Crocs Inc

Previous wording

Crocs, Inc. and its 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. We strive to be the world leader in innovative casual footwear for women, men, and children, combining comfort and style with a value that consumers want. The vast majority of shoes within the Crocs Brand’s collection contain Croslite™ material, a proprietary, molded footwear technology, delivering extraordinary comfort with each step. 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. Our wholesale channel includes domestic and international multi-brand retailers, mono-branded partner stores, e-tailers, and distributors; our direct-to-consumer channel includes company-operated retail stores, company-operated e-commerce sites, and third-party marketplaces.

Current wording

Crocs, Inc. and its 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 for all, combining comfort and style with a value that consumers want. The vast majority of shoes within the Crocs Brand’s collection contain Croslite™ material, a proprietary, molded footwear technology, delivering extraordinary comfort with each step. The HEYDUDE Brand provides an innovative loafer concept that is differentiated through easy on and off, quality, and comfort. 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. Our wholesale channel includes domestic and international multi-brand retailers, mono-branded partner stores, e-tailers, and distributors; our direct-to-consumer channel includes company-operated retail stores, company-operated e-commerce sites, and third-party marketplaces.

Previous wording

•We are operating in an environment where consumers are feeling the effects of elevated interest rates and inflation, and as a result, they are spending more cautiously. In addition, geopolitical tensions remain across the globe, among other things. We are focused on making the right decisions for the health of our brands, maintaining tight inventory control, and investing in strategic initiatives to support durable long-term growth.

Current wording

•We continue to operate in an environment where consumers are feeling the effects of elevated interest rates and inflation, and as a result, they are spending more cautiously. In addition, geopolitical tensions have increased across the globe. In February 2025, the U.S. presidential administration has also imposed tariffs on foreign imports into the United States, including, most relevant to us, an additional 10% tariff on all imports from China and an additional 25% tariff on all imports from Mexico, which tariffs on imports from Mexico were subsequently suspended in order to facilitate negotiations. As of the date of this Annual Report, the proposed tariffs on all imports from Mexico remain suspended. We remain focused on making the right decisions for the health of our brands, maintaining tight inventory control, and investing in strategic initiatives to support durable long-term growth.

Previous wording

•We ended the year in a strong liquidity position with $149.3 million in cash and cash equivalents and up to $570.4 million in available borrowing capacity as of December 31, 2023. In the year ended December 31, 2023, we paid down $665.8 million of net borrowings, reducing total borrowings to $1.66 billion as of December 31, 2023.

Current wording

•Our liquidity position remains strong with approximately $180.5 million in cash and cash equivalents and $824 million in available borrowing capacity as of December 31, 2024. Our total borrowings were $1.3 billion as of December 31, 2024. We repurchased $551.2 million of our common stock during the year.

Previous wording

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. 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%.

Current wording

Revenues were $4,102.1 million for the year ended December 31, 2024, a 3.5% increase compared to the year ended December 31, 2023. The increase was due to the net effects of: (i) higher average selling price on a constant currency basis (“ASP”) in both brands, which increased revenues by $156.2 million, or 3.9%; (ii) higher unit sales volume, which resulted in an increase in revenues of $13.7 million, or 0.3%; and (iii) net unfavorable changes in exchange rates, which decreased revenues by $30.1 million, or 0.8%.

Previous wording

•We grew Crocs Brand revenues 13.3%, despite foreign currency headwinds, compared to the same period in 2022.

Current wording

•We grew Crocs Brand revenues 8.8% compared to the same period in 2023. HEYDUDE Brand revenues decreased 13.2%.

Previous wording

•Selling, general & administrative expenses (“SG&A”) was $1,163.9 million, an increase of $154.4 million, or 15.3%, compared to 2022, primarily as a result of investments in talent and marketing as we continue to grow the business. As a percent of revenues, SG&A increased 100 basis points to 29.4% of revenues.

Current wording

•Selling, general & administrative expenses (“SG&A”) were $1,388.3 million compared to $1,173.2 million 2023, primarily as a result of higher variable expenses related to higher revenues in the DTC channel and continued investment in talent and marketing. As a percent of revenues, SG&A increased to 33.8% of revenues compared to 29.6% in 2023.

Previous wording

•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. Our operating margin improved to 26.2%, compared to 23.9% in 2022.

Current wording

•Income from operations was $1,021.9 million for the year ended December 31, 2024 compared to income from operations of $1,036.8 million for the year ended December 31, 2023. Net income was $950.1 million, or $15.88 per diluted share, compared to $792.6 million, or $12.79 per diluted share, in 2023.

Previous wording

(2) Average footwear selling price is calculated as footwear and charms revenues divided by footwear units.

Current wording

(2) Average footwear selling price is calculated as footwear and footwear accessories revenues divided by footwear units.

Previous wording

Revenues. In the year ended December 31, 2023, revenues increased $407.4 million, or 11.5%, compared to 2022. Higher average selling price on a constant currency basis (“ASP”) increased revenues by $261.1 million, or 7.3%, primarily due to higher ASP in the Crocs Brand, mostly due to favorable product mix, increased pricing, lower discounting, and channel mix, partially offset by lower ASP in the HEYDUDE Brand as a result of more discounting than the prior year. Higher volume of $164.4 million, or 4.6%, also increased revenues, despite the termination of our relationship with a significant distributor in our Crocs Brand segment in the second quarter of 2023 after finding evidence of product diversion to the gray market outside of the distributor’s approved territories. Net unfavorable foreign currency fluctuations, most significantly unfavorability in the Chinese Yuan, Argentine Peso, and Japanese Yen, decreased revenues by $18.1 million, or 0.5%.

Current wording

Revenues. In the year ended December 31, 2024, revenues increased $139.8 million, or 3.5%, compared to 2023. Higher average selling price on a constant currency basis (“ASP”) increased revenues by $156.2 million, or 3.9%, primarily due to higher ASP in both brands, driven mostly by net price increases, favorable channel mix, and favorable product mix. Higher volume of $13.7 million, or 0.3%, primarily due to higher volume in the Crocs Brand, partially offset by lower volume in the HEYDUDE Brand, also increased revenues. Net unfavorable foreign currency fluctuations, primarily in the South Korean Won, Brazilian Real, Japanese Yen, and Chinese Yuan decreased revenues by $30.1 million, or 0.8%.

Previous wording

In the years ended December 31, 2023 and 2022, cost of sales included $515.3 million and $457.0 million, respectively, of distribution expenses primarily related to receiving, inspecting, warehousing, and packaging product in owned and third-party warehouses, combined with transportation costs associated with delivering products from distribution centers to wholesale partners, retail stores, and end customers.

Current wording

In the years ended December 31, 2024 and 2023, cost of sales included $487.1 million and $515.3 million, respectively, of distribution expenses primarily related to receiving, inspecting, warehousing, and packaging product in owned and third-party warehouses, combined with transportation costs associated with delivering products from distribution centers to wholesale partners, retail stores, and end customers.

Previous wording

Selling, general and administrative expenses. SG&A as a percent of revenue increased to 29.4% during the year ended December 31, 2023 compared to 2022, as SG&A expenses increased $154.4 million, or 15.3%. This increase was partly driven by operating HEYDUDE for a full year in 2023 compared to the Partial Period in 2022. There were also higher compensation costs of $65.0 million, primarily associated with an investment in talent, and higher marketing costs of $56.6 million. Additionally, there was an increase in certain variable costs associated with higher revenues of $20.9 million, an increase in facilities costs of $14.2 million, and an increase in information technology costs of $11.0 million. The overall increase in SG&A expenses was partially offset by net decreases in other costs, due in part to prior year costs associated with the shutdown of our direct operations in Russia that did not recur in the current year, of $13.3 million.

Current wording

Selling, general and administrative expenses. SG&A as a percent of revenue increased to 33.8% during the year ended December 31, 2024 compared to 2023, as SG&A expenses increased $215.1 million, or 18.3%, largely driven by higher variable expenses related to higher revenues in the DTC channel of $84.7 million. There were also higher compensation costs of $62.0 million, primarily associated with an investment in talent, and higher marketing costs of $37.1 million. Additionally, there was an increase in impairment charges of $14.8 million due to current year impairments of information technology systems related to the HEYDUDE integration, our former HEYDUDE warehouse in Las Vegas, Nevada, and our former Crocs Brand warehouse in Oudenbosch, the Netherlands, partially offset by a prior year impairment related to the right-of-use asset and leasehold improvement assets for our former headquarters which did not recur in the current year. An increase in information technology costs of $6.9 million and net increases in other costs, including an increase in professional services and facilities costs, of $9.6 million, also contributed to the overall increase in selling, general and administrative expenses.

Previous wording

Foreign currency gains (losses), net. Foreign currency gains (losses), net, consists of unrealized and realized foreign currency gains and losses from the remeasurement and settlement of monetary assets and liabilities denominated in non-functional currencies as well as realized and unrealized gains and losses on certain foreign currency derivative instruments. 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.

Current wording

Foreign currency gains (losses), net. Foreign currency gains (losses), net, consists of unrealized and realized foreign currency gains and losses from the remeasurement and settlement of monetary assets and liabilities denominated in non-functional currencies as well as realized and unrealized gains and losses on certain foreign currency derivative instruments. During the year ended December 31, 2024, we recognized realized and unrealized net foreign currency losses of $6.8 million compared to losses of $1.2 million during the year ended December 31, 2023.

Previous wording

Interest expense. Interest expense during the year ended December 31, 2023 increased $25.2 million, or 18.5%, primarily due to having borrowings on the Term Loan B Facility for a full year in 2023, as well as higher weighted average interest rates on both the Term Loan B Facility and the Revolving Facility.

Current wording

Interest expense. Interest expense during the year ended December 31, 2024 decreased $52.1 million, or 32.3%, primarily due to lower outstanding borrowings and lower weighted average interest rates on the Term Loan B Facility (as defined herein) in the current year.

Previous wording

Income tax expense. 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%. The 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 rightsand the current year release of valuation allowances. Our effective tax rate has varied dramatically in recent years due to the intra-entity intellectual property rights transfer, differences in our profitability levels and relative operating earnings across multiple jurisdictions, and by changes in the valuation allowance.

Current wording

Income tax expense (benefit). During the year ended December 31, 2024, we recognized an income tax benefit of $39.5 million on pre-tax book income of $910.6 million, representing an effective tax rate of (4.3)%, compared to an income tax expense of $83.7 million on pre-tax book income of $876.3 million in 2023, which represented an effective tax rate of 9.6%. The current year effective tax rate is lower primarily due to the current year foreign net income tax benefit as a result of an intra-entity transaction related to certain intellectual property rights, offset by the increase of valuation allowances. Our effective tax rate has varied dramatically in recent years due to intra-entity intellectual property rights transactions, differences in our profitability levels and relative operating earnings across multiple jurisdictions, and by changes in the valuation allowance.

Previous wording

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. Foreign deferred tax assets increased by $611.4 million, inclusive of the reversal of certain deferred tax liabilities. This benefit was offset by an increase in uncertain tax positions of $318.6 million, and an incremental valuation allowance of $164.0 million for amounts not more-likely-than-not to be realized based on available objective evidence. As such, a net change in deferred tax asset of $128.9 million was recognized along with a corresponding foreign income tax benefit.

Current wording

During the three months ended December 31, 2024, we completed an intra-entity transaction related to certain intellectual property rights primarily to align with current and future international operations. The transaction 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 intellectual property rights. Foreign deferred tax assets increased by $268.8 million and this benefit was offset by an increase in uncertain tax positions of $145.6 million. As such, a net change in deferred tax asset of $123.2 million was recognized along with a corresponding foreign income tax benefit. In 2024, we received new information and remeasured the reserve for uncertain tax positions related to the 2020 and 2021 intellectual property rights transactions which resulted in the release of uncertain tax positions of $141.2 million along with a corresponding foreign income tax benefit.

Previous wording

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. We have evaluated the realizability of our deferred tax assets in each jurisdiction by assessing the adequacy of expected taxable income, including the reversal of existing temporary differences, historical and projected operating results and the availability of prudent and feasible tax planning strategies. 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. The weight we give to any particular item is, in part, dependent upon the degree to which it can be objectively verified. Separate from the intra-entity transfers of intellectual property rights the company released immaterial valuation allowances in various jurisdictions. Valuation allowances recorded against deferred tax assets increased by a net $155.4 million.

Current wording

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. We have evaluated the realizability of our deferred tax assets in each jurisdiction by assessing the adequacy of expected taxable income, including the reversal of existing temporary differences, historical and projected operating results and the availability of prudent and feasible tax planning strategies. In assessing our valuation allowance as of December 31, 2024, 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. The weight we give to any particular item is, in part, dependent upon the degree to which it can be objectively verified. Valuation allowances recorded against deferred tax assets increased by a net $58.0 million.

Previous wording

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. 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.

Current wording

The 2024 impact of changes in valuation allowances to the effective tax rate was an unfavorable impact of $58.9 million, equating to a 6.5% unfavorable impact. There is also a $0.9 million favorable change in the valuation allowance related to cumulative translation adjustments. We maintain valuation allowances of approximately $241.6 million as of December 31, 2024, which may be reduced in the future depending upon the achieved profitability of certain jurisdictions as well as the magnitude of the profitability.

Previous wording

Revenues. The Crocs Brand segment grew revenues for the year ended December 31, 2023 compared to 2022, primarily as a result of higher ASPs, mostly due to product mix, increased pricing, and lower discounting. Higher volume, despite the termination of our relationship with a significant distributor in the second quarter of 2023 after finding evidence of product diversion to the gray market outside of the distributor’s approved territories, also contributed to the increase in revenues. The overall increase in revenues was partially offset by net unfavorable currency fluctuations driven by the Chinese Yuan, Argentine Peso, and Japanese Yen.

Current wording

Revenues. The Crocs Brand segment grew revenues for the year ended December 31, 2024 compared to 2023 due to higher volume, primarily in the DTC channel, and higher ASP, mostly due to favorable channel mix, price increases in certain international markets, and favorable product mix. The overall increase in revenues was partially offset by net unfavorable currency fluctuations driven by the South Korean Won, Brazilian Real, Japanese Yen, and Chinese Yuan.

Previous wording

Income from Operations. During the year ended December 31, 2023, income from operations for our Crocs Brand segment was $1,079.3 million, an increase of $227.3 million, or 26.7% from 2022. Gross margin was 60.0% for the year ended December 31, 2023, an increase of 370 basis points compared to 2022. The increase in gross margin was partially due to lower freight costs, primarily as a result of higher air freight costs in the prior year to combat supply chain disruptions, and higher ASP, as discussed above. Product mix partially offset the overall increase to gross margin.

Current wording

Income from Operations. During the year ended December 31, 2024, income from operations for our Crocs Brand segment was $1,182.0 million, an increase of $102.7 million, or 9.5% from 2023. Gross margin was 61.6% for the year ended December 31, 2024, an increase of 160 basis points compared to 2023. The increase in gross margin was primarily due to lower freight and fulfillment costs and favorable product mix.

Previous wording

During the year ended December 31, 2023, total net costs within ‘Enterprise corporate’ increased $42.3 million, or 19.9%, compared to the same period in 2022. This was primarily due to increases in compensation costs, professional services, information technology costs, and a $9.3 million impairment of the right-of-use asset and leasehold improvement assets for our former corporate headquarters. These increases were offset in part by lower costs in 2023 associated with the prior year HEYDUDE acquisition and integration.

Current wording

During the year ended December 31, 2024, total net costs within ‘Enterprise corporate’ increased $42.6 million, or 16.7%, compared to the same period in 2023, primarily due to an increase in compensation costs. An increase in impairment charges due to a current year information technology systems impairment of $18.2 million, partially offset by a prior year impairment of $9.3 million related to the right-of-use asset and leasehold improvement assets for our former corporate headquarters which did not recur in the current year, also increased costs. Additionally, depreciation and amortization expense and information technology costs increased.

Previous wording

(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. Stores in which selling square footage has changed more than 15% as a result of a remodel, expansion, or reduction are excluded until the thirteenth month in which they have comparable prior year sales. Temporarily closed stores are excluded from the comparable store sales calculation during the month of closure and in the same month in the following year. 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.

Current wording

(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. Stores in which selling square footage has changed more than 15% as a result of a remodel, expansion, or reduction are excluded until the thirteenth month in which they have comparable prior year sales. Temporarily closed stores are excluded from the comparable store sales calculation during the month of closure and in the same month in the following year. 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. E-commerce sites that are temporarily offline or unable to transact or fulfill orders (“site disruption”) are excluded from the comparable sales calculation during the month of site disruption and in the same month in the following year. E-commerce site disruptions in excess of three months are excluded until the thirteenth month after the site has re-opened. Additionally, comparable sales do not include leap days in leap years.

Previous wording

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. 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. 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.

Current wording

As of December 31, 2024, we had $180.5 million in cash and cash equivalents and up to $824.4 million of available borrowings, including $809.4 million remaining borrowing availability under the Revolving Facility (as defined below) and $15.0 million of remaining borrowing availability under the Citibank Facility (as defined below). As of December 31, 2024, the Term Loan B Facility (as defined below) was fully drawn, and there was no available borrowing capacity. We believe that our cash flows from operations, our cash and cash equivalents on hand, and available borrowings under our Revolving Facility and Citibank Facility will be sufficient to meet our ongoing liquidity needs and capital expenditure requirements for at least the next twelve months.

Previous wording

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. 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. 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.

Current wording

All of the cash held outside of the U.S. could be repatriated to the U.S. as of December 31, 2024 without incurring additional U.S. federal income taxes. 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, 2024, we held $108.0 million of our total $180.5 million in cash in international locations. This cash is primarily used for the ongoing operations of the business in the locations in which the cash is held. Ofthe $108.0 million, an insignificant amount could potentially be restricted by local laws.

Previous wording

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. Since that time, we have amended the Credit Agreement, which, as amended to date, provides for a revolving credit facility of $750.0 million, which can be increased by an additional $250.0 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.

Current wording

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. Since that time, we have amended the Credit Agreement, which, as amended to date, provides for a revolving credit facility of $1.0 billion, 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, inclusive of a 0.10% SOFR adjustment, 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 three-month interest periods, inclusive of a 0.10% SOFR adjustment. Borrowings under the Credit Agreement are secured by all of the assets of the Borrowers and guaranteed by certain other subsidiaries of the Borrowers.

Previous wording

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). 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 December 31, 2023, we were in compliance with all financial covenants under the Credit Agreement.

Current wording

The Credit Agreement required or requires, as applicable, 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 ended March 31, 2024, (iii) 3.50 to 1.00 for the quarter ended June 30, 2024, and (iv) 3.25 to 1.00 for the quarter ended 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 December 31, 2024, we were in compliance with all financial covenants under the Credit Agreement.

Previous wording

As of December 31, 2023, the total commitments available from the lenders under the Revolving Facility were $750.0 million. 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.

Current wording

As of December 31, 2024, the total commitments available from the lenders under the Revolving Facility were $1.0 billion. At December 31, 2024, we had $190.0 million in outstanding borrowings and $0.6 million in outstanding letters of credit under the Revolving Facility, which reduces amounts available for borrowing under the Revolving Facility. As of December 31, 2024 and 2023, we had $809.4 million and $558.7 million, respectively, of available borrowing capacity under the Revolving Facility, which matures in November 2027.

Previous wording

The Original Term Loan B Credit Agreement provided for an aggregate term loan B facility in the principal amount of $2.0 billion. Prior to the February 2024 Amendment, the outstanding principal balance was $820.0 million. Among other things, the February 2024 Amendment provided for a new $820 million tranche of term loans (the “2024 Refinancing Term Loans” and, such facility, the “Term Loan B Facility”) to refinance the then-outstanding principal balance. 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,

Current wording

The Original Term Loan B Credit Agreement provided for an aggregate term loan B facility in the principal amount of $2.0 billion. Prior to the February 2024 Amendment, the outstanding balance was $820.0 million. Among other things, the February 2024 Amendment provided for a new $820.0 million tranche of term loans (the “2024 Refinancing Term Loans” and, such facility, the “Term Loan B Facility”), to refinance the then-outstanding principal balance. 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, 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

Previous wording

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. 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.

Current wording

During the year ended December 31, 2024, we had one revolving credit facility in Asia with Citibank (China) Company Limited, Shanghai Branch (the “Citibank Facility”), which, as amended, provides up to an equivalent of $15.0 million.

Previous wording

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.

Current wording

As of December 31, 2024, we had no borrowings outstanding on the Citibank Facility. As of December 31, 2023, we had borrowings outstanding of $3.3 million on the Citibank Facility.

Previous wording

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.

Current wording

The Company had or will have, as applicable, 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 also had 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 could have redeemed 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.

Previous wording

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.

Current wording

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 could have redeemed 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.

Previous wording

Operating Activities. 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. 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.

Current wording

Operating Activities. 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 $62.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, driven by higher net income, adjusted for non-cash items, of $360.1 million, partially offset by decreases in operating assets and liabilities of $298.1 million, primarily due to the change in income taxes and inventories.

Previous wording

Investing Activities. There was a $2,035.4 million decrease in cash used in investing activities for the year ended December 31, 2023 compared to the year ended December 31, 2022. 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. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. Additionally, there was an $11.4 million increase in the purchases of property and equipment related, primarily to the expansion of our distribution centers in North America.

Current wording

Investing Activities. There was a $46.3 million decrease in cash used in investing activities for the year ended December 31, 2024 compared to the year ended December 31, 2023. This was due to a decrease in purchases of property, equipment, and software, primarily as a result of prior year purchases related to the expansion of our distribution centers and headquarters in North America in the year ended December 31, 2023, that did not recur in the current year.

Previous wording

Financing Activities. Cash provided by financing activities decreased by $2,389.3 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. 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. 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. The overall decrease was partially offset by a $51.9 million decrease in deferred debt issuance costs.

Current wording

Financing Activities. Cash used in financing activities increased by $26.4 million in the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase in cash used in financing activities was due to a decrease in proceeds from borrowings of $155.7 million, an increase of $377.4 million in repurchases of common stock, including excise tax, and an increase of $0.5 million in deferred debt issuance costs. The overall increase in cash used in financing activities was offset by a decrease in repayments of borrowings of $498.3 million, a decrease of $8.8 million in repurchases of common stock for tax withholding, and other decreases in cash used of $0.1 million.

Previous wording

During the year ended December 31, 2023, we repurchased 1.7 million shares of our common stock at a cost of $175.0 million, including commissions. During the year ended December 31, 2022, we did not repurchase any shares of our common stock.

Current wording

During the year ended December 31, 2024, we repurchased 4.3 million shares of our common stock at a cost of $551.2 million, including commissions. During the year ended December 31, 2023, we repurchased 1.7 million shares of our common stock at a cost of $175.0 million, including commissions.

Previous wording

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.

Current wording

As of December 31, 2024, we had remaining authorization to repurchase approximately $323.9 million of our common stock, subject to restrictions under our Indentures, Credit Agreement, and Term Loan B Credit Agreement. On February 10, 2025, the Board approved a $1.0 billion increase to our share repurchase authorization, after which approximately $1.3 billion remained available for future common stock repurchases.

Previous wording

(1)Net of $49.0 million of unamortized issuance costs.

Current wording

(1)Net of $40.7 million of unamortized issuance costs.

Previous wording

(2) Represents future interest payment obligations, which are estimated by assuming the amounts outstanding under our Term Loan B Facility (as in effect prior to the February 2024 Amendment), Notes, Revolving Facility, and Citibank Facility and the interest rates in effect as of December 31, 2023, will remain constant into the future. 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.

Current wording

(2) Represents future interest payment obligations, which are estimated by assuming the amounts outstanding under our Term Loan B Facility, Notes, Revolving Facility, and Citibank Facility and the interest rates in effect as of December 31, 2024, will remain constant into the future. 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.

Previous wording

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.

Current wording

We had no material off-balance sheet arrangements as of December 31, 2024, other than certain purchase commitments, as described in the footnote (3) above.

Previous wording

Our goodwill and indefinite-lived intangible assets, which primarily consist of the HEYDUDE trademark, are not amortized. We evaluate the carrying value of our goodwill and indefinite-lived intangible assets at least annually or when an interim triggering event has occurred indicating potential impairment. 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.

Current wording

Our goodwill and indefinite-lived intangible assets, which primarily consist of the HEYDUDE trademark, are not amortized. We evaluate the carrying value of our goodwill and indefinite-lived intangible assets at least annually or when an interim triggering event has occurred indicating potential impairment. Our annual test is performed as of the first day of the 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.