CROX's increase in cash last quarter was almost entirely matched by a decrease in Income Tax Receivable, and the rest was due to unrealized foreign currency gains, ie. they are not generating positive cash flow from operations.
Essentially they got a one time tax refund and used it to pay off their credit line. The fact that they have reported $11 million in foreign currency gains this year on a $50 million cash balance suggests a large amount of their cash is tied up overseas and not available to fund operations, and would be subject to significant tax if repatriated.
>>Time to get that credit. Doesn't look like they can... <<
On the last call the CEO did say he expected it to close by quarter end. That's today. My suspicion was that the bank wanted to see how there quarter was going before they committed to whatever terms were on the table at the time of the call. I would expect that CROX would want to sign something by today and they would have to 8-K that by Friday if they do sign. If July & August were strong, I can't see why they would not have signed already, which leads me to believe they haven't moved more obsolete inventory which last quarter, contributed to an extra $23M in gross profit, hence the good quarter.
I think the stock will go down significantly if something is not secured by the time of their next call.
The gain of 11 million on currency is probably related to movement of the US dollar versus other currencies.
And the governemnt doesn't base taxes on when the money gets deposited into a US bank. It's based on revenue - expenses. The revenue for CROX includes foreign sales. So there is no impact on taxes owed if and when Crox decides to convert the currency to US dollars.
And because they have significant sales and operations in foreign countries it is actually good business practice to keep funds in local currency to avoid losses due to the currency value change.
Again I am short CROX but in this situation I don't think this fact indicates any underlying problem.
We are a global business with operations in many different countries, which requires cash accounts to be held in various different currencies. The global market has recently experienced many fluctuations in foreign currency exchange rates which impacts our results of operations and cash positions. The future fluctuations in foreign currencies may have a material impact on our cash flows and capital resources. Cash balances held in foreign countries have additional restrictions and covenants associated with them, which adds increased strains on our liquidity and ability to timely access and transfer cash balances between entities.
Most of the amounts held outside of the U.S. could be repatriated to the U.S., but under current law, would be subject to U.S. federal income taxes, less applicable foreign tax credits. In some countries, repatriation of certain foreign balances is restricted by local laws and could have adverse tax consequences if we were to move the cash to another country. Certain countries, including China, have monetary laws which may limit our ability to utilize cash resources in those countries for operations in other countries. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. or other countries and may adversely affect our liquidity.