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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________
FORM 10-Q

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
or
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to            

Commission File No. 000-51754
_____________________________________________________________
CROCS, INC.
(Exact name of registrant as specified in its charter)
Delaware 20-2164234
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
13601 Via Varra, Broomfield, Colorado 80020
(Address, including zip code, of registrant’s principal executive offices)
(303848-7000
(Registrant’s telephone number, including area code)
_____________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading symbol:Name of each exchange on which registered:
Common Stock, par value $0.001 per shareCROXThe Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No 

As of July 28, 2022, Crocs, Inc. had 61,650,394 shares of its common stock, par value $0.001 per share, outstanding.



Cautionary Note Regarding Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Such forward-looking statements are subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995.

Statements that refer to industry trends, projections of our future financial performance, anticipated trends in our business and other characterizations of future events or circumstances are forward-looking statements. These statements, which express management’s current views concerning future events or results, use words like “anticipate,” “assume,” “believe,” “continue,” “estimate,” “expect,” “future,” “intend,” “plan,” “project,” “strive,” and future or conditional tense verbs like “could,” “may,” “might,” “should,” “will,” “would,” and similar expressions or variations. Examples of forward-looking statements include, but are not limited to, statements we make regarding:

our expectations regarding future trends, expectations, and performance of our business;
our expectations regarding leveraging selling, general and administrative expense as a percent of revenues;
our expectations regarding leveraging our global presence, innovative marketing, and scale infrastructure to grow HEYDUDE and to create significant shareholder value;
our expectations regarding supply chain disruptions;
our belief that we have sufficient liquidity to fund our business operations during the next twelve months; and
our expectations about the impact of our strategic plans.

Forward-looking statements are subject to risks, uncertainties, and other factors, which may cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements include, without limitation, those described in the section entitled “Risk Factors” under Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2021 and our subsequent filings with the Securities and Exchange Commission, including those described in the section entitled “Risk Factors” under Item 1A in this report. Caution should be taken not to place undue reliance on any such forward-looking statements. Moreover, such forward-looking statements speak only as of the date of this report. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements, except as required by applicable law.
 

i

Crocs, Inc.
Table of Contents to the Quarterly Report on Form 10-Q
For the Quarterly Period Ended June 30, 2022
 

ii

PART I — Financial Information
 
ITEM 1. Financial Statements
 
CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
 
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenues
$964,581 $640,773 $1,624,729 $1,100,871 
Cost of sales
466,848 245,592 802,072 452,471 
Gross profit
497,733 395,181 822,657 648,400 
Selling, general and administrative expenses
249,769 199,859 456,016 328,392 
Income from operations
247,964 195,322 366,641 320,008 
Foreign currency losses, net
(1,202)(117)(722)(621)
Interest income
86 71 188 98 
Interest expense
(32,963)(4,712)(52,215)(6,344)
Other income (expense), net
419 2 (528)13 
Income before income taxes
214,304 190,566 313,364 313,154 
Income tax expense (benefit)
53,989 (128,388)80,289 (104,198)
Net income
$160,315 $318,954 $233,075 $417,352 
Net income per common share:
Basic
$2.60 $5.02 $3.84 $6.47 
Diluted
$2.58 $4.93 $3.79 $6.35 
Weighted average common shares outstanding:
Basic
61,590 63,595 60,712 64,526 
Diluted
62,236 64,640 61,571 65,744 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands)
  
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Net income
$160,315 $318,954 $233,075 $417,352 
Other comprehensive income (loss):
  
Foreign currency translation gains (losses), net
(26,352)3,442 (36,503)(7,186)
Total comprehensive income
$133,963 $322,396 $196,572 $410,166 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


2

CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share and par value amounts)
June 30,
2022
December 31,
2021
ASSETS
  
Current assets:
  
Cash and cash equivalents
$187,352 $213,197 
Restricted cash - current
32 65 
Accounts receivable, net of allowances of $28,087 and $20,715, respectively
423,490 182,629 
Inventories
501,527 213,520 
Income taxes receivable
2,223 22,301 
Other receivables
16,742 12,252 
Prepaid expenses and other assets
36,941 22,605 
Total current assets
1,168,307 666,569 
Property and equipment, net of accumulated depreciation and amortization of $89,009 and $83,745, respectively
140,278 108,398 
Intangible assets, net of accumulated amortization of $116,500 and $108,167, respectively
1,804,067 28,802 
Goodwill
714,143 1,600 
Deferred tax assets, net
513,582 567,201 
Restricted cash
3,187 3,663 
Right-of-use assets
236,077 160,768 
Other assets
7,001 8,067 
Total assets
$4,586,642 $1,545,068 
LIABILITIES AND STOCKHOLDERS’ EQUITY
  
Current liabilities:
  
Accounts payable
$225,302 $162,145 
Accrued expenses and other liabilities
242,754 166,887 
Income taxes payable
58,702 16,279 
Current borrowings
25,403  
Current operating lease liabilities
49,983 42,932 
Total current liabilities
602,144 388,243 
Deferred tax liabilities, net
312,821  
Long-term income taxes payable
216,042 219,744 
Long-term borrowings
2,743,507 771,390 
Long-term operating lease liabilities217,586 149,237 
Other liabilities
2,577 2,372 
Total liabilities
4,094,677 1,530,986 
Commitments and contingencies
Stockholders’ equity:
  
Preferred stock, par value $0.001 per share, 5.0 million shares authorized including 1.0 million authorized as Series A Convertible Preferred Stock, none outstanding
  
Common stock, par value $0.001 per share, 250.0 million shares authorized, 109.3 million and 105.9 million issued, 61.6 million and 58.3 million outstanding, respectively
109 106 
Treasury stock, at cost, 47.7 million and 47.6 million shares, respectively
(1,690,780)(1,684,262)
Additional paid-in capital
783,862 496,036 
Retained earnings
1,512,115 1,279,040 
Accumulated other comprehensive loss
(113,341)(76,838)
Total stockholders’ equity
491,965 14,082 
Total liabilities and stockholders’ equity
$4,586,642 $1,545,068 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3

CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands)

 Common StockTreasury StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 SharesAmountSharesAmount
Balance at March 31, 2022
61,572 $109 47,658 $(1,690,312)$774,562 $1,351,800 $(86,989)$349,170 
Share-based compensation— — — — 9,300 — — 9,300 
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units, net of shares withheld for taxes
55 — 9 (468) — — (468)
Net income
— — — — — 160,315 — 160,315 
Other comprehensive loss
— — — — — — (26,352)(26,352)
Balance at June 30, 2022
61,627 $109 47,667 $(1,690,780)$783,862 $1,512,115 $(113,341)$491,965 

 Common StockTreasury StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 SharesAmountSharesAmount
Balance at March 31, 2021
65,225 $106 40,383 $(783,926)$525,289 $651,744 $(66,982)$326,231 
Share-based compensation— — — — 11,294 — — 11,294 
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units, net of shares withheld for taxes
47 — 10 (1,158)1 — — (1,157)
Repurchases of common stock
(2,890)— 2,890 (293,773)(6,227)— — (300,000)
Net income
— — — — — 318,954 — 318,954 
Other comprehensive income
— — — — — — 3,442 3,442 
Balance at June 30, 2021
62,382 $106 43,283 $(1,078,857)$530,357 $970,698 $(63,540)$358,764 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.



4

CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands)

 Common StockTreasury StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 SharesAmountSharesAmount
Balance at December 31, 2021
58,330 $106 47,583 $(1,684,262)$496,036 $1,279,040 $(76,838)$14,082 
Share-based compensation— — — — 17,575 — — 17,575 
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units, net of shares withheld for taxes
445 — 84 (6,518)(142)— — (6,660)
Share issuance at Acquisition2,852 3 — — 270,393 — — 270,396 
Net income
— — — — — 233,075 — 233,075 
Other comprehensive loss
— — — — — — (36,503)(36,503)
Balance at June 30, 2022
61,627 $109 47,667 $(1,690,780)$783,862 $1,512,115 $(113,341)$491,965 

 Common StockTreasury StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 SharesAmountSharesAmount
Balance at December 31, 2020
65,856 $105 39,132 $(688,849)$482,385 $553,346 $(56,354)$290,633 
Share-based compensation— — — — 19,348 — — 19,348 
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units, net of shares withheld for taxes
528 1 149 (11,620)236 — — (11,383)
Repurchases of common stock
(4,002)— 4,002 (378,388)28,388 — — (350,000)
Net income
— — — — — 417,352 — 417,352 
Other comprehensive loss
— — — — — — (7,186)(7,186)
Balance at June 30, 2021
62,382 $106 43,283 $(1,078,857)$530,357 $970,698 $(63,540)$358,764 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

CROCS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Six Months Ended June 30,
 20222021
Cash flows from operating activities:
  
Net income
$233,075 $417,352 
Adjustments to reconcile net income to net cash provided by operating activities:
  
Depreciation and amortization
16,754 15,749 
Operating lease cost
30,887 29,758 
Inventory donations1,941 641 
Recovery of doubtful accounts, net
(180)(2,556)
Share-based compensation
17,575 19,348 
Deferred income taxes (176,862)
Other non-cash items
5,316 836 
Changes in operating assets and liabilities, net of acquired assets and assumed liabilities:
 
Accounts receivable
(181,154)(82,621)
Inventories
(121,452)(36,099)
Prepaid expenses and other assets
(9,309)(6,419)
Accounts payable, accrued expenses and other liabilities
85,091 75,520 
Right-of-use assets and operating lease liabilities
(29,927)(22,759)
Income taxes
36,127 10,478 
Cash provided by operating activities
84,744 242,366 
Cash flows from investing activities:
  
Purchases of property, equipment, and software
(56,744)(21,329)
Acquisition of HEYDUDE, net of cash acquired
(2,040,265) 
Other
(20)6 
Cash used in investing activities
(2,097,029)(21,323)
Cash flows from financing activities:
  
Proceeds from notes issuance 350,000 
Proceeds from borrowings
2,240,677 170,000 
Repayments of borrowings
(195,000)(305,000)
Deferred debt issuance costs(51,395)(8,961)
Repurchases of common stock
 (350,000)
Repurchases of common stock for tax withholding(6,756)(11,619)
Other
95 236 
Cash provided by (used in) financing activities
1,987,621 (155,344)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(1,690)(1,793)
Net change in cash, cash equivalents, and restricted cash
(26,354)63,906 
Cash, cash equivalents, and restricted cash—beginning of period
216,925 139,273 
Cash, cash equivalents, and restricted cash—end of period
$190,571 $203,179 
Non-Cash Investing and Financing Activities:
Accrued purchases of property, equipment, and software
$5,038 $6,423 
Share issuance at Acquisition270,396  
Accrued additional consideration for Acquisition6,616  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

CROCS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise noted in this report, any description of the “Company,” “Crocs,” “we,” “us,” or “our” includes Crocs, Inc. and our consolidated subsidiaries within our reportable operating segments and corporate operations. We are engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for women, men, and children. We strive to be the global leader in the sale of molded footwear characterized by functionality, comfort, color, and lightweight design.

On February 17, 2022, 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. HEYDUDE is engaged in the business of distributing and selling casual footwear under the brand name “HEYDUDE.”

Our reportable operating segments include: (i) North America for the Crocs Brand, operating throughout the United States 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. See Note 14 — Operating Segments and Geographic Information for additional information.

The accompanying unaudited condensed consolidated interim financial statements include our accounts and those of our wholly-owned subsidiaries, and reflect all adjustments which are necessary for a fair statement of the financial position, results of operations, and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Such unaudited condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

These unaudited condensed consolidated interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 (“Annual Report”) and have been prepared on a consistent basis with the accounting policies described in Note 1 of the Notes to the Audited Consolidated Financial Statements included in our Annual Report. Our accounting policies did not change during the six months ended June 30, 2022, other than with respect to the new accounting pronouncements adopted as described in Note 2 — Recent Accounting Pronouncements and our business combination policy as described in Note 16 — Acquisition of HEYDUDE.

Reclassifications

We have reclassified certain amounts on the condensed consolidated statements of cash flows, in Note 3 — Accrued Expenses and Other Liabilities, and in Note 14 — Operating Segments and Geographic Information to conform to current period presentation.

Use of Estimates

U.S. GAAP requires us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions used to determine certain amounts that affect the financial statements are reasonable, based on information available at the time they are made. Management believes that the estimates, judgments, and assumptions made when accounting for items and matters such as, but not limited to, the allowance for doubtful accounts, customer rebates, sales returns, impairment assessments and charges, recoverability of long-lived assets, deferred tax assets, valuation allowances, uncertain tax positions, income tax expense, share-based compensation expense, the assessment of lower of cost or net realizable value on inventory, useful lives assigned to long-lived assets, depreciation and amortization, and purchase price allocation for the Acquisition, as described in Note 16 — Acquisition of HEYDUDE, are reasonable based on information available at the time they are made. To the extent there are differences between these estimates and actual results, our condensed consolidated financial statements may be materially affected.



7

2. RECENT ACCOUNTING PRONOUNCEMENTS
 
New Accounting Pronouncement Adopted

Business Combinations

In October 2021, the FASB issued new guidance primarily related to the accounting for contract assets and liabilities from contracts with customers in a business combination. The standard will be effective for annual reporting periods beginning after December 31, 2022, including interim reporting periods within those periods, with early adoption permitted. On January 1, 2022, we early adopted this guidance on a prospective basis. The adoption did not have a material impact on our consolidated financial statements.

New Accounting Pronouncement Not Yet Adopted

New pronouncements issued but not effective until after June 30, 2022 are not expected to have a material impact on our condensed consolidated financial statements.

3. ACCRUED EXPENSES AND OTHER LIABILITIES
 
Amounts reported in ‘Accrued expenses and other liabilities’ in the condensed consolidated balance sheets were:
June 30, 2022December 31, 2021
 (in thousands)
Accrued compensation and benefits$53,241 $62,945 
Professional services 46,504 33,997 
Fulfillment, freight, and duties51,207 15,629 
Sales/use and value added taxes payable25,886 13,049 
Return liabilities16,773 10,342 
Accrued rent and occupancy9,391 7,431 
Royalties payable and deferred revenue8,152 7,425 
Accrued legal fees8,960 5,872 
Other22,640 10,197 
Total accrued expenses and other liabilities$242,754 $166,887 

4. LEASES

Right-of-Use Assets and Operating Lease Liabilities

Amounts reported in the condensed consolidated balance sheets were:
June 30, 2022December 31, 2021
(in thousands)
Assets:
Right-of-use assets$236,077 $160,768 
Liabilities:
Current operating lease liabilities$49,983 $42,932 
Long-term operating lease liabilities217,586 149,237 
Total operating lease liabilities$267,569 $192,169 



8

Lease Costs and Other Information

Lease-related costs reported within ‘Cost of sales’ and ‘Selling, general and administrative expenses’ in our condensed consolidated statements of operations were:
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(in thousands)
Operating lease cost $16,656 $14,926 $30,887 $29,758 
Short-term lease cost2,371 1,963 5,003 3,404 
Variable lease cost12,013 10,659 16,565 14,307 
Total lease costs$31,040 $27,548 $52,455 $47,469 

Other information related to leases, including supplemental cash flow information, consists of:
Six Months Ended June 30,
20222021
(in thousands)
Cash paid for operating leases$29,411 $31,910 
Right-of-use assets obtained in exchange for operating lease liabilities52,837 43,582 

The weighted average remaining lease term and discount rate related to our lease liabilities as of June 30, 2022 were 7.5 years and 3.6%, respectively. As of June 30, 2021, the weighted average remaining lease term and discount rate related to our lease liabilities were 7.3 years and 3.9%, respectively.

Maturities

The maturities of our operating lease liabilities were:
As of
June 30, 2022
(in thousands)
2022 (remainder of year)$25,568 
202354,625 
202440,768 
202529,934 
202627,413 
Thereafter130,510 
Total future minimum lease payments308,818 
Less: imputed interest(41,249)
Total operating lease liabilities$267,569 

5. FAIR VALUE MEASUREMENTS
 
Recurring Fair Value Measurements
 
All of our derivative instruments are classified as Level 2 of the fair value hierarchy and are reported in the condensed consolidated balance sheets within either ‘Prepaid expenses and other assets’ or ‘Accrued expenses and other liabilities’ at June 30, 2022 and December 31, 2021. The fair values of our derivative instruments were an insignificant asset at June 30, 2022 and an insignificant liability at December 31, 2021. See Note 6 — Derivative Financial Instruments for more information.

The carrying amounts of our cash, cash equivalents, and restricted cash, accounts receivable, accounts payable, and current accrued expenses and other liabilities approximate their fair value as recorded due to the short-term maturity of these instruments.

9

Our borrowing instruments are recorded at their carrying values in the condensed consolidated balance sheets, which may differ from their respective fair values. During the six months ended June 30, 2022, we entered into a credit agreement for a term loan B facility in the aggregate principal amount of $2.0 billion (the “Term Loan B Facility”), as described in more detail in Note 7 — Borrowings. The Term Loan B Facility is classified as Level 1 of the fair value hierarchy. The Notes (as defined below) are also classified as Level 1 of the fair value hierarchy and are reported in our condensed consolidated balance sheet at face value, less unamortized issuance costs. The fair values of our revolving credit facilities approximate their carrying values at June 30, 2022 and December 31, 2021 based on interest rates currently available to us for similar borrowings. The carrying value and fair value of our borrowing instruments as of June 30, 2022 and December 31, 2021 were:
June 30, 2022December 31, 2021
Carrying ValueFair ValueCarrying ValueFair Value
(in thousands)
Term Loan B Facility$1,995,000 $1,825,425 $ $ 
2029 Notes350,000 259,656 350,000 346,281 
2031 Notes350,000 246,750 350,000 341,250 
Revolving credit facilities130,000 130,000 85,000 85,000 

Non-Financial Assets and Liabilities

Our non-financial assets, which primarily consist of property and equipment, right-of-use assets, goodwill, and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. The fair values of these assets are determined, as required, based on Level 3 measurements, including estimates of the amount and timing of future cash flows based upon historical experience, expected market conditions, and management’s plans.

6. DERIVATIVE FINANCIAL INSTRUMENTS
 
We transact business in various foreign countries and are therefore exposed to foreign currency exchange rate risk that impacts the reported U.S. Dollar amounts of revenues, expenses, and certain foreign currency monetary assets and liabilities. In order to manage exposure to fluctuations in foreign currency and to reduce the volatility in earnings caused by fluctuations in foreign exchange rates, we may enter into forward contracts to buy and sell foreign currency. By policy, we do not enter into these contracts for trading purposes or speculation.

Counterparty default risk is considered low because the forward contracts that we enter into are over-the-counter instruments transacted with highly-rated financial institutions. We were not required to and did not post collateral as of June 30, 2022 or December 31, 2021.

Our derivative instruments are recorded at fair value as a derivative asset or liability in the condensed consolidated balance sheets. We report derivative instruments with the same counterparty on a net basis when a master netting arrangement is in place. Changes in fair value are recognized within ‘Foreign currency losses, net’ in the condensed consolidated statements of operations. For the condensed consolidated statements of cash flows, we classify cash flows from derivative instruments at settlement in the same category as the cash flows from the related hedged items within ‘Cash provided by operating activities.’

Results of Derivative Activities

The fair values of derivative assets and liabilities, net, all of which are classified as Level 2, reported within either ‘Accrued expenses and other liabilities’ or ‘Prepaid expenses and other assets’ in the condensed consolidated balance sheets, were:
June 30, 2022December 31, 2021
Derivative AssetsDerivative LiabilitiesDerivative AssetsDerivative Liabilities
(in thousands)
Forward foreign currency exchange contracts$339 $(113)$724 $(938)
Netting of counterparty contracts(113)113 (724)724 
  Foreign currency forward contract derivatives$226 $ $ $(214)

10

The notional amounts of outstanding foreign currency forward exchange contracts presented below report the total U.S. Dollar equivalent position and the net contract fair values for each foreign currency position.
June 30, 2022December 31, 2021
NotionalFair ValueNotionalFair Value
(in thousands)
Singapore Dollar$51,851 $(85)$43,723 $(296)
British Pound Sterling18,861 2 25,795 104 
Euro28,428 43 21,198 162 
South Korean Won18,057 (28)14,201 (112)
Japanese Yen12,877 54 12,910 80 
Indian Rupee21,285 229 10,379 (86)
Other currencies1,345 11 19,481 (66)
Total$152,704 $226 $147,687 $(214)
Latest maturity dateSeptember 2022January 2022

Amounts reported in ‘Foreign currency losses, net’ in the condensed consolidated statements of operations include both realized and unrealized gains (losses) from foreign currency transactions and derivative contracts and were:
Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
 (in thousands)
Foreign currency transaction gains (losses)
$(3,135)$506 $(4,052)$(345)
Foreign currency forward exchange contracts gains (losses)
1,933 (623)3,330 (276)
Foreign currency losses, net
$(1,202)$(117)$(722)$(621)

7. BORROWINGS
 
Our long-term borrowings were as follows:
MaturityStated Interest RateEffective Interest RateJune 30, 2022December 31, 2021
(in thousands)
Notes issuance of $350.0 million
20294.250 %4.64 %$350,000 $350,000 
Notes issuance of $350.0 million
20314.125 %4.35 %350,000 350,000 
Term Loan B Facility20291,995,000  
Revolving credit facilities130,000 85,000 
Total face value of long-term borrowings2,825,000 785,000 
Less:
Unamortized issuance costs61,493 13,610 
Current portion of long-term borrowings (1)
20,000  
Total long-term borrowings$2,743,507 $771,390 
(1) Represents the current portion of the borrowings on the Term Loan B facility.

At June 30, 2022 and December 31, 2021, $9.2 million and $10.4 million, respectively, of accrued interest related to our borrowings was reported in ‘Accounts payable’ in the condensed consolidated balance sheets.

11

Senior Revolving Credit Facility

In July 2019, the Company and certain of its subsidiaries (the “Borrowers”) entered into a Second Amended and Restated Credit Agreement (as amended, the “Credit Agreement”), with the lenders named therein and PNC Bank, National Association, as a lender and administrative agent for the lenders. In February 2022, we amended the Credit Agreement, which, as amended to date, provides for a revolving credit facility of $600.0 million, which can be increased by an additional $400.0 million subject to certain conditions (the “Revolving Facility”). Borrowings under the Credit Agreement bear interest at a variable interest rate based on (A) a Base Rate (defined as the highest of (i) the Overnight Bank Funding Rate (as defined in the Credit Agreement), plus 0.25%, (ii) the Prime Rate (as defined in the Credit Agreement), and (iii) the Daily Simple SOFR (as defined in the Credit Agreement), plus 1.00%), plus an applicable margin ranging from 0.25% to 0.875% based on our leverage ratio or 1.35% to 1.975% for the Daily Simple SOFR based on the leverage ratio, or (B) the Term SOFR Rate (as defined in the Credit Agreement), plus an applicable margin ranging from 1.35% to 1.975% based on our leverage ratio for one-month interest periods and 1.40% to 2.025% based on our leverage ratio for three month interest periods. Borrowings under the Credit Agreement are secured by all of the assets of the Borrowers and guaranteed by certain other subsidiaries of the Borrowers.

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 permits, among other things, (i) stock repurchases subject to certain restrictions, including after giving effect to such stock repurchases, the maximum leverage ratio does not exceed certain levels; and (ii) certain acquisitions so long as there is borrowing availability under the Credit Agreement of at least $40.0 million. As of June 30, 2022, we were in compliance with all financial covenants under the Credit Agreement.

As of June 30, 2022, the total commitments available from the lenders under the Revolving Facility were $600.0 million. At June 30, 2022, we had $130.0 million in outstanding borrowings, which are due when the Revolving Facility matures in July 2024, and $0.3 million in outstanding letters of credit under the Revolving Facility, which reduces amounts available for borrowing under the Revolving Facility. As of June 30, 2022 and December 31, 2021, we had $469.7 million and $414.7 million, respectively, of available borrowing capacity under the Revolving Facility.

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.

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. Additionally, subject to certain conditions, including, without limitation, satisfying certain leverage ratios, the Company may, at any time, on one or more occasions, add one or more new classes of term facilities and/or increase the principal amount of the loans of any existing class by requesting one or more incremental term facilities.

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%. 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%.

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. As of June 30, 2022, we had $1,995.0 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 June 30, 2022, we were in compliance with all financial covenants under the Term Loan B Credit Agreement.

12

Asia Revolving Credit Facilities

During the six months ended June 30, 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 $1.5 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.

As of June 30, 2022, we had borrowings outstanding of $0.5 million on the CMBC Facility, which are due in September 2022 and borrowings outstanding of $4.9 million on the Citibank Facility, which are due at various dates within the third quarter of 2022. We had no borrowings under our Asia revolving facilities during the year ended December 31, 2021 or outstanding at December 31, 2021.

Senior Notes Issuances

In March 2021, the Company completed the issuance and sale of $350.0 million aggregate principal amount of 4.250% Senior Notes due March 15, 2029 (the “2029 Notes”), pursuant to the indenture related thereto (as amended and/or supplemented to date, the “2029 Notes Indenture”). Additionally, in August 2021, the Company completed the issuance and sale of $350.0 million aggregate principal amount of 4.125% Senior Notes due August 15, 2031 (the “2031 Notes”), pursuant to the indenture related thereto (as amended and/or supplemented to date, “the 2031 Notes Indenture” and, together with the 2029 Notes Indenture, the “Indentures” and, each, an “Indenture”). Interest on each of the 2029 Notes and the 2031 Notes (collectively, the “Notes”) is payable semi-annually.

The Company will have the option to redeem all or any portion of the 2029 Notes, at once or over time, at any time on or after March 15, 2024, at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably on an annual basis to par and accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company will also have the option to redeem some or all of the 2029 Notes at any time before March 15, 2024 at a redemption price of 100% of the principal amount to be redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. In addition, at any time before March 15, 2024, the Company may redeem up to 40% of the aggregate principal amount of the 2029 Notes at a redemption price of 104.250% 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.

The Company will have the option to redeem all or any portion of the 2031 Notes, at once or over time, at any time on or after August 15, 2026, at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably on an annual basis to par and accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company will also have the option to redeem some or all of the 2031 Notes at any time before August 15, 2026 at a redemption price of 100% of the principal amount to be redeemed, plus a “make-whole” premium and 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 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.

The Notes rank pari passu in right of payment with all of the Company’s existing and future senior debt, including the Credit Agreement, and are senior in right of payment to any of the Company’s future debt that is, by its term, expressly subordinated in right of payment to the Notes. The Notes are unconditionally guaranteed by each of the Company’s restricted subsidiaries that is a borrower or guarantor under the Credit Agreement and by each of the Company’s wholly-owned restricted subsidiaries that guarantees any debt of the Company or any guarantor under any syndicated credit facility or capital markets debt in an aggregate principal amount in excess of $25.0 million.

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. As of June 30, 2022, we were in compliance with all financial covenants under the Notes.

13

8. COMMON STOCK REPURCHASE PROGRAM 

During the three and six months ended June 30, 2022, we did not repurchase shares of our common stock.

During the three months ended June 30, 2021, we repurchased 2.9 million shares of our common stock at a cost of $300.0 million, including commissions, under a $300.0 million April 2021 accelerated share repurchase arrangement (“ASR”). Under the ASR, a financial institution delivers shares of our common stock during the purchase period in exchange for an up-front payment. The total number of shares ultimately delivered under the ASR, and therefore the average repurchase price paid per share, is determined based on the volume-weighted average price of our common stock during the purchase period. During the six months ended June 30, 2021, we repurchased 4.0 million shares of our common stock at an aggregate cost of $350.0 million, including commissions. This included 0.5 million shares received in January 2021 at the conclusion of the purchase period for an accelerated share repurchase agreement we entered into in November 2020.

As of June 30, 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.

9. REVENUES

Revenues by channel and brand were:

Second Quarter

Three Months Ended June 30, 2022
Crocs BrandHEYDUDE BrandTotal
(in thousands)
Channel:
Wholesale$392,511 $162,499 $555,010 
Direct-to-consumer 339,705 69,866 409,571 
Total revenues$732,216 $232,365 $964,581 

Three Months Ended June 30, 2021
Crocs BrandHEYDUDE BrandTotal
(in thousands)
Channel:
Wholesale$307,327 $ $307,327 
Direct-to-consumer333,446  333,446 
Total revenues$