying values, the fair values are sensitive to the aforementioned potential unfavorable changes that could have an adverse impact on future analyses.
Our ability to comply with these negative covenants can be affected by events beyond our control.
In addition, our ability to comply with these negative covenants can be affected by events beyond our control.
See “ The ongoing war between Russia and Ukraine could cause further disruptions in the global economy as well as a negative impact on our business, financial condition and results of operations .” Any such volatility and disruptions may adversely affect our business or the third parties on whom we rely.
See “ Ongoing wars could cause further disruptions in the global economy as well as a negative impact on our business, financial condition and results of operations .” Any such volatility and disruptions may adversely affect our business or the third parties on whom we rely.
See also the risk factor under “HEYDUDE Acquisition Risks — Our ability to realize the benefits from the Acquisition is substantially dependent on our ability to continue to grow HEYDUDE.” Failure to adequately protect our trademarks and other intellectual property rights and counterfeiting of our brands could divert sales, damage our brands’ image, and adversely affect our business.
See also the risk factor under “Risks Specific to Our Company and Strategy — Our ability to realize the benefits from the Acquisition is substantially dependent on our ability to continue to grow HEYDUDE.” Failure to adequately protect our trademarks and other intellectual property rights and counterfeiting of our brands could divert sales, damage our brands’ image, and adversely affect our business.
Similarly, the ongoing war between Russia and Ukraine has created extreme volatility in the global capital markets and is expected to continue to have further global economic consequences, including disruptions of the global supply chain and energy markets.
Similarly, the ongoing war between Israel and Hamas has created extreme volatility in the global capital markets and is expected to continue to have further global economic consequences, including disruptions of the global supply chain and energy markets.
For more information, please see the risk factors under “Risks Related to the Economy — The ongoing war between Russia and Ukraine could cause further disruptions in the global economy as well as a negative impact on our business, financial condition, and results of operations,” “Risks Related to Our Supply Chain — We depend solely on third-party manufacturers located outside the U.S.,” “ Risks Related to our Supply Chain — Our third-party manufacturing operations must comply with labor, trade, and other laws.
For more information, please see the risk factors under “Risks Related to the Economy — Ongoing wars could cause further disruptions in the global economy as well as a negative impact on our business, financial condition, and results of operations,” “Risks Related to Our Supply Chain — We depend solely on third-party manufacturers located outside the U.S.,” “ Risks Related to our Supply Chain — Our third-party manufacturing operations must comply with labor, trade, and other 17 Table of Contents laws.
We also require our third-party manufacturers to meet certain product safety standards. A failure by any of our third-party manufacturers to adhere to such product safety standards could lead to a product recall, which could result in critical media coverage; harm our business, brands, and reputation; and cause us to incur additional costs.
A failure by any of our third-party manufacturers to adhere to such product safety standards could lead to a product recall, which could result in critical media coverage; harm our business, brands, and reputation; and cause us to incur additional costs.
Our largest third-party manufacturer for the Crocs Brand, with the vast majority of operations in Vietnam and China, produced approximately 42%, 34%, and 46% of our production during the years ended December 31, 2022, 2021, and 2020, respectively, and our second largest third-party manufacturer for the Crocs Brand, primarily operating in both Vietnam and China, produced approximately 27%, 30%, and 22% of our production during the years ended December 31, 2022, 2021, and 2020, respectively.
Our largest third-party manufacturer for the Crocs Brand, with the vast majority of operations in Vietnam and China, produced approximately 47%, 42%, and 34% of our production during the years ended December 31, 2023, 2022, and 2021, respectively, and our second largest third-party manufacturer for the Crocs Brand, primarily operating in both Vietnam and China, produced approximately 26%, 27%, and 30% of our production during the years ended December 31, 2023, 2022, and 2021, respectively.
We have also moved to, and subsequently expanded, a new distribution center in Dayton, Ohio to serve our North American businesses for the Crocs Brand, and have moved to a new company-operated distribution center in the Netherlands and a new third-party operated distribution center in Japan to serve our EMEALA and Asia Pacific businesses, respectively, for the Crocs Brand.
We have also moved to, and subsequently expanded, a new distribution center in Dayton, Ohio to serve our North American businesses for the Crocs Brand, and have moved to a new company-operated distribution center in the Netherlands and a new third-party operated distribution center in Japan to serve our international businesses for the Crocs Brand.
Issues in implementing or integrating new business operations, such as HEYDUDE, and new systems with our current operations, failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, issues with transitioning to or operating our new distribution centers, cost overruns, or a breach in security of these systems could cause delays in product fulfillment and reduced efficiency of our operations, require significant additional capital investments to remediate, and may have an adverse effect on our business and financial results. 21 Table of Contents We depend on employees across the globe, the loss of whom would harm our business.
Issues in implementing or integrating new business operations, such as HEYDUDE, and new systems 21 Table of Contents with our current operations, failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, issues with transitioning to or operating our new distribution centers, cost overruns, or a breach in security of these systems could cause delays in product fulfillment and reduced efficiency of our operations, require significant additional capital investments to remediate, and may have an adverse effect on our business and financial results.
We may have difficulty managing our brands’ image across markets and international borders as certain consumers may perceive our brands’ image to be out of style, outdated, or otherwise undesirable.
We may have difficulty managing the image of our brands across markets and international borders as certain consumers may perceive the image of either or both of our brands to be out of style, outdated, or otherwise undesirable.
Any failure on our part or on the part of third parties to provide effective, reliable, user-friendly e-commerce platforms that offer a wide assortment of our products could place us at a competitive disadvantage, result in the loss of sales, and could have a material adverse impact on our business and financial results.
Any failure on our part or on the part of third parties to provide effective, reliable, user-friendly e-commerce platforms that offer a wide assortment of our products and that continually meet the evolving expectations of online shoppers or any failure to provide attractive digital experiences could place us at a competitive disadvantage, result in the loss of sales, and could have a material adverse impact on our business and financial results.
To finance the Acquisition in part, we entered into an agreement (the “Term Loan B Credit Agreement”) with respect to a new senior secured term loan B facility in an aggregate principal amount equal to $2.0 billion (the “Term Loan B Facility”) and borrowed $50.0 million under the Revolving Facility.
To finance the Acquisition in part, we entered into an agreement (as amended prior to the February 2024 Amendment (as defined below), the “Term Loan B Credit Agreement”) with respect to a new senior secured term loan B facility in an aggregate principal amount equal to $2.0 billion (as amended prior to the February 2024 Amendment, the “Term Loan B Facility”) and borrowed $50.0 million under the Revolving Facility.
Additionally, we have expanded our HEYDUDE Brand distribution center in Las Vegas, Nevada, and we are further expanding our distribution capabilities of the HEYDUDE Brand by constructing a distribution facility in Nevada set to open in late 2023. As our business grows, we may also need to make further investments in business systems and distribution capabilities.
Additionally, we have expanded our HEYDUDE Brand distribution center in Las Vegas, Nevada, and we further expanded our distribution capabilities of the HEYDUDE Brand by constructing a distribution facility in Nevada that opened in 2023. As our business grows, we may also need to make further investments in business systems and distribution capabilities.
Declines in revenue and operating performance of our company-operated retail stores could cause us to record impairment charges and have a material adverse effect on our business and financial results. During 2022, we opened 22 and closed 50 retail stores, and we operated 345 retail stores at December 31, 2022.
Declines in revenue and operating performance of our company-operated retail stores could cause us to record impairment charges and have a material adverse effect on our business and financial results. During 2023, we opened 29 and closed 11 retail stores, and we operated 363 retail stores at December 31, 2023.
A failure by any of our third-party manufacturers to adhere to quality standards or labor, environmental, and other laws could cause us to incur additional costs for our products, generate negative publicity, damage our reputation and the value of our brands, and discourage customers from buying our 15 Table of Contents products.
A failure by any of our third-party manufacturers to adhere to quality standards or labor, environmental, and other laws could cause us to incur additional costs for our products, generate negative publicity, damage our reputation and the value of our brands, and discourage customers from buying our products. We also require our third-party manufacturers to meet certain product safety standards.
As our business context continues to change, such as with the acquisition of HEYDUDE, we will continue to evaluate pathways and feasibility of our carbon reduction journey.
As our business context continues to change, we will continue to evaluate pathways and feasibility of our carbon reduction journey.
In addition, the COVID-19 pandemic has, among other things, caused global macroeconomic uncertainty, disrupted consumer spending and supply chains, contributed to various global shipping delays and port congestions, and created significant volatility and disruption of financial markets.
Pandemics, including the COVID-19 pandemic, and other public health emergencies have, among other things, caused global macroeconomic uncertainty, disrupted consumer spending and supply chains, contributed to various global shipping delays and port congestions, and created significant volatility and disruption of financial markets.
Indebtedness Risks Our senior revolving credit facility agreement (as amended to date, the “Revolving Credit Agreement”), the Term Loan B Credit Agreement, and the Indentures each impose significant operating and financial restrictions on us and certain of our subsidiaries, which may prevent us from capitalizing on business opportunities.
Indebtedness Risks The Revolving Credit Agreement, the Term Loan B Credit Agreement, and the Indentures (each as defined below) each impose significant operating and financial restrictions on us and certain of our subsidiaries, which may prevent us from capitalizing on business opportunities.
As a global company, we have significant revenues and costs denominated in currencies other than the USD. We are exposed to the risk of losses resulting from changes in exchange rates on monetary assets and liabilities within our international subsidiaries that are denominated in currencies other than the subsidiaries’ functional currencies.
We are exposed to the risk of losses resulting from changes in exchange rates on monetary assets and liabilities within our international subsidiaries that are denominated in currencies other than the subsidiaries’ functional currencies.
The ongoing war between Russia and Ukraine could cause further disruptions in the global economy as well as a negative impact on our business, financial condition, and results of operations.
Ongoing wars could cause further disruptions in the global economy as well as a negative impact on our business, financial condition, and results of operations. The ongoing war between Israel and Hamas as well as the ongoing war between Russia and Ukraine have adversely affected the global economy and have resulted in geopolitical instability.
Specifically, our level of debt could have important consequences, including the following: • making it more difficult for us to meet our obligations with respect to our debt; • reducing the availability of cash flow to fund future working capital, capital expenditures, acquisitions or other general corporate purposes; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate purposes; • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions or other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; • exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest; • placing us at a disadvantage compared to other, less leveraged competitors; • increasing our cost of borrowing; and • limiting our flexibility in planning for changes in our business and reacting to changes in the industry in which we compete.
Specifically, our level of debt could have important consequences, including the following: • making it more difficult for us to meet our obligations with respect to our debt; • reducing the availability of cash flow to fund future working capital, capital expenditures, acquisitions or other general corporate purposes; • limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate purposes; • requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions or other general corporate purposes; • increasing our vulnerability to general adverse economic and industry conditions; • exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest; • placing us at a disadvantage compared to other, less leveraged competitors; • increasing our cost of borrowing; and • limiting our flexibility in planning for changes in our business and reacting to changes in the industry in which we compete. 24 Table of Contents Furthermore, if we are unable to meet our debt service obligations or should we fail to comply with our financial and other negative covenants contained in the agreements governing our indebtedness, we may be required to refinance all or part of our debt, sell important strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities.
While we enter into foreign currency exchange forward contracts to reduce our exposure to changes in exchange rates on monetary assets and liabilities, the volatility of foreign currency exchange rates is dependent on many factors that cannot be forecasted with reliable accuracy and, as a result, our forward contracts may not prove effective in reducing our exposures.
While we enter into foreign currency exchange forward contracts to reduce our exposure to changes in exchange rates on monetary assets and liabilities, the volatility of foreign currency exchange rates is dependent on many factors that cannot be forecasted with reliable accuracy and, as a result, our forward contracts may not prove effective in reducing our exposures. 16 Table of Contents We conduct significant business activity outside the U.S., which exposes us to risks of international commerce.
Further escalation of geopolitical tensions related to the war between Russia and Ukraine, including increased trade barriers or restrictions on global trade, could result in, among other things, broader impacts that expand into other markets, cyberattacks, supply chain and logistics disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain.
Further escalation of geopolitical tensions could also result in, among other things, broader impacts that expand into other markets, cyberattacks, supply chain and logistics disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain.
As of December 31, 2022, we had approximately $2,322.4 million in total indebtedness outstanding (net of $57.0 million of unamortized issuance costs related to the issuance of the Notes), including $1,675.0 million outstanding on the Term Loan B Facility.
As of December 31, 2023, we had approximately $1,664.3 million in total indebtedness outstanding (net of $49.0 million of unamortized issuance costs related to the issuance of the Notes), including $820.0 million outstanding on the Term Loan B Facility.
For example, during the year ended December 31, 2022, we expended $67 million on an air freight program initiated as a result of partial COVID-19-related factory closures in Vietnam at the end of 2021.
Despite our actions to mitigate these impacts, we were negatively impacted by global logistics challenges in 2022. For example, during the year ended December 31, 2022, we expended $67 million on an air freight program initiated as a result of partial COVID-19-related factory closures in Vietnam at the end of 2021.
Risks Related to Our Supply Chain Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs. We rely on third-party manufacturers outside of the U.S. to produce our products.
Risks Related to Our Supply Chain Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs. We rely on third-party manufacturers outside of the U.S. to produce our products. See the risk factor under “We depend solely on third-party manufacturers located outside the U.S.” for more information.
This could lead to results outside of analyst and investor expectations, which could increase volatility of our stock price. 25 Table of Contents The risks of maintaining significant cash abroad could adversely affect our cash flows in the U.S., our business, and financial results.
This could lead to results outside of analyst and investor expectations, which could increase volatility of our stock price. The risks of maintaining significant cash abroad could adversely affect our cash flows in the U.S., our business, and financial results. We have substantial cash requirements in the U.S., but a significant portion of our cash is generated and held abroad.
See the risk factor under “ Risks Related to Our Supply Chain — We depend solely on third-party manufacturers located outside the U.S .” and “ Risks Related to Our Supply Chain — Our operations are dependent on the global supply chain and impacts of supply chain constraints and inflationary pressure could adversely impact our operating results ” for more information.
See the risk factors under “ Risks Related to Our Supply Chain — Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs ,” “ Risks Related to Our Supply Chain — Our operations are dependent on the global supply chain and impacts of supply chain constraints and inflationary pressure could adversely impact our operating results ,” and “ Risks Related to Our Supply Chain — We depend solely on third-party manufacturers located outside of the U.S. ” Our business relies significantly on the use of information technology.
Our indebtedness could adversely affect our business, financial condition, and results of operations, as well as the ability to meet payment obligations under our Revolving Credit Agreement, the Term Loan B Credit Agreement, and the Notes.
Our indebtedness, including the incurrence by us of substantial indebtedness in connection with the financing of the Acquisition, could adversely affect our business, financial condition, and results of operations, as well as the ability to meet payment obligations under our Revolving Credit Agreement, the Term Loan B Credit Agreement, and the Notes (as defined below).
We also have outsourced a significant 19 Table of Contents portion of work associated with our finance and accounting, human resources, customer service, and other information technology functions to third-party service providers.
We also have outsourced a significant portion of work associated with our finance and accounting, human resources, customer service, and other information technology functions to third-party service providers. In addition, we continuously assess and implement upgrades to improve our information technology systems globally.
If we are unable to anticipate, identify, or react appropriately to changes in consumer preferences, our revenues may decrease, our brands’ image may suffer, our operating performance may decline, and we may not be able to execute our growth plans. In producing new footwear models, we may encounter difficulties that we did not anticipate during the product development stage.
If we are unable to anticipate, identify, or react appropriately to changes in consumer preferences, our revenues may decrease, the image of our brands may suffer, our operating performance may decline, and we may not be able to execute our growth plans.
See the risk factor under “We depend solely on third-party manufacturers located outside the U.S.” for more information. We also rely on international shipping to transport our products to their various geographic markets. During the year ended December 31, 2022, international shipping to the U.S. was disrupted and delayed due to congestion in west coast ports.
We also rely on international shipping to transport our products to their various geographic markets. During the year ended December 31, 2022, international shipping to the U.S. was disrupted and delayed due to congestion in west coast ports.
We rely on executives and senior management to drive the financial and operational performance of our business.
We depend on employees across the globe, the loss of whom would harm our business. We rely on executives and senior management to drive the financial and operational performance of our business.
As of December 31, 2022, we had $2,322.4 million in total indebtedness outstanding (net of $57.0 million of unamortized issuance costs related to the issuance of the Notes).
As of December 31, 2023, we had $1,664.3 million in total indebtedness outstanding (net of $49.0 million of unamortized issuance costs related to the issuance of the Notes).
If we are unable to obtain suitable elastomer resins, or if we are unable to procure sufficient quantities of the materials that go into the Croslite™ and LiteRide™ formulations, we may not be able to meet our production requirements in a timely manner or may need to modify our product characteristics, which could result in less favorable market acceptance, lost potential sales, delays in shipments to customers, strained relationships with customers, and diminished brand loyalty. 16 Table of Contents Risks Related to International Operations Changes in foreign exchange rates, most significantly but not limited to the Euro and South Korean Won, or other global currencies could have a material adverse effect on our business and financial results.
If we are unable to obtain suitable elastomer resins, or if we are unable to procure sufficient quantities of the materials that go into the Croslite™ and LiteRide™ formulations, we may not be able to meet our production requirements in a timely manner or may need to modify our product characteristics, which could result in less favorable market acceptance, lost potential sales, delays in shipments to customers, strained relationships with customers, and diminished brand loyalty.
In 2021, we made a public commitment regarding a plan to be Net Zero by 2030. Although we intend to meet these commitments, we may be required to expend significant resources to do so, which could increase our operational costs.
Although we intend to meet these commitments, we may be required to expend significant resources to do so, which could increase our operational costs.
We have substantial cash requirements in the U.S., but a significant portion of our cash is generated and held abroad. We generally consider unremitted earnings of subsidiaries operating outside the U.S. to be indefinitely reinvested, and it is not our current intent to change this position.
We generally consider unremitted earnings of subsidiaries operating outside the U.S. to be indefinitely reinvested, and it is not our current intent to change this position. Cash held outside of the U.S. is primarily used for the ongoing operations of the business in the locations in which the cash is held.
Risks Related to the Economy The COVID-19 pandemic has had an adverse impact, and may have a future material adverse impact, on our business, operations, liquidity, financial condition, and results of operations.
A pandemic, epidemic, or other public health emergency has had an adverse impact, and may have a future material adverse impact, on our business, operations, liquidity, financial condition, and results of operations.
Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 5 — Goodwill and Intangible Assets, Net in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information.
See Part II - Item 7. 25 Table of Contents Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 5 — Goodwill and Intangible Assets, Net in the accompanying notes to the consolidated financial statements included in Part II - Item 8.
We conduct significant business activity outside the U.S., which exposes us to risks of international commerce. A significant portion of our revenues is generated from foreign sales. Our ability to maintain the current level of operations in our existing international markets is subject to risks associated with international sales operations.
A significant portion of our revenues is generated from foreign sales. Our ability to maintain the current level of operations in our existing international markets is subject to risks associated with international sales operations. We operate retail stores and sell our products to retailers outside of the U.S. and utilize foreign-based third-party manufacturers.
Continued or additional delays in shipping may cause us to have to use more expensive air freight or other more costly methods to ship our products. The ongoing COVID-19 pandemic and related governmental and port facility actions have caused delays in shipments of our products.
Continued or additional delays in shipping may cause us to have to use more expensive air freight or other more costly methods to ship our products.
Bribery Act, there can be no assurance that our employees, business partners, or agents will not violate our policies. 18 Table of Contents Risks Specific to Our Company and Strategy We may be unable to successfully execute our long-term growth strategy, maintain or grow our current revenue and profit levels, or accurately forecast demand and supply for our products.
Risks Specific to Our Company and Strategy We may be unable to successfully execute our long-term growth strategy, maintain or grow our current revenue and profit levels, or accurately forecast demand and supply for our products.
Although we have implemented policies and procedures designed to ensure compliance with these foreign and U.S. laws and regulations, including the U.S. Foreign Corrupt Practices Act and the U.K.
Although we have implemented policies and procedures designed to ensure compliance with these foreign and U.S. laws and regulations, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, there can be no assurance that our employees, business partners, or agents will not violate our policies.
Global supply chain disruptions during the year ended December 31, 2022 negatively impacted our gross margins and net income and could continue to do so in 2023 and beyond, which could have a material adverse effect on the business, financial condition, and results of operations. 11 Table of Contents The effects of COVID-19 could affect our ability to successfully operate in many ways, including, but not limited to, the following factors: • the impact of the pandemic on the economies and financial markets of the countries and regions in which we operate; • the impact on our supply chain, including, but not limited to, staffing shortages, cost inflation, and shipping delays; and • operational risk, including, but not limited to, cybersecurity risks as a result of extended remote work arrangements and restrictions on employee travel.
The effects of a pandemic, epidemic, or other public health emergency could affect our ability to successfully operate in many ways, including, but not limited to, the following factors: • the impact of the pandemic on the economies and financial markets of the countries and regions in which we operate; 12 Table of Contents • the impact on our supply chain, including, but not limited to, staffing shortages, cost inflation, and shipping delays; and • operational risk, including, but not limited to, cybersecurity risks as a result of extended remote work arrangements and restrictions on employee travel.
Any of these factors could have an adverse effect on our business, financial condition, and results of operations and our ability to meet our debt payment obligations.
Any of these factors could have an adverse effect on our business, financial condition, and results of operations and our ability to meet our debt payment obligations. Despite our current level of indebtedness, we may be able to incur substantially more debt, which could increase the risks to our financial condition described above.
In addition, inconsistent regulations among jurisdictions may also affect our cost to comply with such laws and regulations. Any assessment of the potential impact of future climate change legislation, regulations, or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we operate.
Any assessment of the potential impact of future climate change legislation, regulations, or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we operate. 22 Table of Contents In 2022, we updated our public, enterprise-wide commitment to be Net Zero by 2040.
We may not have sufficient funds to repay such indebtedness upon a default or be unable to receive a waiver of the default from the lenders. If we are unable to repay the indebtedness, the lenders could initiate a bankruptcy proceeding or collection proceedings with respect to our assets, all of which secure our indebtedness under the Revolving Credit Agreement.
If we are unable to repay the indebtedness, the lenders could initiate a bankruptcy proceeding or 23 Table of Contents collection proceedings with respect to our assets, all of which secure our indebtedness under the Revolving Credit Agreement. The foregoing risks also apply to the Term Loan B Credit Agreement.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation Reportable Operating Segment(s) Use Approximate Square Feet Dayton, Ohio North America Distribution center 2,037,000 Dordrecht, the Netherlands EMEALA Distribution center 517,000 Las Vegas, Nevada HEYDUDE Brand Distribution center 456,000 Rotterdam, the Netherlands EMEALA Warehouse 172,000 Broomfield, Colorado (1) North America Regional office and Crocs Brand headquarters 88,000 Oudenbosch, the Netherlands EMEALA Warehouse 75,000 Hoofddorp, the Netherlands EMEALA Regional office 47,000 Westwood, Massachusetts North America, HEYDUDE Brand Regional office and HEYDUDE Brand headquarters 23,000 Singapore Asia Pacific Regional office 17,000 (1) In 2021, we entered into a lease to move our corporate headquarters to a new location, also in Broomfield, Colorado, with an approximate size of 190,000 square feet.
Biggest changeLocation Reportable Operating Segment(s) Use Approximate Square Feet Las Vegas, Nevada (1) HEYDUDE Brand Distribution center 1,500,000 Dayton, Ohio Crocs Brand Distribution center 1,322,000 Dordrecht, the Netherlands Crocs Brand, HEYDUDE Brand Distribution center 517,000 Broomfield, Colorado Crocs Brand, HEYDUDE Brand Regional office and Crocs Brand headquarters 190,000 Oudenbosch, the Netherlands Crocs Brand Warehouse 75,000 Hoofddorp, the Netherlands Crocs Brand, HEYDUDE Brand Regional office 47,000 Westwood, Massachusetts Crocs Brand, HEYDUDE Brand Regional office and HEYDUDE Brand headquarters 46,000 Singapore Crocs Brand Regional office 17,000 (1) In 2022, we entered into a lease to transfer our existing warehouses to a new single distribution center also in Las Vegas, Nevada, with an approximate size of 1,050,000 square feet.
The terms of our leases include fixed monthly rents and/or contingent rents based on percentage of revenues for certain of our retail locations and expire at various dates through the year 2033. The general location, use, and approximate size of our principal properties, as well as the reportable operating segment that utilizes each property, are given below.
The terms of our leases include fixed monthly rents and/or contingent rents based on percentage of revenues for certain of our retail locations and expire at various dates through the year 2034. The general location, use, and approximate size of our principal properties, as well as the reportable operating segment that utilizes each property, are given below.
Aside from the principal properties listed above, we lease various other offices and distribution centers worldwide to meet our sales and operational needs. We also lease 345 retail locations worldwide as of December 31, 2022. See Item 1. Business of this Annual Report on Form 10-K for further discussion regarding global company-operated stores.
Aside from the principal properties listed above, we lease various other offices and distribution centers worldwide to meet our sales and operational needs. We also lease 363 retail locations 28 Table of Contents worldwide as of December 31, 2023. See Item 1. Business of this Annual Report on Form 10-K for further discussion regarding global company-operated stores.
During 2022, we gained access to and began construction on the new location. We plan to complete the move of our corporate headquarters in 2023. We believe these properties, particularly our distribution centers and warehouses, along with various third-party distribution centers not included above, are adequate for our operations.
During 2023, we gained access to the new location. We plan to complete the move of these warehouses in 2024. We believe these properties, particularly our distribution centers and warehouses, along with various third-party distribution centers not included above, are adequate for our operations.
ITEM 2. Properties Our principal executive and administrative offices are located at 13601 Via Varra, Broomfield, Colorado 80020. We lease all of our domestic and international facilities. We currently enter into short-term and long-term leases for office, warehouse, and retail, including kiosk and store-in-store, space.
ITEM 2. Properties Our principal executive and administrative offices are located at 500 Eldorado Blvd., Building 5, Broomfield, CO 80021. We lease all of our domestic and international facilities. We currently enter into short-term and long-term leases for office, warehouse, and retail, including kiosk and store-in-store, space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. Legal Proceedings A discussion of legal matters is found in Note 16 — Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. ITEM 4. Mine Safety Disclosures Not applicable. 28 Table of Contents PART II
Biggest changeITEM 3. Legal Proceedings A discussion of legal matters is found in Note 16 — Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. ITEM 4. Mine Safety Disclosures Not applicable. 29 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe believe each of the Nasdaq Composite Total Return Index and Dow Jones U.S. Footwear Total Return Index better reflects the market in which we operate and the companies with which we compete. The graph assumes an investment of $100.00 on December 31, 2017 and assumes the reinvestment of all dividends and other distributions. The Dow Jones U.S.
Biggest changeFootwear Total Return Index. The graph assumes an investment of $100.00 on December 31, 2018 and assumes the reinvestment of all dividends and other distributions. The Dow Jones U.S. Footwear Total Return Index is a sector index and includes companies in the major line of business in which we compete.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the Nasdaq Global Select Market under the stock symbol “CROX.” Performance Graph The following performance graph illustrates a five-year comparison from December 31, 2017 through December 31, 2022 of cumulative total return of our common stock, compared to the Nasdaq Composite Total Return Index and the Dow Jones U.S.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the Nasdaq Global Select Market under the stock symbol “CROX.” Performance Graph The following performance graph illustrates a five-year comparison from December 31, 2018 through December 31, 2023 of cumulative total return of our common stock, the Nasdaq Composite Total Return Index, and the Dow Jones U.S.
The repurchase authorization does not have an expiration date and does not oblige us to acquire any particular amount of our common stock. The Board may suspend, modify, or terminate the repurchase program at any time without prior notice.
The repurchase authorization does not have an expiration date and does not oblige us to acquire any particular amount of our common stock. The Board may suspend, modify, or terminate the repurchase program at any time without prior notice. ITEM 6. [Reserved] 31 Table of Contents
Holders The approximate number of stockholders of record of our common stock was 46 as of February 9, 2023. 29 Table of Contents Dividends We have never declared or paid cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Holders The approximate number of stockholders of record of our common stock was 42 as of February 8, 2024. 30 Table of Contents Dividends We have never declared or paid cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Purchases of Equity Securities by the Issuer On April 23, 2021, the Board approved a $712.2 million increase to our share repurchase authorization. Additionally, on September 23, 2021, the Board approved an increase of $1.0 billion to our share repurchase authorization. As of December 31, 2022, approximately $1,050.0 million remained available for repurchase under our share repurchase authorization.
Additionally, on September 23, 2021, the Board approved an increase of $1.0 billion to our share repurchase authorization. As of December 31, 2023, approximately $875.0 million remained available for repurchase under our share repurchase authorization.
Footwear Index includes NIKE, Inc., Deckers Outdoor Corporation, Skechers U.S.A., Inc., Steven Madden Ltd., and Wolverine World Wide, Inc. The Nasdaq Composite Total Return Index is a market capitalization-weighted index that includes reinvestment of all cash distributions of index members and consists of more than 3,000 common equities, including Crocs, Inc.
This index does not encompass all of our competitors or all of our product categories and lines of business. The Nasdaq Composite Total Return Index is a market capitalization-weighted index that includes reinvestment of all cash distributions of index members and consists of more than 3,000 common equities, including Crocs, Inc.
Removed
Footwear Total Return Index, both of which are new published industry indices we have selected to use beginning this year, and compared to the Nasdaq Composite Index and the Dow Jones U.S. Footwear Index, the published industry indices we previously used for the purposes of this disclosure.
Added
Purchases of Equity Securities by the Issuer Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) October 1-31, 2023 275,419 $ 86.37 275,419 $ 876,232,951 November 1-30, 2023 14,184 85.87 14,184 875,015,198 December 1-31, 2023 — — — 875,015,198 Total 289,603 $ 86.34 289,603 $ 875,015,198 (1) On April 23, 2021, the Board approved and authorized a program to repurchase up to $1.0 billion of our common stock.
Removed
Footwear Total Return Index is a sector index and includes companies in the major line of business in which we compete. This index does not encompass all of our competitors or all of our product categories and lines of business. The Dow Jones U.S.
Removed
In the immediate term, we plan to continue to prioritize repayments of debt, including debt incurred to finance a part of the Acquisition, and in the year ended December 31, 2022, we suspended our share repurchase program until such time that our gross leverage is under 2.0x.
Removed
Accordingly, we did not repurchase any shares of our common stock during the year ended December 31, 2022. ITEM 6. [Reserved] 30 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+34 added−91 removed64 unchanged
Biggest changeYear Ended December 31, % Change Constant Currency % Change (1) Favorable (Unfavorable) 2022 2021 2020 2022-2021 2021-2020 2022-2021 (in thousands) Revenues: North America (2) $ 1,644,630 $ 1,553,891 $ 832,540 5.8 % 86.6 % 6.0 % Asia Pacific 473,935 350,160 278,515 35.3 % 25.7 % 47.0 % EMEALA (2) 540,534 409,278 274,733 32.1 % 49.0 % 46.8 % Brand corporate (3) 26 87 163 (70.1) % (46.6) % (70.1) % Crocs Brand revenues 2,659,125 2,313,416 1,385,951 14.9 % 66.9 % 19.4 % HEYDUDE Brand revenues (4) 895,860 — — — % — % — % Total consolidated revenues $ 3,554,985 $ 2,313,416 $ 1,385,951 53.7 % 66.9 % 58.2 % Income from operations: North America (2) $ 683,350 $ 755,723 $ 313,913 (9.6) % 140.7 % (9.4) % Asia Pacific 145,011 71,936 32,830 101.6 % 119.1 % 119.5 % EMEALA (2) 153,976 134,126 75,513 14.8 % 77.6 % 28.1 % Brand corporate (3) (130,312) (100,391) (92,833) (29.8) % (8.1) % (31.4) % Crocs Brand income from operations 852,025 861,394 329,423 (1.1) % 161.5 % 2.4 % HEYDUDE Brand income from operations (4) 211,361 — — — % — % — % Enterprise corporate (3) (212,630) (178,330) (115,299) (19.2) % (54.7) % (19.2) % Total consolidated income from operations 850,756 683,064 214,124 24.5 % 219.0 % 29.0 % Foreign currency gains (losses), net 3,228 (140) (1,128) 2,405.7 % 87.6 % Interest income 1,020 775 215 31.6 % 260.5 % Interest expense (136,158) (21,647) (6,742) (529.0) % (221.1) % Other income (expense), net (338) 1,797 510 (118.8) % 252.4 % Income before income taxes $ 718,508 $ 663,849 $ 206,979 8.2 % 220.7 % (1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure.
Biggest changeYear Ended December 31, % Change Constant Currency % Change (1) Favorable (Unfavorable) 2023 2022 2023-2022 2023-2022 (in thousands) Revenues: Crocs Brand revenues (2) $ 3,012,954 $ 2,659,125 13.3 % 14.0 % HEYDUDE Brand revenues (3) 949,393 895,860 6.0 % 6.0 % Total consolidated revenues $ 3,962,347 $ 3,554,985 11.5 % 12.0 % Income from operations: Crocs Brand income from operations (2) $ 1,079,330 $ 852,025 26.7 % 25.7 % HEYDUDE Brand income from operations (3) 212,386 211,361 0.5 % 0.5 % Enterprise corporate (3) (254,933) (212,630) (19.9) % (19.9) % Total consolidated income from operations 1,036,783 850,756 21.9 % 20.9 % Foreign currency gains (losses), net (1,240) 3,228 (138.4) % Interest income 2,406 1,020 135.9 % Interest expense (161,351) (136,158) (18.5) % Other income (expense), net (326) (338) 3.6 % Income before income taxes $ 876,272 $ 718,508 22.0 % (1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure.
The Credit Agreement requires us to maintain a minimum interest coverage ratio of 3.00 to 1.00 and a maximum leverage ratio of (i) 4.00 to 1.00 from the quarter ended March 31, 2022 through, and including, the quarter ending December 31, 2023, (ii) 3.75 to 1.00 for the quarter ending March 31, 2024, (iii) 3.50 to 1.00 for the quarter ending June 30, 2024, and (iv) 3.25 to 1.00 for the quarter ending September 30, 2024 and thereafter (subject to adjustment in certain circumstances).
The Credit Agreement requires us to maintain a minimum interest coverage ratio of 3.00 to 1.00 and a maximum leverage ratio of (i) 4.00 to 1.00 from the quarter ended March 31, 2022 through, and including, the quarter ended December 31, 2023, (ii) 3.75 to 1.00 for the quarter ending March 31, 2024, (iii) 3.50 to 1.00 for the quarter ending June 30, 2024, and (iv) 3.25 to 1.00 for the quarter ending September 30, 2024 and thereafter (subject to adjustment in certain circumstances).
For RMB loans under the CMBC Facility, interest is based on a National Interbank Funding Center 1-year prime rate, plus 65 basis points. For USD loans under the Citibank Facility, interest is mutually agreed upon prior to utilization of a loan.
For RMB loans under the CMBC Facility, interest was based on a National Interbank Funding Center 1-year prime rate, plus 65 basis points. For USD loans under the Citibank Facility, interest is mutually agreed upon prior to utilization of a loan.
It is possible that the costs of the ultimate tax liability or benefit from these matters may be materially more or less than the amount that we estimated. 48 Table of Contents Income Tax Accounting We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of other assets and liabilities.
It is possible that the costs of the ultimate tax liability or benefit from these matters may be materially more or less than the amount that we estimated. 46 Table of Contents Income Tax Accounting We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of other assets and liabilities.
In assessing our valuation allowance as of December 31, 2022, we considered all available evidence, including the magnitude of recent and current operating results, the duration of statutory carryforward periods, our historical experience utilizing tax attributes prior to their expiration dates, the historical volatility of operating results of these jurisdictions and our assessment regarding the sustainability of their profitability.
In assessing our valuation allowance as of December 31, 2023, we considered all available evidence, including the magnitude of recent and current operating results, the duration of statutory carryforward periods, our historical experience utilizing tax attributes prior to their expiration dates, the historical volatility of operating results of these jurisdictions and our assessment regarding the sustainability of their profitability.
This assessment is based on the cash flow projections and operational and fiscal objectives of each of our U.S. and foreign subsidiaries. Foreign withholding taxes have not been provided on cumulative undistributed foreign earnings of the non-U.S. subsidiaries as of December 31, 2022, which are considered to be indefinitely reinvested outside of the U.S.
This assessment is based on the cash flow projections and operational and fiscal objectives of each of our U.S. and foreign subsidiaries. Foreign withholding taxes have not been provided on cumulative undistributed foreign earnings of the non-U.S. subsidiaries as of December 31, 2023, which are considered to be indefinitely reinvested outside of the U.S.
This is only an estimate, as actual amounts borrowed and rates may vary over time for certain borrowing instruments, as described in Note 10 — Borrowings. (2) Represents purchase commitments to our third-party manufacturers, primarily for materials and supplies used in the manufacture of our products.
This is only an estimate, as actual amounts borrowed and rates may vary over time for certain borrowing instruments, as described in Note 10 — Borrowings. (3) Represents purchase commitments to our third-party manufacturers, primarily for materials and supplies used in the manufacture of our products.
A discussion of the changes in our results of operations between the years ended December 31, 2021 and December 31, 2020 has been omitted from this Annual Report on Form 10-K but may be found in Item 7.
A discussion of the changes in our results of operations between the years ended December 31, 2022 and December 31, 2021 has been omitted from this Annual Report on Form 10-K but may be found in Item 7.
Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a description of recently adopted accounting pronouncements and issued accounting pronouncements that we believe may have an impact on our consolidated financial statements when adopted. 49 Table of Contents
Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a description of recently adopted accounting pronouncements and issued accounting pronouncements that we believe may have an impact on our consolidated financial statements when adopted. 47 Table of Contents
The broad appeal of our footwear has allowed us to market our products through a wide range of distribution channels. We currently sell our products in more than 85 countries, through two distribution channels: wholesale and direct-to-consumer.
The broad appeal of our footwear has allowed us to market our products through a wide range of distribution channels. We currently sell our products in more than 80 countries, through two distribution channels: wholesale and direct-to-consumer.
(3) Our operating lease obligations consist of leases for real estate, which includes retail, warehouse, distribution center, and office spaces and represent the minimum cash commitment under contract to various third parties for operating lease obligations.
(4) Our operating lease obligations consist of leases for real estate, which includes retail, warehouse, distribution center, and office spaces and represent the minimum cash commitment under contract to various third parties for operating lease obligations.
The Indentures contain covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to incur additional debt or issue certain preferred stock; pay dividends or repurchase or redeem capital stock or make other restricted payments; declare or pay dividends or other payments; incur liens; enter into certain types of transactions with the 43 Table of Contents Company’s affiliates; and consolidate or merge with or into other companies.
The Indentures contain covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to incur additional debt or issue certain preferred stock; pay dividends or repurchase or redeem capital stock or make other restricted payments; declare or pay dividends or other payments; incur liens; enter into certain types of transactions with the Company’s affiliates; and consolidate or merge with or into other companies.
In addition, at any time before August 15, 2024, the Company may redeem up to 40% of the aggregate principal amount of the 2031 Notes at a redemption price of 104.125% of the principal amount with the proceeds from certain equity issuances, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
In addition, at any time before August 15, 2024, the Company may redeem up to 40% of the aggregate 41 Table of Contents principal amount of the 2031 Notes at a redemption price of 104.125% of the principal amount with the proceeds from certain equity issuances, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
We did not record any impairment charges in the years ended December 31, 2022, 2021, or 2020 based on the results of our goodwill and indefinite-lived intangible assets impairment testing.
We did not record any impairment charges in the years ended December 31, 2023, 2022, or 2021 based on the results of our goodwill and indefinite-lived intangible assets impairment testing.
We had no material off-balance sheet arrangements as of December 31, 2022, other than certain purchase commitments, as described in the footnote (2) above. 45 Table of Contents Critical Accounting Policies and Estimates General Our discussion and analysis of financial condition and results of operations, outside of discussions regarding constant currency, is based on the consolidated financial statements, which have been prepared in accordance with GAAP.
We had no material off-balance sheet arrangements as of December 31, 2023, other than certain purchase commitments, as described in the footnote (2) above. 43 Table of Contents Critical Accounting Policies and Estimates General Our discussion and analysis of financial condition and results of operations, outside of discussions regarding constant currency, is based on the consolidated financial statements, which have been prepared in accordance with GAAP.
Outstanding principal under the Term Loan B Facility is payable on the last business day of each March, June, September, and December, in a quarterly aggregate principal amount of $5.0 million. Quarterly aggregate principal payments began on June 30, 42 Table of Contents 2022, with the remaining principal amount due on February 17, 2029, the maturity date.
Outstanding principal under the Term Loan B Facility is payable on the last business day of each March, June, September, and December, in a quarterly aggregate principal amount of $5.0 million. Quarterly aggregate principal payments began on June 30, 2022, with the remaining principal amount due on February 17, 2029, the maturity date.
Although we believe we have adequate sources of liquidity over the long term, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets could each impact our business and liquidity. Repatriation of Cash As a global business, we have cash balances in various countries and amounts are denominated in various currencies.
Although we believe we have adequate sources of liquidity over the long term, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets could each impact our business and liquidity. 39 Table of Contents Repatriation of Cash As a global business, we have cash balances in various countries and amounts are denominated in various currencies.
As of December 31, 2022, we were in compliance with all financial covenants under the Credit Agreement. As of December 31, 2022, the total commitments available from the lenders under the Revolving Facility were $750.0 million.
As of December 31, 2023, we were in compliance with all financial covenants under the Credit Agreement. As of December 31, 2023, the total commitments available from the lenders under the Revolving Facility were $750.0 million.
Certain factors, such as failure to achieve forecasted revenue growth rates or increases in the discount rates, have the potential to create variances in the estimated fair values of our goodwill and indefinite-lived intangible assets that could result in impairment charges.
Certain factors, such as failure to 44 Table of Contents achieve forecasted revenue growth rates or increases in the discount rates, have the potential to create variances in the estimated fair values of our goodwill and indefinite-lived intangible assets that could result in impairment charges.
As of December 31, 2022, we were in compliance with all financial covenants under the Term Loan B Credit Agreement.
As of December 31, 2023, we were in compliance with all financial covenants under the Term Loan B Credit Agreement.
Cash balances held in foreign countries may have additional restrictions and covenants associated with them which could adversely impact our liquidity and our ability to timely access and transfer cash balances between entities. 41 Table of Contents All of the cash held outside of the U.S. could be repatriated to the U.S. as of December 31, 2022 without incurring additional U.S. federal income taxes.
Cash balances held in foreign countries may have additional restrictions and covenants associated with them which could adversely impact our liquidity and our ability to timely access and transfer cash balances between entities. All of the cash held outside of the U.S. could be repatriated to the U.S. as of December 31, 2023 without incurring additional U.S. federal income taxes.
During the year ended December 31, 2022, we did not repurchase any shares of our common stock. As of December 31, 2022, we had remaining authorization to repurchase approximately $1,050.0 million of our common stock, subject to restrictions under our Indentures, Credit Agreement, and Term Loan B Credit Agreement.
During the year ended December 31, 2022, we did not repurchase any shares of our common stock. As of December 31, 2023, we had remaining authorization to repurchase approximately $875.0 million of our common stock, subject to restrictions under our Indentures, Credit Agreement, and Term Loan B Credit Agreement.
During the three months ended December 31, 2021, we completed an intra-entity transfer of certain intellectual property rights primarily to align with current and future international operations. The transfer resulted in a step-up in tax basis of intellectual property rights and a correlated increase in foreign deferred tax assets based on the fair value of the transferred intellectual property rights.
During the three months ended December 31, 2023, we completed intra-entity transfers of certain intellectual property rights primarily to align with current and future international operations. Each transfer resulted in a step-up in tax basis of intellectual property rights and a correlated increase in foreign deferred tax assets based on the fair value of the transferred intellectual property rights.
Historically, actual amounts of customer returns, allowances, discounts, and rebates have not differed significantly from our estimates. A hypothetical 1% increase in our reserves for returns and allowances as of December 31, 2022 would have had an insignificant impact on our 2022 revenues. See Schedule II in Part IV - Item 15.
Historically, actual amounts of customer returns, allowances, discounts, and rebates have not differed significantly from our estimates. A 45 Table of Contents hypothetical 1% increase in our reserves for returns and allowances as of December 31, 2023 would have had an insignificant impact on our 2023 revenues. See Schedule II in Part IV - Item 15.
In order to support and sustain the amortizable tax basis (and associated deferred tax asset, net of uncertain tax position), we must demonstrate economic ownership, including the appropriate authority and expertise to manage the IP owned and serviced in the Netherlands.
In order to support and sustain the amortizable tax basis for these transactions (and associated deferred tax asset, net of uncertain tax position), we must demonstrate economic ownership, including the appropriate authority and expertise to manage the IP owned and serviced in the Netherlands and Singapore.
We believe that our cash flows from operations, our cash and cash equivalents on hand, and available borrowings under our Revolving Facility and other financing agreements will be sufficient to meet our ongoing liquidity needs and capital expenditure requirements for at least the next twelve months. We completed the Acquisition on February 17, 2022.
We believe that our cash flows from operations, our cash and cash equivalents on hand, and available borrowings under our Revolving Facility and other financing agreements will be sufficient to meet our ongoing liquidity needs and capital expenditure requirements for at least the next twelve months.
As of December 31, 2022, we were in compliance with all financial covenants under the Notes.
As of December 31, 2023, we were in compliance with all financial covenants under the Notes.
Additionally for the years ended December 31, 2022, 2021, and 2020, we performed a qualitative assessment for the goodwill in our EMEALA segment, which indicated that it was more likely than not that the estimated fair value exceeded its carrying value.
Additionally, for the years ended December 31, 2023, 2022, and 2021, we performed a qualitative assessment for the goodwill in our Crocs Brand segment, which indicated that it was more likely than not that the estimated fair value exceeded its carrying value.
During the year ended December 31, 2022, we had two reporting units, comprised of a reporting unit within the HEYDUDE Brand segment and a reporting unit within the EMEALA segment. During the years ended December 31, 2021 and 2020, we had one reporting unit in our EMEALA segment.
During the years ended December 31, 2023 and 2022, we had two reporting units, comprised of a reporting unit within the HEYDUDE Brand segment and a reporting unit within the Crocs Brand segment. During the year ended December 31, 2021, we had one reporting unit in our Crocs Brand segment.
Asia Revolving Credit Facilities During the year ended December 31, 2022, we had two revolving credit facilities in Asia, the revolving credit facility with China Merchants Bank Company Limited, Shanghai Branch (the “CMBC Facility”), which provides up to 10.0 million RMB, or $1.4 million at current exchange rates, and matures in January 2023, and the revolving credit facility with Citibank (China) Company Limited, Shanghai Branch (the “Citibank Facility”), which provides up to an equivalent of $10.0 million.
Asia Revolving Credit Facilities During the year ended December 31, 2023, we had two revolving credit facilities in Asia, the revolving credit facility with China Merchants Bank Company Limited, Shanghai Branch (the “CMBC Facility”), which matured in January 2023 and provided up to 10.0 million RMB, or $1.5 million at current exchange rates as of January 2023, and the revolving credit facility with Citibank (China) Company Limited, Shanghai Branch (the “Citibank Facility”), which provides up to an equivalent of $15.0 million.
Our primary source of liquidity is cash provided by operating activities, consisting of net income adjusted for non-cash items and changes in working capital. Cash provided by operating activities increased $36.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Our primary source of liquidity is cash provided by operating activities, consisting of net income adjusted for non-cash items and changes in working capital. Cash provided by operating activities increased $327.3 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Each term loan borrowing which is a term benchmark borrowing bears interest at a rate per annum equal to the Adjusted Term SOFR Rate (as defined in the Term Loan B Credit Agreement) plus 3.50%.
Each term loan borrowing which is a term SOFR borrowing bears interest at a rate per annum equal to the Adjusted Term SOFR Rate (as defined in the Term Loan B Credit Agreement) plus 2.25%.
At December 31, 2022, we had no outstanding borrowings and $1.3 million in outstanding letters of credit under the Revolving Facility, which reduces amounts available for borrowing under the Revolving Facility. As of December 31, 2022 and 2021, we had $748.7 million and $414.7 million, respectively, of available borrowing capacity under the Revolving Facility, which matures November 2027.
At December 31, 2023, we had $190.0 million outstanding borrowings and $1.3 million in outstanding letters of credit under the Revolving Facility, which reduces amounts available for borrowing under the Revolving Facility. As of December 31, 2023 and 2022, we had $558.7 million and $748.7 million, respectively, of available borrowing capacity under the Revolving Facility, which matures November 2027.
In some countries, repatriation of certain foreign balances is restricted by local laws. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. or other countries and could adversely affect our liquidity. As of December 31, 2022, we held $97.0 million of our total $191.6 million in cash in international locations.
In some countries, repatriation of certain foreign balances is restricted by local laws. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. or other countries and could adversely affect our liquidity. As of December 31, 2023, we held $90.7 million of our total $149.3 million in cash in international locations.
These amounts include an income tax expense of $178.3 million in 2022 and an income tax benefit of $61.8 million in 2021, as described in more detail under Income tax expense (benefit) below. Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 A discussion of our comparison between 2022 and 2021 is presented below.
These amounts include an income tax expense of $83.7 million and $178.3 million in 2023 and 2022, respectively, as described in more detail under Income tax expense below. Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 A discussion of our comparison between 2023 and 2022 is presented below.
We maintain valuation allowances of approximately $28.1 million as of December 31, 2022, which may be reduced in the future depending upon the achieved profitability of certain jurisdictions as well as the magnitude of the profitability. 35 Table of Contents Reportable Operating Segments The following table sets forth information related to our reportable operating business segments for the years ended December 31, 2022, 2021, and 2020.
We maintain valuation allowances of approximately $183.5 million as of December 31, 2023, which may be reduced in the future depending upon the achieved profitability of certain jurisdictions as well as the magnitude of the profitability. 36 Table of Contents Reportable Operating Segments The following table sets forth information related to our reportable operating segments for the years ended December 31, 2023 and 2022.
As of December 31, 2022, we had $1,675.0 million in outstanding principal and the Term Loan B Facility was fully drawn with no remaining borrowing capacity. The Term Loan B Credit Agreement also contains customary affirmative and negative covenants, incurrence financial covenants, representations and warranties, events of default and other provisions.
As of December 31, 2023, we had $820.0 million in outstanding principal and the Term Loan B Facility (as in effect prior to the February 2024 Amendment) was fully drawn with no remaining borrowing capacity. The Term Loan B Credit Agreement also contains customary affirmative and negative covenants, incurrence financial covenants, representations and warranties, events of default and other provisions.
During the year ended December 31, 2022, we recognized an income tax expense of $178.3 million on pre-tax book income of $718.5 million, representing an effective tax rate of 24.8%, compared to an income tax benefit of $61.8 million on pre-tax book income of $663.8 million in 2021, which represented an effective tax rate of (9.3)%.
During the year ended December 31, 2023, we recognized an income tax expense of $83.7 million on pre-tax book income of $876.3 million, representing an effective tax rate of 9.6%, compared to an income tax expense of $178.3 million on pre-tax book income of $718.5 million in 2022, which represented an effective tax rate of 24.8% .
During the year ended December 31, 2022, we recognized realized and unrealized net foreign currency gains of $3.2 million compared to net losses of $0.1 million during the year ended December 31, 2021. Income tax expense (benefit).
During the year ended December 31, 2023, we recognized realized and unrealized net foreign currency losses of $1.2 million compared to net gains of $3.2 million during the year ended December 31, 2022. Interest expense.
We performed the quantitative assessments for the HEYDUDE Brand reporting unit goodwill using the discounted cash flow method and the guideline public company method. For the impairment testing of the indefinite-lived trademark, we used the Multi Period Excess Earnings approach.
Both quantitative assessments were performed with the assistance of third-party valuation specialists. We performed the quantitative assessment for the HEYDUDE Brand reporting unit goodwill using the discounted cash flow method and the guideline public company method. For the impairment testing of the indefinite-lived trademark, we used the Multi-Period Excess Earnings approach.
For more information on our lease obligations and obligations for leases not yet commenced, refer to Note 7 — Leases in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information. (4) Represents material contractual obligations associated with global distribution and logistics projects.
For more information on our lease obligations and obligations for leases not yet commenced, refer to Note 7 — Leases in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information.
See the “Use of Non-GAAP Financial Measures” section for additional information. (2) Comparable store status, as included in the DTC comparable sales figures above, is determined on a monthly basis. Comparable store sales include the revenues of stores that have been in operation for more than twelve months.
(2) Comparable store status, as included in the DTC comparable sales figures above, is determined on a monthly basis. Comparable store sales include the revenues of stores that have been in operation for more than twelve months.
Our impairment evaluations represent a critical accounting policy as they require significant judgments and assumptions that we believe to be reasonable but that are inherently uncertain and unpredictable. We perform our goodwill impairment testing for each reporting unit that has goodwill.
Our annual test is performed as of the first day of our fiscal fourth quarter. Our impairment evaluations represent a critical accounting policy as they require significant judgments and assumptions that we believe to be reasonable but that are inherently uncertain and unpredictable. We perform our goodwill impairment testing for each reporting unit that has goodwill.
As of December 31, 2022, the related net deferred tax asset is $438.5 million, net of a reserve for uncertain tax positions of $194.4 million.
As of December 31, 2021, the related net deferred tax asset was $490.2 million, net of a reserve for uncertain tax positions of $206.0 million. As of December 31, 2022, the related net deferred tax asset was $438.5 million, net of a reserve for uncertain tax positions of $194.4 million.
The primary assumptions developed by management and used in the quantitative analysis of the HEYDUDE Brand reporting unit and indefinite-lived trademark included future revenue growth rates and market-based discount rates.
The primary assumptions developed by management and used in the quantitative assessments of the HEYDUDE Brand reporting unit and indefinite-lived trademark included future revenue growth rates and market-based discount rates. The estimated fair values of the HEYDUDE Brand reporting unit goodwill and indefinite-lived trademark exceeded their carrying values.
This cash is primarily used for the ongoing operations of the business in the locations in which the cash is held. Of the $97.0 million, $4.8 million could potentially be restricted by local laws.
This cash is primarily used for the ongoing operations of the business in the locations in which the cash is held. Of the $90.7 million, $2.9 million could potentially be restricted by local laws.
See footnote (1) above. 40 Table of Contents Direct-to-consumer (“DTC”) comparable sales for the Crocs Brand are as follows: Constant Currency (1) Year Ended December 31, 2022 2021 Direct-to-consumer comparable sales: (2) Crocs Brand (3) 15.0 % N/A (1) Reflects period over period change on a constant currency basis, which is a non-GAAP financial measure.
Direct-to-consumer (“DTC”) comparable sales are as follows: Constant Currency (1) Year Ended December 31, 2023 2022 Direct-to-consumer comparable sales: (2) Crocs Brand 15.5 % 15.0 % HEYDUDE Brand (3) 3.6 % N/A (1) Reflects period over period change on a constant currency basis, which is a non-GAAP financial measure. See the “Use of Non-GAAP Financial Measures” section for additional information.
Investors should not consider constant currency in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. 2022 Financial and Operational Highlights Revenues were $3,555.0 million for the year ended December 31, 2022, a 53.7% increase compared to the year ended December 31, 2021.
Investors should not consider constant currency in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. 32 Table of Contents 2023 Financial and Operational Highlights Revenues were $3,962.3 million for the year ended December 31, 2023, an 11.5% increase compared to the year ended December 31, 2022.
Term Loan B Facility On February 17, 2022, the Company entered into a credit agreement (the “Term Loan B Credit Agreement”) with Citibank, N.A., as administrative agent and lender, to among other things, finance a portion of the cash consideration for the Acquisition.
Term Loan B Facility On February 17, 2022, the Company entered into a credit agreement (the “Original Term Loan B Credit Agreement”) with Citibank, N.A., as administrative agent and lender, to among other things, finance a portion of the cash consideration for the Acquisition, which was amended on August 8, 2023 (the “August 2023 Amendment”) and on February 13, 2024 (the “February 2024 Amendment”).
The 2022 impact of changes in valuation allowances to the effective tax rate was an unfavorable impact of $4.4 million, equating to a 0.6% unfavorable impact. There is also a $2.7 million favorable change in the valuation allowance related to cumulative translation adjustments.
The 2023 impact of changes in valuation allowances to the effective tax rate was an unfavorable impact of $156.3 million, equating to a 17.8% unfavorable impact. There is also a $0.9 million favorable change in the valuation allowance related to cumulative translation adjustments.
Each term loan borrowing which is an alternate base rate borrowing bears interest at a rate per annum equal to the Alternate Base Rate (as defined in the Term Loan B Credit Agreement), plus 2.50%.
Pursuant to the reduced interest rate margins applicable to the 2024 Refinancing Term Loans, each term loan borrowing which is an alternate base rate borrowing bears interest at a rate per annum equal to the Alternate Base Rate (as defined in the Term Loan B Credit Agreement), plus 1.25%.
Therefore, the amounts shown above for the year ended December 31, 2022 represent results during the Partial Period, and there are no comparative amounts for the year ended December 31, 2021. Revenues.
Therefore, the amounts shown above for the year ended December 31, 2022 represent results during the Partial Period.
We have also recorded certain tax reserves to address potential differences involving our income tax positions. These potential tax liabilities result from the varying application of statutes, rules, regulations and interpretations by different taxing jurisdictions.
In 2023, we undertook many additional activities to align business operations that support the economic substance of the IP. We have also recorded certain tax reserves to address potential differences involving our income tax positions. These potential tax liabilities result from the varying application of statutes, rules, regulations and interpretations by different taxing jurisdictions.
The prior year effective tax rate is lower primarily due to the prior year net foreign deferred income tax benefit as a result of an intra-entity intellectual property rights transfer of $127.7 million and the prior year release of valuation allowances.
Th e current year effective tax rate is lower primarily due to the current year foreign net income tax benefit as a result of intra-entity transfers of certain intellectual property rights and the current year release of valuation allowances.
As of December 31, 2022, the Term Loan B Facility (as defined below) was fully drawn, and there was no available borrowing capacity.
As of December 31, 2023, the Term Loan B Facility (as in effect prior to the February 2024 Amendment) (as defined below) was fully drawn, and there was no available borrowing capacity.
As of December 31, 2022, we had no outstanding borrowings on the CMBC Facility, and we had borrowings outstanding of $4.3 million on the Citibank Facility, which are due in January 2023 and May 2023. We had no outstanding borrowings under our Asia revolving facilities at December 31, 2021.
As of December 31, 2023, we had borrowings outstanding of $3.3 million on the Citibank Facility, which became due in January 2024. As of December 31, 2022, we had no outstanding borrowings on the CMBC Facility, and we had borrowings outstanding of $4.3 million on the Citibank Facility.
See “Use of Non-GAAP Financial Measures” for more information. (2) We acquired HEYDUDE on February 17, 2022 and, as a result, added the HEYDUDE Brand as a new reportable operating segment.
See “Use of Non-GAAP Financial Measures” for more information. (2) We acquired HEYDUDE on February 17, 2022 and, as a result, added the HEYDUDE Brand as a new reportable operating segment. Therefore, the amounts shown above for the year ended December 31, 2022 represent results during the Partial Period. Revenues.
The Term Loan B Credit Agreement provides for an aggregate term loan B facility in the principal amount of $2.0 billion (the “Term Loan B Facility”), which is secured by substantially all of the Company’s and each subsidiary guarantor’s assets on a pari passu basis with their obligations arising from the Credit Agreement and is scheduled to mature on February 17, 2029, subject to certain exceptions set forth in the Term Loan B Credit Agreement.
The 2024 Refinancing Term Loans are secured by substantially all of the Company’s and each subsidiary guarantor’s assets on a pari passu basis with their obligations arising from the Term Loan B Credit Agreement and is scheduled to mature on February 17, 40 Table of Contents 2029, subject to certain exceptions set forth in the Term Loan B Credit Agreement.
Liquidity and Capital Resources Our liquidity position as of December 31, 2022 was: December 31, 2022 (in thousands) Cash and cash equivalents $ 191,629 Available borrowings 755,789 As of December 31, 2022, we had $191.6 million in cash and cash equivalents and up to $755.8 million of available borrowings, including $748.7 million remaining borrowing availability under the Revolving Facility (as defined below) and $7.1 million of remaining borrowing availability under the Asia revolving facilities.
Liquidity and Capital Resources Our liquidity position as of December 31, 2023 was: December 31, 2023 (in thousands) Cash and cash equivalents $ 149,288 Available borrowings 570,362 As of December 31, 2023, we had $149.3 million in cash and cash equivalents and up to $570.4 million of available borrowings, including $558.7 million remaining borrowing availability under the Revolving Facility (as defined below) and $11.7 million of remaining borrowing availability under the Asia revolving facilities.
Our valuation allowances are primarily the result of uncertainties regarding the future realization of tax attributes recorded in various jurisdictions. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than not that the deferred tax assets will not be realized.
The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than not that the deferred tax assets will not be realized.
Therefore, the amounts shown above for the year ended December 31, 2022 represent results during the Partial Period, and there are no comparative amounts for the year ended December 31, 2021. 33 Table of Contents Revenues by Channel Year Ended December 31, % Change Constant Currency % Change (1) Favorable (Unfavorable) 2022 2021 2022-2021 2022-2021 (in thousands) Crocs Brand: Wholesale $ 1,377,302 $ 1,174,081 17.3 % 23.4 % Direct-to-consumer 1,281,823 1,139,335 12.5 % 15.3 % Total Crocs Brand 2,659,125 2,313,416 14.9 % 19.4 % HEYDUDE Brand (2) : Wholesale 574,140 — — % — % Direct-to-consumer 321,720 — — % — % Total HEYDUDE Brand 895,860 — — % — % Total consolidated revenues (2) $ 3,554,985 $ 2,313,416 53.7 % 58.2 % (1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure.
Therefore, the amounts shown above for the year ended December 31, 2022 represent results during the Partial Period. 34 Table of Contents Revenues by Channel Year Ended December 31, % Change Constant Currency % Change (1) Favorable (Unfavorable) 2023 2022 2023-2022 2023-2022 (in thousands) Crocs Brand: Wholesale $ 1,493,537 $ 1,377,302 8.4 % 9.3 % Direct-to-consumer 1,519,417 1,281,823 18.5 % 19.0 % Total Crocs Brand 3,012,954 2,659,125 13.3 % 14.0 % HEYDUDE Brand (2) : Wholesale 566,937 574,140 (1.3) % (1.3) % Direct-to-consumer 382,456 321,720 18.9 % 18.9 % Total HEYDUDE Brand 949,393 895,860 6.0 % 6.0 % Total consolidated revenues (2) $ 3,962,347 $ 3,554,985 11.5 % 12.0 % (1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure.
Digital sales, which includes sales through our company-owned website, third-party marketplaces, and e-tailers (which are reported in our wholesale channel), as a percent of total revenues, by reportable operating segment were: Year Ended December 31, 2022 2021 Digital sales as a percent of total revenues: Crocs Brand 37.6 % 36.7 % HEYDUDE Brand (1) 38.5 % — % Total (2) 37.8 % 36.7 % (1) We acquired HEYDUDE on February 17, 2022.
Store Locations and Digital Sales Percentage The table below illustrates the overall change in the number of our company-operated retail locations by reportable operating segment: December 31, 2022 Opened Closed December 31, 2023 Company-operated retail locations: Crocs Brand 340 20 11 349 HEYDUDE Brand 5 9 — 14 Total 345 29 11 363 38 Table of Contents Digital sales, which includes sales through our company-owned website, third-party marketplaces, and e-tailers (which are reported in our wholesale channel), as a percent of total revenues, by reportable operating segment were: Year Ended December 31, 2023 2022 Digital sales as a percent of total revenues: Crocs Brand 36.6 % 37.6 % HEYDUDE Brand (1) 41.8 % 38.5 % Total 37.9 % 37.8 % (1) We acquired HEYDUDE on February 17, 2022.
See Note 4 — Property 47 Table of Contents and Equipment, Net in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further information related to long-lived asset impairments.
In 2022 and 2021, we did not record impairments to reduce the net carrying value of certain long-lived assets. See Note 8 — Fair Value Measurements in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further information related to long-lived asset impairments.
Risk Factors of this Annual Report on Form 10-K for further information on liquidity risks associated with the Acquisition. Additional future financing may be necessary to fund our operations and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all.
Additional future financing may be necessary to fund our operations and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all.
We perform our indefinite-lived intangible impairment testing at the asset level. 46 Table of Contents When performing our annual test for impairment, we may assess goodwill and indefinite-lived intangible assets for potential impairment using either a qualitative or quantitative assessment.
We perform our indefinite-lived intangible impairment testing at the asset level. When performing our annual test for impairment, we may assess goodwill and indefinite-lived intangible assets for potential impairment using either a qualitative or quantitative assessment. The qualitative assessment may evaluate factors such as macroeconomic conditions, industry and market considerations, and overall financial performance, among other factors.
Our operating margin declined to 23.9%, compared to 29.5% in 2021. • Net income was $540.2 million compared to $725.7 million in 2021. Diluted net income per common share was $8.71 for the year ended December 31, 2022, compared to a diluted net income per common share of $11.39 for the year ended 32 Table of Contents December 31, 2021.
Our operating margin improved to 26.2%, compared to 23.9% in 2022. • Net income was $792.6 million compared to $540.2 million in 2022. Diluted net income per common share was $12.79 for the year ended December 31, 2023, compared to a diluted net income per common share of $8.71 for the year ended December 31, 2022.
The increase in 2022 revenues compared to 2021 revenues was due to the net effects of: (i) the addition of HEYDUDE Brand revenues of $895.9 million as a result of the Acquisition, which increased revenues by 38.7%; (ii) higher Crocs Brand sales volumes, which increased revenues by $294.1 million, or 12.7%; (iii) higher average selling prices for the Crocs Brand, which increased revenues by $155.3 million, or 6.7%, as a result of increased pricing; and (iv) unfavorable changes in exchange rates, which decreased revenues by $103.7 million, or 4.5% for the Crocs Brand.
The increase in 2023 revenues compared to 2022 revenues was due to the net effects of: (i) higher average selling prices, which increased revenues by $261.1 million, or 7.3%; (ii) higher sales volume, which increased revenues by $164.4 million, or 4.6%, partially due to operating HEYDUDE for a full year in 2023 compared to 2022; and (iii) unfavorable changes in exchange rates, which decreased revenues by $18.1 million, or 0.5%.
The determination of economic substance is a judgment that has to be evaluated by management on a continual basis requiring understanding and expertise of local laws of each associated tax jurisdiction.
The determination of economic substance is a judgment that has to be evaluated by management on a continual basis requiring understanding and expertise of local laws of each associated tax jurisdiction. The Netherlands and Singapore subsidiaries serve as the primary corporate headquarters outside of the U.S. and already perform significant functions in support of the economic ownership of the IP.
Gross margin for the HEYDUDE Brand was 40.8%, which is inclusive of an approximately 690 basis points unfavorable impact from a non-cash step-up of acquired HEYDUDE inventory to fair value.
Gross margin for the HEYDUDE Brand was 44.0% compared to 40.8% in the Partial Period. The gross margin for the Partial Period included a 690 basis points unfavorable impact from a non-cash step-up of acquired HEYDUDE inventory to fair value that did not recur in the current year.
These estimates and assumptions include, but are not limited to, estimated future revenue growth and discount rates, which by their nature are inherently uncertain and, therefore, may ultimately differ materially from our actual results. As of December 31, 2021, the related net deferred tax asset is $490.2 million, net of a reserve for uncertain tax positions of $206.0 million.
These estimates and assumptions include, but are not limited to, estimated future revenue growth and discount rates, which by their nature are inherently uncertain and, therefore, may ultimately differ materially from our actual results. Foreign deferred tax assets increased by $611.4 million, inclusive of the reversal of certain deferred tax liabilities.
Additionally, there was a decrease in cash used by financing activities of $1,000.0 million in repurchases of common stock and $8.6 million in repurchases of common stock for tax withholding.
Additionally, there was an increase in cash used by financing activities of $175.0 million in repurchases of common stock and $5.6 million in repurchases of common stock for tax withholding. There was also a $348.4 million increase in repayments of borrowings and a $0.2 million increase in other cash used in financing activities.
Share repurchases may be made in the open market or in privately negotiated transactions. The repurchase authorization does not have an expiration date and does not obligate us to acquire any amount of our common stock. Under Delaware state law, these shares are not retired, and we have the right to resell any of the shares repurchased.
The Board of Directors may suspend, modify, or terminate the program at any time without prior notice. Share repurchases may be made in the open market or in privately negotiated transactions. The repurchase authorization does not have an expiration date and does not obligate us to acquire any amount of our common stock.
For the quantitative assessment, we compare the estimated fair value of a reporting unit with its carrying value, including the goodwill assigned to the reporting unit. If carrying value of the reporting unit exceeds its estimated fair value, an impairment charge is recorded.
If we determine that it is more likely than not that the fair value of a reporting unit or an indefinite-lived intangible asset is less than its carrying value, a quantitative assessment is performed. For the quantitative assessment, we compare the estimated fair value of a reporting unit with its carrying value, including the goodwill assigned to the reporting unit.
However, as a percent of revenues, SG&A improved 350 basis points to 28.4% of revenues as a result of strong sales growth and our continued leveraging of operating costs. • Income from operations was $850.8 million for the year ended December 31, 2022 compared to income from operations of $683.1 million for the year ended December 31, 2021.
As a percent of revenues, SG&A increased 100 basis points to 29.4% of revenues. • Income from operations was $1,036.8 million for the year ended December 31, 2023 compared to income from operations of $850.8 million for the year ended December 31, 2022.
The number, price, structure, and timing of the repurchases are at our sole discretion and may be made depending on market conditions, liquidity needs, restrictions under the agreements governing our indebtedness, and other factors. The Board of Directors may suspend, modify, or terminate the program at any time without prior notice.
Additionally, on September 23, 2021, the Board approved an increase of $1.0 billion to our share repurchase authorization. The number, price, structure, and timing of the repurchases are at our sole discretion and may be made depending on market conditions, liquidity needs, restrictions under the agreements governing our indebtedness, and other factors.
This change was driven by higher net income adjusted for non-cash items of $83.1 million, partly offset by a net decrease in operating assets and liabilities of $47.1 million. Investing Activities. There was a $2,095.2 million increase in cash used in investing activities for the year ended December 31, 2022 compared to the year ended December 31, 2021.
This change was driven by a net increase in operating assets and liabilities of $458.2 million, primarily due to income taxes and inventories, partially offset by the impact of higher net income adjusted for non-cash items of $130.9 million. Investing Activities.
Location closures in excess of three months are excluded until the thirteenth month post re-opening. E-commerce comparable revenues are based on same site sales period over period. (3) In the year ended December 31, 2021, as a result of the COVID-19 pandemic’s impact on 2020 sales, we did not disclose DTC comparable sales, as they were not meaningful.
Location closures in excess of three months are excluded until the thirteenth month post re-opening. E-commerce comparable revenues are based on same site sales period over period. (3) We acquired HEYDUDE on February 17, 2022 and, as a result, added the HEYDUDE Brand as a new operating segment.
We sold 30.5 million pairs of shoes for the HEYDUDE Brand in the Partial Period. • Gross margin was 52.3% compared to 61.4% in 2021, a decrease of 910 basis points.
We sold 33.0 million pairs of shoes for the HEYDUDE Brand. • Gross margin was 55.8% compared to 52.3% in 2022, an increase of 350 basis points.
The increase was primarily due to an increase of $1,779.9 million in proceeds from borrowings, which includes borrowings under the Term Loan B Facility and the Revolving Facility that were used to finance the Acquisition in part.
The decrease was primarily due to a decrease of $1,912.0 million in proceeds from borrowings, which includes borrowings under the Term Loan B Facility of $2.0 billion used to finance the Acquisition in part during the year ended December 31, 2022 that did not recur in the current year.
The increase is primarily due to the Cash Consideration for the Acquisition, net of cash acquired. Refer to Note 3 — Acquisition of HEYDUDE in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
The decrease is primarily due to $2.05 billion paid in cash consideration for the Acquisition, net of cash acquired in the year ended December 31, 2022, that did not recur in the current year. Refer to Note 3 — Acquisition of HEYDUDE in the accompanying notes to the consolidated financial statements included in Part II - Item 8.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022, we had borrowings with a face value of $2,379.3 million, comprised of the Notes, which carry a fixed interest rate, the Term Loan B Facility, and borrowings under our Asia revolving facilities. We also had $1.3 million in outstanding letters of credit under our Revolving Facility as of December 31, 2022.
Biggest changeAs of December 31, 2023, we had borrowings with a face value of $1,713.3 million, comprised of the Notes, which carry a fixed interest rate, the Term Loan B Facility (as in effect prior to the February 2024 Amendment), the Revolving Facility, and borrowings under our Asia revolving facility.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for a discussion of the impact of the change in foreign exchange rates on our USD consolidated statements of operations for the years ended December 31, 2022 and 2021. 50 Table of Contents ITEM 8.
Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for a discussion of the impact of the change in foreign exchange rates on our USD consolidated statements of operations for the years ended December 31, 2023 and 2022. 48 Table of Contents ITEM 8.
See Part I - Item 1A. Risk Factors of this Annual Report on Form 10-K for a discussion of risks to our business and financial results associated with foreign currencies. We perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our foreign currency forward exchange contracts.
Risk Factors of this Annual Report on Form 10-K for a discussion of risks to our business and financial results associated with foreign currencies. We perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our foreign currency forward exchange contracts.
An increase of 1% of the value of the USD relative to foreign currencies would have decreased our revenues and income before taxes during the year ended December 31, 2022 by approximately $10.8 million and $1.6 million, respectively. The volatility of the exchange rates is dependent on many factors that cannot be forecasted with reliable accuracy.
An increase of 1% of the value of the USD relative to foreign currencies would have decreased our revenues and income before taxes during the year ended December 31, 2023 by approximately $13.8 million and $2.1 million, respectively. The volatility of the exchange rates is dependent on many factors that cannot be forecasted with reliable accuracy.
Financial Statements and Supplementary Data of this Annual Report on this Form 10-K. As of December 31, 2022, the USD notional value of our outstanding foreign currency forward exchange contracts was approximately $193.1 million. The fair value of these contracts at December 31, 2022 was an asset of $0.3 million and a liability of $1.1 million.
Financial Statements and Supplementary Data of this Annual Report on this Form 10-K. As of December 31, 2023, the USD notional value of our outstanding foreign currency forward exchange contracts was approximately $185.0 million. The fair value of these contracts at December 31, 2023 was an asset of $1.4 million and an insignificant liability. See Part I - Item 1A.
As of December 31, 2022, a 10% appreciation in the value of the USD would result in a net increase in the fair value of our derivative portfolio of approximately $0.3 million. See Item 7.
As of December 31, 2023, a 10% appreciation in the value of the USD would result in a net decrease in the fair value of our derivative portfolio of approximately $1.5 million. See Item 7.
As of December 31, 2021, we had long-term borrowings with a face value of $785.0 million and $0.3 million in outstanding letters of credit under our Revolving Facility.
We also had $1.3 million in outstanding letters of credit under our Revolving Facility as of December 31, 2023. As of December 31, 2022, we had long-term borrowings with a face value of $2,379.3 million and $1.3 million in outstanding letters of credit under our Revolving Facility.
A hypothetical increase of 1% in the interest rate on the variable rate borrowings under our Term Loan B Facility and Revolving Facility would have increased interest expense by $18.1 million for the year ended December 31, 2022.
A hypothetical increase of 1% in the interest rate on the variable rate borrowings under our Term Loan B Facility (as in effect prior to the February 2024 Amendment) and Revolving Facility would increase our interest expense over the next twelve months by $10.1 million based on the balances outstanding for these borrowings as of December 31, 2023.

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