With a maturity date of April 2, this Thursday, the deadline for Crocs to amend its credit facility is looming. Under the current agreement, the company has $22.4mm in borrowings, which is due Thursday if the company is unable to secure a new facility. It ended the year with $52mm in cash, so CROX will have had to burn through more than half of this during the quarter to risk not having enough cash on hand to fund its debt service. (Note: I wonder if the Bill and Melinda Gates Foundation – which owns at least 3.6% of shares outstanding – will let the company go under due to a near-term inability to fund short-term debt?)
Here’s how I look at it. I’m not saying that Crocs is a growth company. In fact, let’s assume the opposite. Let’s say that either the new CEO or a strategic buyer scoops up this company, takes the top line from the $847mm peak down to a core of $400mm and runs at a 10% margin (I can defend this rate six ways til Sunday). That suggests about $42mm in EBITDA. With no store openings, Crocs can sustain itself on $10-15mm/yr in capex – so we’re looking at about $25-$30mm in free cash.
At $1.19 we’re looking at an EV of $69.2mm. Do the math…the midpoint of the implied free cash flow ($27.5mm) suggests that internally generated cash flow can pay for the company in 2.5 years.