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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 September 30, 2021
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 October 14, 2021, Crocs, Inc. had 58,847,388 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 supply chain disruptions;
our belief that we have sufficient liquidity to fund our business operations during the next twelve months;
our expectations about the impact of our strategic plans;
the amount and timing of our capital expenditures; and
our intent to achieve various Environmental, Social, and Governance initiatives.

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, 2020 and our subsequent filings with the Securities and Exchange Commission. 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.
 

i

Crocs, Inc.
Table of Contents to the Quarterly Report on Form 10-Q
For the Quarterly Period Ended September 30, 2021
 

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 September 30,Nine Months Ended September 30,
2021202020212020
Revenues
$625,919 $361,736 $1,726,790 $974,445 
Cost of sales
226,123 154,967 678,594 453,581 
Gross profit
399,796 206,769 1,048,196 520,864 
Selling, general and administrative expenses
196,728 134,683 525,120 371,371 
Income from operations
203,068 72,086 523,076 149,493 
Foreign currency gains (losses), net
537 (516)(84)(1,434)
Interest income
615 43 713 189 
Interest expense
(6,486)(1,502)(12,830)(5,593)
Other income (expense), net
2 (27)15 901 
Income before income taxes
197,736 70,084 510,890 143,556 
Income tax expense (benefit)
44,247 8,195 (59,951)14,025 
Net income
$153,489 $61,889 $570,841 $129,531 
Net income per common share:
Basic
$2.47 $0.92 $8.96 $1.92 
Diluted
$2.42 $0.91 $8.79 $1.89 
Weighted average common shares outstanding:
Basic
62,033 67,473 63,695 67,606 
Diluted
63,324 68,385 64,937 68,608 
 
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 September 30,Nine Months Ended September 30,
 2021202020212020
Net income
$153,489 $61,889 $570,841 $129,531 
Other comprehensive income (loss):
  
Foreign currency translation gains (losses), net
(12,867)4,160 (20,053)(3,663)
Reclassification of foreign currency translation loss to income (1)
   (164)
Total comprehensive income
$140,622 $66,049 $550,788 $125,704 
(1) Represents the reclassification of cumulative foreign currency translation adjustment upon liquidation of foreign subsidiaries during the nine months ended September 30, 2020.

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)
September 30,
2021
December 31,
2020
ASSETS
  
Current assets:
  
Cash and cash equivalents
$436,601 $135,802 
Restricted cash - current
1,412 1,542 
Accounts receivable, net of allowances of $21,137 and $21,093, respectively
229,298 149,847 
Inventories
212,496 175,121 
Income taxes receivable
1,255 1,857 
Other receivables
16,990 10,816 
Prepaid expenses and other assets
22,000 17,856 
Total current assets
920,052 492,841 
Property and equipment, net of accumulated depreciation and amortization of $88,595 and $86,305, respectively
91,318 57,467 
Intangible assets, net of accumulated amortization of $108,014 and $95,426, respectively
31,634 37,636 
Goodwill
1,630 1,719 
Deferred tax assets, net
517,929 350,784 
Restricted cash
3,731 1,929 
Right-of-use assets
170,957 167,421 
Other assets
7,814 8,926 
Total assets
$1,745,065 $1,118,723 
LIABILITIES AND STOCKHOLDERS’ EQUITY
  
Current liabilities:
  
Accounts payable
$133,446 $112,778 
Accrued expenses and other liabilities
149,206 126,704 
Income taxes payable
22,315 5,038 
Current operating lease liabilities
45,248 47,064 
Total current liabilities
350,215 291,584 
Long-term income taxes payable
193,990 205,974 
Long-term borrowings
685,955 180,000 
Long-term operating lease liabilities157,874 146,401 
Other liabilities
4,200 4,131 
Total liabilities
1,392,234 828,090 
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, 105.9 million and 105.0 million issued, 61.5 million and 65.9 million outstanding, respectively
106 105 
Treasury stock, at cost, 44.4 million and 39.1 million shares, respectively
(1,236,003)(688,849)
Additional paid-in capital
540,948 482,385 
Retained earnings
1,124,187 553,346 
Accumulated other comprehensive loss
(76,407)(56,354)
Total stockholders’ equity
352,831 290,633 
Total liabilities and stockholders’ equity
$1,745,065 $1,118,723 
 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 June 30, 2021
62,382 $106 43,283 $(1,078,857)$530,357 $970,698 $(63,540)$358,764 
Share-based compensation— — — — 10,591 — — 10,591 
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units
174 — 52 (7,146)— — — (7,146)
Repurchases of common stock
(1,055)— 1,055 (150,000)— — — (150,000)
Net income
— — — — — 153,489 — 153,489 
Other comprehensive loss
— — — — — — (12,867)(12,867)
Balance at September 30, 2021
61,501 $106 44,390 $(1,236,003)$540,948 $1,124,187 $(76,407)$352,831 

 Common StockTreasury StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 SharesAmountSharesAmount
Balance at June 30, 2020
67,455 $105 37,470 $(587,940)$502,958 $308,127 $(66,366)$156,884 
Share-based compensation— — — — 4,867 — — 4,867 
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units
35 — 1 (43)230 — — 187 
Repurchases of common stock
— — — — — — — — 
Net income
— — — — — 61,889 — 61,889 
Other comprehensive income
— — — — — — 4,160 4,160 
Balance at September 30, 2020
67,490 $105 37,471 $(587,983)$508,055 $370,016 $(62,206)$227,987 

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, 2020
65,856 $105 39,132 $(688,849)$482,385 $553,346 $(56,354)$290,633 
Share-based compensation— — — — 29,939 — — 29,939 
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units
702 1 201 (18,766)236 — — (18,529)
Repurchases of common stock
(5,057)— 5,057 (528,388)28,388 — — (500,000)
Net income
— — — — — 570,841 — 570,841 
Other comprehensive loss
— — — — — — (20,053)(20,053)
Balance at September 30, 2021
61,501 $106 44,390 $(1,236,003)$540,948 $1,124,187 $(76,407)$352,831 

 Common StockTreasury StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
 SharesAmountSharesAmount
Balance at December 31, 2019
68,232 $104 35,796 $(546,208)$495,903 $240,485 $(58,379)$131,905 
Share-based compensation— — — — 10,809 — — 10,809 
Exercises of stock options, issuance of restricted stock awards, and vests of restricted stock units
817 1 116 (2,616)1,343 — — (1,272)
Repurchases of common stock
(1,559)— 1,559 (39,159)— — — (39,159)
Net income
— — — — — 129,531 — 129,531 
Other comprehensive loss
— — — — — — (3,827)(3,827)
Balance at September 30, 2020
67,490 $105 37,471 $(587,983)$508,055 $370,016 $(62,206)$227,987 

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)

Nine Months Ended September 30,
 20212020
Cash flows from operating activities:
  
Net income
$570,841 $129,531 
Adjustments to reconcile net income to net cash provided by operating activities:
  
Depreciation and amortization
23,832 20,251 
Operating lease cost
44,067 45,818 
Inventory donations1,153 8,873 
Provision for (recovery of) doubtful accounts, net(2,441)5,720 
Share-based compensation
29,939 10,809 
Deferred income taxes(176,873) 
Other non-cash items
(1,384)3,632 
Changes in operating assets and liabilities:
 
Accounts receivable
(80,981)(38,937)
Inventories
(41,193)(14,873)
Prepaid expenses and other assets
(5,069)7,706 
Accounts payable, accrued expenses and other liabilities
30,997 25,243 
Right-of-use assets and operating lease liabilities
(37,723)(45,133)
Cash provided by operating activities
355,165 158,640 
Cash flows from investing activities:
  
Purchases of property, equipment, and software
(35,758)(33,193)
Proceeds from disposal of property and equipment
6 434 
Other
(15)(168)
Cash used in investing activities
(35,767)(32,927)
Cash flows from financing activities:
  
Proceeds from notes issuance700,000  
Proceeds from bank borrowings
170,000 150,000 
Repayments of bank borrowings
(350,000)(220,000)
Deferred debt issuance costs(14,491)(520)
Repurchases of common stock
(500,000)(39,159)
Repurchases of common stock for tax withholding(18,766)(2,616)
Other
237 1,344 
Cash used in financing activities
(13,020)(110,951)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
(3,907)130 
Net change in cash, cash equivalents, and restricted cash
302,471 14,892 
Cash, cash equivalents, and restricted cash—beginning of period
139,273 112,045 
Cash, cash equivalents, and restricted cash—end of period
$441,744 $126,937 

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.

Our reportable operating segments include: the Americas, operating in North and South America; Asia Pacific, operating throughout Asia, Australia, and New Zealand; and Europe, Middle East, and Africa (“EMEA”), operating throughout Europe, Russia, the Middle East, and Africa. See Note 15 — 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, 2020 (“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 nine months ended September 30, 2021, other than with respect to the new accounting pronouncements adopted as described in Note 2 — Recent Accounting Pronouncements.

Reclassifications

We have reclassified certain amounts on the condensed consolidated statements of cash flows, Note 10 — Revenues, and Note 15 — 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, and depreciation and amortization, 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.

Condensed Consolidated Statements of Cash Flows - Supplemental Schedule of Non-Cash Investing and Financing Activities
Nine Months Ended September 30,
20212020
(in thousands)
Accrued purchases of property, equipment, and software$13,061 $4,640 

7

2. RECENT ACCOUNTING PRONOUNCEMENTS
 
New Accounting Pronouncement Adopted

Simplifying Accounting for Income Taxes

In December 2019, the FASB issued new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as franchise taxes, intra-period income tax expense allocation exceptions, and interim recognition of enactment of tax laws or rate changes. On January 1, 2021, we adopted this guidance. The adoption did not have a material effect on our condensed consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued optional guidance related to reference rate reform, which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for our revolving borrowing instruments, which use LIBOR as a reference rate, and is available for adoption effective immediately, but is only available through December 31, 2022. We are currently evaluating the potential impact of this standard on our condensed consolidated financial statements.

Other Pronouncements

Other new pronouncements issued but not effective until after September 30, 2021 are not expected to have a material impact on our condensed consolidated financial statements.

3. PROPERTY AND EQUIPMENT, NET

‘Property and equipment, net’ consists of the following:
September 30, 2021December 31, 2020
 (in thousands)
Leasehold improvements$68,734 $66,661 
Machinery and equipment52,486 47,107 
Furniture, fixtures, and other21,665 21,817 
Construction-in-progress37,028 8,187 
Property and equipment179,913 143,772 
Less: Accumulated depreciation and amortization(88,595)(86,305)
Property and equipment, net$91,318 $57,467 

8

4. ACCRUED EXPENSES AND OTHER LIABILITIES
 
Amounts reported in ‘Accrued expenses and other liabilities’ in the condensed consolidated balance sheets were:
September 30, 2021December 31, 2020
 (in thousands)
Accrued compensation and benefits$47,353 $48,870 
Professional services 28,567 18,478 
Fulfillment, freight, and duties25,068 17,868 
Sales/use and value added taxes payable12,616 12,480 
Return liabilities8,424 6,906 
Royalties payable and deferred revenue6,004 6,254 
Accrued rent and occupancy6,602 3,818 
Accrued legal fees6,139 1,078 
Other8,433 10,952 
Total accrued expenses and other liabilities$149,206 $126,704 

5. LEASES

Right-of-Use Assets and Operating Lease Liabilities

Amounts reported in the condensed consolidated balance sheets were:
September 30, 2021December 31, 2020
(in thousands)
Assets:
Right-of-use assets$170,957 $167,421 
Liabilities:
Current operating lease liabilities$45,248 $47,064 
Long-term operating lease liabilities157,874 146,401 
Total operating lease liabilities$203,122 $193,465 

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 September 30,Nine Months Ended September 30,
2021202020212020
(in thousands)
Operating lease cost $14,309 $15,605 $44,067 $45,818 
Short-term lease cost2,095 1,274 5,499 3,936 
Variable lease cost10,568 5,728 24,875 11,502 
Total lease costs$26,972 $22,607 $74,441 $61,256 

Other information related to leases, including supplemental cash flow information, consists of:
Nine Months Ended September 30,
20212020
(in thousands)
Cash paid for operating leases$46,345 $41,043 
Right-of-use assets obtained in exchange for operating lease liabilities52,145 54,218 

9

The weighted average remaining lease term and discount rate related to our lease liabilities as of September 30, 2021 were 7.1 years and 3.9%, respectively. As of September 30, 2020, the weighted average remaining lease term and discount rate related to our lease liabilities were 6.7 years and 4.4%, respectively.

Maturities

The maturities of our operating lease liabilities were:
As of
September 30, 2021
(in thousands)
2021 (remainder of year)$9,631 
202249,292 
202337,690 
202425,216 
202519,023 
Thereafter92,364 
Total future minimum lease payments233,216 
Less: imputed interest(30,094)
Total operating lease liabilities$203,122 

Leases That Have Not Yet Commenced

As of September 30, 2021, we had significant obligations for a lease not yet commenced related to the expansion of our Americas distribution center in Dayton, Ohio. The total contractual commitment related to the lease, with payments expected to begin in the first quarter of 2022 and continue through September 2032, is approximately $39 million.

6. 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 ‘Prepaid expenses and other assets’ and ‘Accrued expenses and other liabilities’ at September 30, 2021 and December 31, 2020, respectively. The fair values of our derivative instruments were an immaterial asset at September 30, 2021 and an immaterial liability at December 31, 2020. See Note 7 — Derivative Financial Instruments for more information.

The carrying amounts of our cash, cash equivalents, and current 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.

Our borrowing instruments are recorded at their carrying values in the condensed consolidated balance sheets, which may differ from their respective fair values. In the nine months ended September 30, 2021, we completed the issuance and sale of $350.0 million aggregate principal amount of 2029 Notes (as defined below) and $350.0 million aggregate principal amount of 2031 Notes (as defined below), as described in more detail in Note 8 — Long-Term Borrowings. The Notes (as defined below) are 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 carrying and fair values of our revolving credit facilities approximate their carrying values at September 30, 2021 and December 31, 2020 based on interest rates currently available to us for similar borrowings. The carrying value and fair value of our borrowing instruments as of September 30, 2021 and December 31, 2020 were:
September 30, 2021December 31, 2020
Carrying ValueFair ValueCarrying ValueFair Value
(in thousands)
Senior notes due 2029$350,000 $360,719 $ $ 
Senior notes due 2031350,000 354,375   
Revolving credit facilities  180,000 180,000 

10

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. Impairment expense is reported in ‘Selling, general and administrative expenses’ in our condensed consolidated statements of operations. We did not record impairment expense in the three and nine months ended September 30, 2021. Additionally, no impairment expense was recorded in the three or nine months ended September 30, 2020.

7. 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 September 30, 2021 or December 31, 2020.

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 gains (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:
September 30, 2021December 31, 2020
Derivative AssetsDerivative LiabilitiesDerivative AssetsDerivative Liabilities
(in thousands)
Forward foreign currency exchange contracts$1,168 $(843)$794 $(1,225)
Netting of counterparty contracts(843)843 (794)794 
  Foreign currency forward contract derivatives$325 $ $ $(431)

11

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.
September 30, 2021December 31, 2020
NotionalFair ValueNotionalFair Value
(in thousands)
Euro$23,972 $130 $28,851 $(82)
Singapore Dollar42,200 (131)24,211 457 
Indian Rupee15,735 (179)18,937 (134)
Japanese Yen25,498 129 17,447 (240)
British Pound Sterling14,138 90 16,134 (182)
South Korean Won31,401 411 3,741 (56)
Other currencies13,349 (125)9,675 (194)
Total$166,293 $325 $118,996 $(431)
Latest maturity dateOctober 2021January 2021

Amounts reported in ‘Foreign currency gains (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 September 30,Nine Months Ended September 30,
 2021202020212020
 (in thousands)
Foreign currency transaction gains (losses)
$493 $(477)$148 $223 
Foreign currency forward exchange contracts gains (losses)
44 (39)(232)(1,657)
Foreign currency gains (losses), net
$537 $(516)$(84)$(1,434)

8. LONG-TERM BORROWINGS
 
Our borrowings were as follows:
MaturityStated Interest RateEffective Interest RateSeptember 30, 2021December 31, 2020
(in thousands)
Notes issuance of $350.0 million
20294.250 %4.64 %$350,000 $ 
Notes issuance of $350.0 million
20314.125 %4.35 %350,000  
Revolving credit facilities 180,000 
Total face value of long-term borrowings700,000 180,000 
Less:
Unamortized issuance costs14,045  
Current portion of borrowings  
Total long-term borrowings$685,955 $180,000 

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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, which provided for a revolving credit facility of $500.0 million, which can be increased by an additional $100.0 million subject to certain conditions (the “Facility”). Borrowings under the Credit Agreement bear interest at a variable rate based on (A) a domestic base rate (defined as the highest of (i) the Federal Funds open rate, plus 0.25%, (ii) the Prime Rate, and (iii) the Daily LIBOR rate, plus 1.00%), plus an applicable margin ranging from 0.25% to 0.875% based on our leverage ratio, or (B) a LIBOR rate, plus an applicable margin ranging from 1.25% to 1.875% based on our leverage ratio. 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 4.00 to 1.00, and a maximum leverage ratio of (i) 3.50 to 1.00 from the quarter ended December 31, 2020 to the quarter ended December 31, 2021, and (ii) 3.25 to 1.00 from the quarter ended March 31, 2022 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 September 30, 2021, we were in compliance with all financial covenants under the Credit Agreement.

As of September 30, 2021, the total commitments available from the lenders under the Facility were $500.0 million. At September 30, 2021, we had no outstanding borrowings and $0.3 million in outstanding letters of credit under the Facility, which reduces amounts available for borrowing under the Facility. As of September 30, 2021 and December 31, 2020, we had $499.7 million and $319.4 million, respectively, of available borrowing capacity under the Facility.

Asia Revolving Credit Facilities

During the nine months ended September 30, 2021, we had two revolving credit facilities in Asia, a revolving credit facility with Citibank (China) Company Limited, Shanghai Branch, which, as amended, provides up to an equivalent of $10.0 million, and a revolving credit facility with China Merchants Bank Company Limited, Shanghai Branch, which matured in May 2021 and provided up to 30.0 million RMB, or $4.7 million using current exchange rates as of May 2021.

We had no borrowings under our Asia revolving facilities during the three or nine months ended September 30, 2021 and year ended December 31, 2020 or borrowings outstanding at September 30, 2021 and December 31, 2020.

Senior Notes Issuance

On March 12, 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 (“the March Indenture”). Additionally, on August 10, 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 (“the August Indenture” and, together with the March Indenture, the “Indentures”). 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
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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 September 30, 2021, we were in compliance with all financial covenants under the Notes.

9. COMMON STOCK REPURCHASE PROGRAM 

During the three months ended September 30, 2021, we repurchased 1.1 million shares of our common stock at a cost of $150.0 million, including commissions. During the nine months ended September 30, 2021, we repurchased 5.1 million shares of our common stock at an aggregate cost of $500.0 million, including commissions. This includes 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.

During the three months ended September 30, 2020, we did not repurchase shares of our common stock to preserve maximum liquidity and flexibility as a result of the COVID-19 pandemic. During the nine months ended September 30, 2020, we repurchased 1.6 million shares of our common stock at a cost of $39.2 million, including commissions.

During the third quarter of 2021, the Board of Directors (the “Board”) approved a $1,000.0 million increase to our share repurchase authorization. As of September 30, 2021, we had remaining authorization to repurchase approximately $1,550.0 million of our common stock, subject to restrictions under our Notes and Credit Agreement.

In September 2021, we entered into an accelerated share repurchase arrangement (“ASR”) to repurchase $500.0 million of our common stock. In exchange for an up-front payment of $500.0 million in October 2021, the financial institution that was party to the ASR committed to deliver us shares of our common stock during the ASR’s purchase period, which ends in December 2021.

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10. REVENUES

Revenues by reportable operating segment and by channel were:

Third Quarter
Three Months Ended September 30, 2021
AmericasAsia PacificEMEAUnallocated Corporate and OtherTotal
(in thousands)
Channel:
Wholesale$213,321 $37,207 $59,058 $25 $309,611 
Direct-to-consumer (1)
242,587 46,438 27,283  316,308 
Total revenues$455,908 $83,645 $86,341