Document And Entity Information - USD ($) $ in Millions	12 Months Ended
Document And Entity Information - USD ($) $ in Millions	Dec. 31, 2018	Feb. 20, 2019	Jun. 30, 2018
Document And Entity Information[Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2018
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2018
Entity Registrant Name	Crocs, Inc.
Entity Central Index Key	0001334036
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Common stock outstanding (shares)		73,336,332
Trading Symbol	CROX
Entity Public Float			$ 857.0

Consolidated Statements Of Operations - USD ($)
shares in Thousands, $ in Thousands

12 Months Ended

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Income Statement [Abstract]

Revenues

$ 1,088,205

$ 1,023,513

$ 1,036,273

Cost of sales

528,051

506,292

536,109

Gross profit

560,154

517,221

500,164

Selling, general and administrative expenses

495,028

494,601

503,174

Asset impairments

2,182

5,284

3,144

Income (loss) from operations

62,944

17,336

(6,154)

Foreign currency gains (losses), net

1,318

563

(2,454)

Interest income

1,281

870

692

Interest expense

(955)

(869)

(836)

Other income, net

569

280

1,539

Income (loss) before income taxes

65,157

18,180

(7,213)

Income tax expense

14,720

7,942

9,281

Net income (loss)

50,437

10,238

(16,494)

Dividends on Series A convertible preferred stock

^[1]

(108,224)

(12,000)

Dividend equivalents on Series A convertible preferred shares related to redemption value accretion and beneficial conversion feature

^[1]

(11,429)

(3,532)

(3,244)

Net loss attributable to common stockholders

$ (69,216)

$ (5,294)

$ (31,738)

Net loss per common share:

Basic (in dollars per share)

$ (1.01)

$ (0.07)

$ (0.43)

Diluted (in dollars per share)

$ (1.01)

$ (0.07)

$ (0.43)

Weighted average common shares outstanding:

Weighted average common shares outstanding - basic (shares)

68,421

72,255

73,371

Weighted average common shares outstanding - diluted (shares)

68,421

72,255

73,371

[1]

On December 5, 2018, all issued and outstanding shares of Series A Convertible Preferred Stock were repurchased in exchange for cash or converted to common stock. As a result, amounts reported for the year ended December 31, 2018, include amounts resulting from the repurchase and conversion, in addition to dividends, payments to induce conversion, and accretion of dividend equivalents prior to December 5, 2018. See Note 1 — Basis of Presentation and Summary of Significant Accounting Policies, for additional information.

Consolidated Statements Of Comprehensive Income (Loss) - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Statement of Comprehensive Income [Abstract]

Net income (loss)

$ 50,437

$ 10,238

$ (16,494)

Other comprehensive income (loss):

Foreign currency gains (losses), net

(6,846)

12,202

(4,683)

Reclassification of foreign currency translation loss to income

^[1]

(4,412)

0

Total comprehensive income (loss)

$ 39,179

$ 22,440

$ (21,177)

[1]	Reclassification of cumulative foreign currency translation adjustment upon closure of manufacturing operations, presented within ‘Selling, general and administrative expenses’ on the consolidated statement of operations.

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 123,367	$ 172,128
Accounts receivable, net of allowances of $20,477 and $31,389, respectively	97,627	83,518
Inventories	124,491	130,347
Income taxes receivable	3,041	3,652
Other receivables	7,703	10,664
Restricted cash - current	1,946	2,144
Prepaid expenses and other assets	22,123	22,596
Total current assets	380,298	425,049
Property and equipment, net	22,211	35,032
Intangible assets, net	45,690	56,427
Goodwill	1,614	1,688
Deferred tax assets, net	8,663	10,174
Restricted cash	2,217	2,783
Other assets	8,208	12,542
Total assets	468,901	543,695
Current liabilities:
Accounts payable	77,231	66,381
Accrued expenses and other liabilities	102,171	84,460
Income taxes payable	5,089	5,515
Current portion of borrowings	0	662
Total current liabilities	184,491	157,018
Long-term income taxes payable	4,656	6,081
Long-term Debt, Excluding Current Maturities	120,000	0
Other liabilities	9,446	12,298
Total liabilities	318,593	175,397
Commitments and contingencies:
Series A convertible preferred stock, 0.0 million and 0.2 million shares outstanding, liquidation preference $0 million and $203 million, respectively	0	182,433
Stockholders’ equity:
Preferred stock, par value $0.001 per share, none outstanding	0	0
Common stock, par value $0.001 per share, 103.0 million and 94.8 million issued, 73.3 million and 68.8 million shares outstanding, respectively	103	95
Treasury stock, at cost, 29.7 million and 26.0 million shares, respectively	(397,491)	(334,312)
Additional paid-in capital	481,133	373,045
Retained earnings	121,215	190,431
Accumulated other comprehensive loss	(54,652)	(43,394)
Total stockholders’ equity	150,308	185,865
Total liabilities and stockholders’ equity	$ 468,901	$ 543,695

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Allowances	$ 20,477	$ 31,389
Series A preferred shares outstanding (shares)	0	200,000
Series A convertible stock, liquidation preference	$ 0	$ 203,000
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock outstanding (shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock issued (shares)	103,000,000	94,800,000
Common shares outstanding (shares)	73,300,000	68,800,000
Treasury stock (shares)	29,700,000	26,000,000

Consolidated Statements of Stockholders' Equity - USD ($)
shares in Thousands, $ in Thousands

Total

Common Stock

Treasury Stock

Additional Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Loss

Beginning balance (shares) at Dec. 31, 2015

72,851

20,250

Stockholders' equity - beginning balance at Dec. 31, 2015

$ 245,972

$ 94

$ (283,913)

$ 353,241

$ 227,463

$ (50,913)

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Share-based compensation

10,736

Exercises of stock options and issuance of restricted stock awards (shares)

749

37

Exercises of stock options and issuance of restricted stock awards

96

$ 0

$ (324)

420

Series A preferred dividends

(12,000)

Series A preferred accretion

(3,244)

Net income (loss)

(16,494)

Other comprehensive income (loss)

(4,683)

Ending balance (shares) at Dec. 31, 2016

73,600

20,287

Stockholders' equity - ending balance at Dec. 31, 2016

220,383

$ 94

$ (284,237)

364,397

195,725

(55,596)

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Share-based compensation

11,619

Exercises of stock options and issuance of restricted stock awards (shares)

850

41

Exercises of stock options and issuance of restricted stock awards

(3,045)

$ 1

$ (75)

(2,971)

Repurchases of common stock (shares)

5,659

Repurchases of common stock

(50,000)

$ (50,000)

Series A preferred dividends

(12,000)

Series A preferred accretion

(3,532)

Net income (loss)

10,238

Other comprehensive income (loss)

12,202

Ending balance (shares) at Dec. 31, 2017

68,791

25,987

Stockholders' equity - ending balance at Dec. 31, 2017

185,865

$ 95

$ (334,312)

373,045

190,431

(43,394)

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Share-based compensation

13,732

Exercises of stock options and issuance of restricted stock awards (shares)

1,238

49

Exercises of stock options and issuance of restricted stock awards

(772)

$ 1

$ (48)

(725)

Repurchases of common stock (shares)

3,620

Repurchases of common stock

(63,131)

$ (63,131)

Series A preferred repurchase

^[1]

(84,224)

Series A preferred conversion (shares)

^[2]

6,897

Series A preferred conversion

^[2]

100,000

$ 7

99,993

Series A preferred dividends

^[3]

(24,000)

Series A preferred accretion

^[4]

(17,567)

(6,138)

(11,429)

Net income (loss)

50,437

Other comprehensive income (loss)

(11,258)

Other

1,226

Ending balance (shares) at Dec. 31, 2018

73,306

29,656

Stockholders' equity - ending balance at Dec. 31, 2018

$ 150,308

$ 103

$ (397,491)

$ 481,133

$ 121,215

$ (54,652)

[1]	Repurchase premium is the difference between cash paid and the carrying value of 100,000 shares of Series A Convertible Preferred Stock repurchased, including other costs associated with the transaction.
[2]	Represents the issuance of common stock upon conversion of 100,000 shares of Series A Convertible Preferred Stock.
[3]	Represents Series A Convertible Preferred Stock cash dividends declared and paid of $9.0 million, and $15.0 million of payments paid and payable to induce conversion.
[4]	Represents total accretion of $17.6 million, net of $6.1 million acquired value of beneficial conversion feature attributable to repurchased Series A Convertible Preferred Stock.

Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($)
$ in Thousands

12 Months Ended

Dec. 05, 2018

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Statement of Stockholders' Equity [Abstract]

Shares repurchased (shares)

100,000

Preferred shares converted into common stock (shares)

100,000

Cash dividends declared and paid

$ 9,000

Inducements paid

$ 12,000

12,000

Convertible preferred stock accretion of beneficial conversion feature

$ 14,700

17,567

^[1]

$ 3,532

$ 3,244

Acquired value of beneficial conversion feature

$ 6,100

[1]	Represents total accretion of $17.6 million, net of $6.1 million acquired value of beneficial conversion feature attributable to repurchased Series A Convertible Preferred Stock.

Consolidated Statements Of Cash Flows - USD ($)
$ in Thousands

12 Months Ended

Dec. 31, 2018

Dec. 31, 2017

Dec. 31, 2016

Cash flows from operating activities:

Net income (loss)

$ 50,437

$ 10,238

$ (16,494)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

29,250

33,130

34,043

Unrealized foreign currency (gain) loss, net

(1,455)

1,025

(9,027)

(Gain) loss on disposals of assets

5,019

(842)

547

Share-based compensation

13,105

9,773

10,736

Asset impairments

2,182

5,284

3,144

Provision (recovery) for doubtful accounts, net

711

(589)

3,230

Deferred taxes

959

(3,093)

(388)

Other non-cash items

1,994

(1,564)

(44)

Changes in operating assets and liabilities:

Accounts receivable, net of allowances

(24,623)

620

2,408

Inventories

(1,987)

23,319

20,371

Prepaid expenses and other assets

9,703

18,907

(4,532)

Accounts payable

12,953

(2,714)

(1,354)

Accrued expenses and other liabilities

18,065

5,489

2,884

Income taxes

(2,151)

(719)

(5,770)

Cash provided by operating activities

114,162

98,264

39,754

Cash flows from investing activities:

Purchases of property, equipment, and software

(11,979)

(13,117)

(22,194)

Proceeds from disposal of property and equipment

1,856

1,579

2,438

Other

13

0

(100)

Cash used in investing activities

(10,110)

(11,538)

(19,856)

Cash flows from financing activities:

Proceeds from borrowings

120,000

5,500

31,582

Repayments of borrowings

(662)

(8,611)

(35,627)

Series A preferred stock repurchase

(183,724)

0

Dividends — Series A convertible preferred stock

^[1]

(21,015)

(12,000)

Repurchases of common stock

(63,131)

(50,000)

0

Other

(270)

(259)

(398)

Cash used in financing activities

(148,802)

(65,370)

(16,443)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

(4,775)

3,053

(255)

Net change in cash, cash equivalents, and restricted cash

(49,525)

24,409

3,200

Cash, cash equivalents, and restricted cash—beginning of year

177,055

152,646

149,446

Cash, cash equivalents, and restricted cash—end of year

127,530

177,055

152,646

Supplemental disclosure of cash flow information—cash paid during the period for:

Cash paid for interest

462

434

653

Cash paid for income taxes

$ 18,633

$ 13,208

$ 12,344

[1]	Represents Series A Convertible Preferred Stock cash dividends declared and paid of $9.0 million and $12.0 million paid to induce conversion for the year ended December 31, 2018.

Consolidated Statements Of Cash Flows (Parenthetical) - USD ($) $ in Millions		12 Months Ended
	Dec. 05, 2018	Dec. 31, 2018
Statement of Cash Flows [Abstract]
Cash dividends declared and paid		$ 9.0
Inducements paid	$ 12.0	$ 12.0

Basis of Presentation and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

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 its consolidated subsidiaries within our reportable operating segments and corporate operations. The Company is engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for men, women, 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.

Basis of Presentation and Consolidation

The Company’s consolidated financial statements include its accounts and those of its wholly-owned subsidiaries, and reflect all adjustments which are necessary for a fair statement of 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”). All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require 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, uncertain tax positions, income tax expense, share-based compensation expense, the assessment of lower of cost or net realizable value on inventory, useful lives assigned to long-lived assets, depreciation, and provisions for contingencies are reasonable based on information available at the time they are made. Management also makes estimates in the assessments of potential losses in relation to tax matters and threatened or pending legal proceedings (see Note 12 — Income Taxes and Note 16 — Legal Proceedings).To the extent there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.

Reclassifications

The Company has reclassified certain amounts on the consolidated balance sheets, the consolidated statements of cash flows, and Note 2 — Recent Accounting Pronouncements, Note 5 — Accrued Expenses and Other Liabilities, Note 6 — Fair Value Measurements, Note 8 — Revolving Credit Facility and Bank Borrowings, Note 12 — Income Taxes, and Note 14 — Commitments and Contingencies to conform to current period presentation.

Transactions with Affiliates

The Company receives services from three subsidiaries of Blackstone Capital Partners VI L.P. (“Blackstone”). Blackstone and certain of its permitted transferees beneficially owned all the outstanding shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred”) until December 5, 2018, the closing date of an agreement with Blackstone and certain of its permitted transferees, whereby: (i) the Company repurchased 100,000 shares of Series A Preferred for an aggregate purchase price of $183.7 million; (ii) the Series A Preferred holders converted the remaining 100,000 shares of Series A Preferred into 6,896,548 shares of common stock; and (iii) the Company paid the holders $15.0 million to induce conversion, of which $12.0 million was paid at closing, with the remaining $3.0 million paid in January 2019.

The Company applied the accounting prescribed in Appendix D, Topic No. D-42 “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock,” as summarized in Emerging Issues Task Force abstracts for the repurchase and conversion. For accounting purposes, the repurchase was categorized as a redemption and the payments to induce conversion were treated as deemed dividends. For more information on the repurchase and conversion, see Note 9 — Equity. For more information on the earnings per share impact of the repurchase and conversion, see Note 13 — Earnings per Share.

Certain Blackstone subsidiaries provide various services to the Company, including inventory count services, cybersecurity and consulting, and workforce management services. The Company incurred expenses of $0.8 million, $0.7 million, and $0.8 million for the years ended December 31, 2018, 2017, and 2016 respectively, for these services, which are reported in ‘Selling, general and administrative expenses’ in the consolidated statements of operations.

Revenue Recognition

Revenues are recognized in the amount expected to be received in exchange for goods when control of the products transfers to customers, and excludes various forms of promotions, which range from contractually-fixed percentage price reductions to sales returns, discounts, rebates, and other incentives that may vary in amount and must be estimated. Variable amounts are estimated based on an analysis of historical experience and adjusted as better estimates become available. We also may accept returns from our wholesale customers, on an exception basis, to ensure that our products are merchandised in the proper assortments. The estimated costs of sales incentives, discounts, returns, price promotions, rebates, and loyalty and coupon programs are reported as a reduction of revenues.

Shipping and Handling Costs and Fees

Shipping and handling costs are expensed as incurred and are included in ‘Cost of sales’ in the consolidated statements of operations. Shipping and handling fees billed to customers are included in revenues.

Taxes Assessed by Governmental Authorities

Taxes assessed by governmental authorities that are directly imposed on a revenue transaction, including value added tax, are recorded on a net basis and are therefore excluded from revenues.

Cost of Sales

Our cost of sales includes costs incurred to design, produce, procure, and ship our footwear. These costs include our raw materials, both direct and indirect labor, shipping and handling including freight costs, utilities, maintenance costs, depreciation, packaging, and other manufacturing overheads and costs. During 2018, we transitioned all production of our products to third-party contract manufacturers.

Research, Design, and Development Expenses

We continue to dedicate significant resources to product design and development based on opportunities we identify in the marketplace. We incurred expenses of $14.1 million, $13.4 million, and $11.9 million in research, design, and development activities for the years ended December 31, 2018, 2017, and 2016, respectively, which are expensed as incurred and are reported in ‘Selling, general and administrative expenses’ in the consolidated statements of operations.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses include media advertising (television, radio, print, social, digital), tactical advertising (signs, banners, point-of-sale materials) and promotional costs. Advertising production costs are expensed when the advertising is first run. Advertising communication costs are expensed in the periods that the communications occur. Certain of the Company’s promotional expenses result from payments under endorsement contracts. Expenses under endorsement contracts are expensed on a straight-line basis over the related annual contract terms.

Total marketing expenses, inclusive of advertising, production, promotion, and agency expenses, including variable marketing expenses, were $68.6 million, $59.1 million, and $56.0 million for the years ended December 31, 2018, 2017, and 2016, respectively. Prepaid advertising and promotional endorsement expenses of $7.5 million and $7.0 million, were included in ‘Prepaid expenses and other assets’ in the consolidated balance sheets at December 31, 2018 and 2017, respectively.

Selling, general and administrative expenses consist primarily of labor and outside services, rent expense, bad debt expense, legal costs, amortization of intangible assets, as well as certain depreciation costs related to corporate, non-product, and non-manufacturing assets and share-based compensation. Selling, general and administrative expenses also include costs for our marketing and sales organizations, and other functions including finance, legal, human resources and information technology.

Other Income, Net

Other income, net primarily includes gains and losses associated with activities not directly related to making and selling footwear, as well as certain gains or losses on sales of non-operating assets.

Foreign Currency Gains (Losses), Net

Foreign currency gains (losses), net includes realized and unrealized foreign exchange gains and losses resulting from remeasurement and settlement of foreign-currency transactions denominated in a currency other than the functional currency of an entity, and realized and unrealized gains and losses on forward foreign currency exchange derivative contracts. Realized foreign exchange gains and losses are reported in the operating segment in which they occur. Foreign exchange gains and losses on intercompany balances and forward foreign exchange derivative contracts are reported within corporate operations.

Other Comprehensive Income (Loss)

Our foreign subsidiaries use their foreign currency as their functional currency. Functional currency assets and liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average exchange rates during the period. Resulting translation gains and losses are reported in other comprehensive income (loss), until the substantial disposition of a subsidiary, at which time accumulated translation gains or losses are reclassified into net income.

Income Taxes

Income taxes are accounted for using the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of other assets and liabilities. We provide for income taxes at the current and future enacted tax rates and laws applicable in each taxing jurisdiction. We account for the tax effects of global intangible low-taxed income (“GILTI”) as a component of income tax expense in the period the tax arises, to the extent applicable. We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. We recognize interest and penalties related to income tax matters in income tax expense in the consolidated statement of operations. See Note 12 — Income Taxes for further discussion.

Cash and Cash Equivalents

Cash and cash equivalents represent cash and short-term, highly-liquid investments with maturities of three months or less at the date of purchase. The Company reports receivables from credit card companies, if expected to be received within five days, in cash and cash equivalents.

Restricted Cash

Restricted cash primarily consists of funds to secure certain retail store leases, certain customs requirements, and other contractual arrangements.

Accounts Receivable, Net

Accounts receivable are recorded at invoiced amounts, net of reserves and allowances. The Company reduces the carrying value for estimated uncollectible accounts based on a variety of factors including the length of time receivables are past due, economic trends and conditions affecting the Company’s customer base, and historical collection experience. Specific provisions are recorded for individual receivables when the Company becomes aware of a customer’s inability to meet its financial obligations. The Company writes off accounts receivable to the reserves when they are deemed uncollectible or, in certain jurisdictions, when legally able to do so. See Item 15, Schedule II for more information.

Inventories

Inventories are stated at the lower of cost or net realizable value. Effective January 1, 2018, the Company completed implementation of a new inventory costing system for approximately 95% of its inventories. In connection with the implementation, the Company changed its method of inventory costing from a moving average cost method to a first-in-first-out method. The Company believes this change in accounting principle is preferable because it results in more precision and consistency in global and regional inventory costs, more efficient analysis and better matching of inventory costs with revenues, better matches the physical flow of inventories, and improves comparability with industry peers. The change from the Company’s former inventory cost method did not have a material effect on inventory or cost of sales, and, as a result, prior comparative financial statements have not been restated.

We estimate the market value of inventory based on an analysis of historical sales trends of our individual product lines, the impact of market trends and economic conditions, and a forecast of future demand, giving consideration to the value of current orders in-house for future sales of inventory, as well as plans to sell discontinued or end-of-life inventory through our outlet stores, among other off-price channels. Estimates may differ from actual results due to the quantity, quality, and mix of products in inventory, consumer and retailer preferences, and market conditions. If the estimated market value is less than its carrying value, the carrying value is adjusted to the market value and the difference is recorded in ‘Cost of sales’ in our consolidated statements of operations.

Reserves for the risk of physical loss of inventory are estimated based on historical experience and are adjusted based upon physical inventory counts, and recorded within ‘Cost of sales’ in our consolidated statements of operations.

As of December 31, 2018 and 2017, our finished goods inventories accounted for approximately 100.0% and 97.5%, respectively, of our consolidated inventories, and the remaining balance consisted of raw materials and work-in-process.

Property and Equipment, Net

Property, equipment, furniture, and fixtures are stated at original cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful asset lives, which are reviewed periodically and have the following ranges: machinery and equipment: 2 to 5 years; furniture, fixtures, and other: 2 to 10 years. Leasehold improvements are stated at cost and amortized on a straight-line basis over their estimated economic useful lives or the lease term, whichever is shorter. Costs of enhancements or modifications that substantially extend the capacity or useful life of an asset are capitalized and depreciated accordingly. Ordinary repairs and maintenance are expensed as incurred. Depreciation of manufacturing assets is included in cost of sales in our consolidated statements of operations for 2016, 2017, and through the third quarter of 2018 when all manufacturing was transferred to third-party manufacturers. Depreciation related to corporate, non-product, and non-manufacturing assets is included in ‘Selling, general and administrative expenses’ in our consolidated statements of operations. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our consolidated balance sheets and the resulting gain or loss, if any, is reflected in ‘Income (loss) from operations’ in the consolidated statements of operations.

Goodwill and Other Intangible Assets, Net

We evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment at the reporting unit level at least annually or when an interim triggering event has occurred indicating potential impairment. Our annual test is performed as of the last day of our fiscal fourth quarter. We continuously monitor the performance of our definite-lived intangible assets and evaluate for impairment when evidence exists that certain events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Significant judgments and assumptions are required in such impairment evaluations. Definite-lived intangible assets are stated at cost, less accumulated amortization. Amortization is recorded using the straight-line method over the estimated lives of the assets.

Direct costs of acquiring or developing internal-use computer software, including costs of employees, are capitalized and classified within intangible assets. Software maintenance and training costs are expensed in the period incurred. Initial costs associated with internally-developed-and-used software are expensed until it is determined that the project has reached the application development stage, after which subsequent additions, modifications, or upgrades are capitalized to the extent that they add functionality. The Company’s capitalized software consists primarily of enterprise resource system software, warehouse management software, and point of sale software. Amortization for software is provided using the straight-line method over the estimated useful asset lives, which are reviewed periodically and range from 2 to 8 years. Amortization of capitalized software used in manufacturing activities is included in ‘Cost of sales’ in the consolidated statements of operations for 2016, 2017, and through the third quarter of 2018 when all manufacturing was transferred to third-party manufacturers. Amortization related to corporate, non-product, and non-manufacturing assets, such as the Company’s global information systems, is included in ‘Selling, general, and administrative expenses’ in the consolidated statements of operations.

Amortization for patents, copyrights, and trademarks is provided using the straight-line method over the estimated useful asset lives, which are reviewed periodically and range from 7 to 25 years.

Disposals of Property and Equipment and Intangible Assets

The Company recognized net losses on disposals of property and equipment and intangible assets of $4.8 million and $0.5 million, respectively, for the years ended December 31, 2018 and 2016, and net gains on disposals of property and equipment and intangible assets of $0.8 million for the year ended December 31, 2017, which are included in ‘Selling, general and administrative expenses’ in the consolidated statement of operations.

Impairment of Long-Lived Assets

Long-lived assets to be held and used are evaluated for impairment when events or circumstances indicate the carrying value of a long-lived asset or asset group is less than the undiscounted cash flows from its use and eventual disposition over its remaining economic life. The Company assesses recoverability by comparing the sum of projected undiscounted cash flows from the use and eventual disposition over the remaining economic life of a long-lived asset or asset group to its carrying value, and records a loss from impairment if the carrying value is more than its undiscounted cash flows. For assets involved in Crocs’ retail business, the asset group is at the retail store level. As retail store performance will vary in new and existing markets due to many factors, including maturity of the market and brand recognition, we periodically evaluate the fixed assets and leasehold improvements related to our retail locations for impairment. Assets or asset groups to be abandoned or from which no future benefit is expected are written down to zero in the period it is determined they will no longer be used and are removed entirely from service. See Note 3 — Property and Equipment, Net for a discussion of impairment losses recorded during the periods presented.

Share-Based Compensation

Share-based compensation expense associated with manufacturing and retail employees is included in ‘Cost of sales’ in the consolidated statements of operations. Share-based compensation expense associated with selling, marketing, and administrative employees is included in ‘Selling, general and administrative expenses’ in the consolidated statements of operations.

Stock Options

Stock options are granted with exercise prices equal to the fair market value of our common stock on the date of grant. We use the Black-Scholes option-pricing model to estimate the grant date fair value of stock options, which requires the use of assumptions, including the expected term of the option, expected volatility of our stock price, our expected dividend yield, and the risk-free interest rate, among others. These assumptions reflect our best estimates, however; they involve inherent uncertainties including market conditions and employee behavior that are generally outside of our control. We expense all share-based compensation awarded based on the grant date fair value of the awards using the straight-line method over the requisite service period, adjusted for forfeitures.

Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”)

The Company grants RSAs, service-condition RSUs, performance-condition RSUs, and market-condition RSUs. The grant date fair values of RSAs and service-condition and performance-condition RSUs are based on the closing market price of our common stock on the grant date; the grant date fair value and derived service period of market-condition RSUs is estimated using a Monte Carlo simulation valuation model. Our service-condition RSUs vest based on continued service; our performance-condition RSUs vest based on achievement of multiple weighted performance goals, certification of performance achievement by the Compensation Committee of the Board of Directors, and continued service; our market-condition RSUs vest based on the market price of the Company’s stock. Compensation expense, net of forfeitures, is recognized on a straight-line basis over the requisite service period. For performance-condition RSUs, compensation expense is updated for the Company’s expected performance level against performance goals at the end of each reporting period, which involves judgment as to achievement of certain performance metrics.

See Note 11 — Share-Based Compensation for additional information related to share-based compensation.

Earnings per Share

Basic and diluted earnings per common share (“EPS”) is presented using the two-class method. Participating securities are included in the computation of EPS on a pro-rata, if-converted basis. Diluted EPS reflects the potential dilution to common shareholders from securities that could share in the Company’s earnings. The dilutive effect of each participating security, if any, is calculated using the more dilutive of the two-class method described above. Anti-dilutive securities are excluded from diluted EPS. See Note 13 — Earnings per Share for additional information.

Derivative Foreign Currency Contracts

The Company enters into forward foreign currency exchange contracts (“contracts”) to mitigate the potential impact of foreign currency exchange rate risk. By policy, the Company does not enter into these contracts for trading purposes or speculation. The fair value of the contracts is reported either as an asset or liability in our consolidated balance sheets. Changes in the fair value of our contracts are recorded in ‘Foreign currency gains (losses), net’ in our consolidated statements of operations. The Company did not designate any derivative instruments for hedge accounting during any of the periods presented. See Note 7 — Derivative Financial Instruments for further information.

Foreign Currency Translation and Remeasurement

The financial position and operating results of the Company’s foreign subsidiaries are reported using their respective local currency as the functional currency. The Company recognizes and reports remeasurement gains and losses within ‘Foreign currency gains (losses), net’ in the consolidated statements of operations. Cumulative translation gain and losses are reported within ‘Other comprehensive income (loss)’.

Fair Value

U.S. GAAP for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The Company utilizes a combination of market and income approaches to value derivative instruments. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels of the hierarchy and the related inputs are as follows:



Level		Inputs
1		Unadjusted quoted prices in active markets for identical assets and liabilities.
2		Unadjusted quoted prices in active markets for similar assets and liabilities;
		Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or
		Inputs other than quoted prices that are observable for the asset or liability.
3		Unobservable inputs for the asset or liability.

The Company categorizes fair value measurements within the fair value hierarchy based upon the lowest level of the most significant inputs used to determine fair value.

The Company’s non-financial assets, which primarily consist of property and equipment, goodwill, and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value. See Note 6 — Fair Value Measurements for further discussion related to estimated fair value measurements.

Consolidated Statements of Cash Flows - Supplemental Schedule of Non-Cash Investing and Financing Activities



	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Accrued purchases of property, equipment, and software	$	1,141	$	2,195	$	2,728
Series A preferred stock conversion	100,000		—		—
Series A preferred stock accretion, net ⁽¹⁾	17,567		3,532		3,244
Vendor financed insurance premiums	—		1,450		2,082

⁽¹⁾ Represents total accretion of $17.6 million, net of $6.1 million acquired value of beneficial conversion feature attributable to repurchased Series A Preferred.

Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Recent Accounting Pronouncements

RECENT ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncement Adopted

Income Tax Accounting Implications of the Tax Cuts and Jobs Act

In March 2018, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on the income tax accounting implications of the U.S. Tax Cuts and Job Act (“Tax Act”), addressing the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As a result of the Tax Act, we recorded provisional estimates in accordance with Staff Accounting Bulletin No. 118 ("SAB 118"), Income Tax Accounting Implications of the Tax Cuts and Jobs Act, during the year ended December 31, 2017 in relation to the revaluation of our net deferred tax assets at the lower U.S. corporate income tax rate and the additional tax expense associated with the deemed repatriation tax. During the year ended December 31, 2018, we recorded measurement period adjustments related to the provisional estimates. We now consider our accounting for the Tax Act complete. For more information, see Note 12 — Income Taxes.

Stock Compensation Scope of Modification Accounting

In May 2017, the FASB issued authoritative guidance intended to clarify those changes to terms and conditions of share-based compensation awards that are required to be accounted for as modifications of existing share-based awards. The Company adopted this guidance as of January 1, 2018. The adoption did not have an impact on our consolidated financial position or results of operations.

Statements of Cash Flows - Classification and Change in Restricted Cash

In August 2016, the FASB issued authoritative guidance intended to clarify how entities should classify certain cash receipts and cash payments in the statements of cash flows. In November 2016, the FASB issued additional guidance requiring that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts reported in the statements of cash flows. The guidance is applied retrospectively to all periods presented and is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. The Company adopted this guidance as of January 1, 2018. As a result of the adoption, the Company changed the presentation in its statements of cash flows for all periods presented.

Prepaid Stored-Value Products

In March 2016, the FASB issued guidance related to the recognition of breakage for certain prepaid stored-value products. The standard is effective for annual periods (including interim periods) beginning after December 15, 2017. The Company adopted this guidance as of January 1, 2018. The adoption did not have a significant impact on our consolidated financial position or results of operations.

Revenue Recognition

In May 2014, the FASB issued authoritative guidance related to revenue recognition from contracts with customers. On January 1, 2018, the Company adopted the guidance using the modified retrospective method. The comparative information presented in the consolidated financial statements was not restated and is reported under the accounting standards in effect for the periods presented. The adoption of this guidance did not have, and is not expected to have, a significant impact on our reported revenues, gross margins, income from operations, or cash flows from operations.

Substantially all of the Company’s revenues are recognized when control of product passes to customers when the products are shipped or delivered. Effective January 1, 2018, the Company changed its balance sheet presentation for expected product returns by reporting a product return asset for the right to receive returned products and a returns liability for amounts expected to be refunded to customers as a result of product returns. The product return asset is reported within ‘Prepaid expenses and other assets’ in the consolidated balance sheet. The returns liability and payments received from customers for future delivery of products are reported within ‘Accrued liabilities and other expenses’ in the consolidated balance sheet.

The Company elected to account for shipping and handling costs associated with outbound freight after control of product passes to customers as fulfillment costs, which are expensed as incurred and included in ‘Cost of sales’ in our consolidated statements of operations. There is no change to the Company’s comparative reporting of shipping and handling costs as a result of adoption.

The Company elected to expense incremental costs to obtain customer contracts, consisting primarily of commission incentives, when incurred and reports these costs within ‘Selling, general and administrative expenses’ in its consolidated statement of operations. There is no change to the Company’s comparative reporting of incremental costs to obtain customer contracts as a result of adoption.

The impact of adoption on the January 1, 2018 consolidated balance sheet was:



	December 31, 2017		Impact of Adoption ⁽¹⁾		January 1, 2018
	(in thousands)
Assets:
Accounts receivable, net	$	83,518	$	1,801	$	85,319
Prepaid expenses and other assets	22,596		1,555		24,151

Liabilities:
Accrued expenses and other liabilities	84,460		3,356		87,816

⁽¹⁾ Prior to adoption, product return assets and return liabilities were reported within ‘Accounts receivable, net’, within the allowance for doubtful accounts. As of the adoption date, the product return assets were reclassified and reported as a component of ‘Prepaid expenses and other assets’, and return liabilities were reclassified to ‘Accrued expenses and other liabilities’ in the Company’s consolidated balance sheet.

The impact of the new revenue recognition guidance on our consolidated balance sheet as of December 31, 2018 was:



	December 31, 2018
	Balances Without Adoption		Effects of New Guidance ⁽¹⁾		As Reported
	(in thousands)
Assets:
Accounts receivable, net	$	93,994	$	3,633	$	97,627
Prepaid expenses and other assets	19,327		2,796		22,123

Liabilities:
Accrued expenses and other liabilities	95,742		6,429		102,171

⁽¹⁾ The new revenue recognition guidance requires comparative disclosures of the effects of the new guidance on the Company’s consolidated financial statements for all interim periods and the annual period during the year of adoption. The new guidance did not have a significant effect on the Company’s consolidated statements of operations for the year ended December 31, 2018.

See Note 10 — Revenues for additional disclosures.

New Accounting Pronouncements Not Yet Adopted

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued authoritative guidance that permits reclassification of the income tax effects of the Tax Act on accumulated other comprehensive income (“AOCI”) to retained earnings. This guidance may be adopted retrospectively to each period (or periods) in which the income tax effects of the Tax Act related to items remaining in AOCI are recognized, or at the beginning of the period of adoption. The guidance becomes effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. The Company is currently assessing the adoption method and the impact that adopting this new accounting standard will have on its consolidated financial statements.

Leases

The Company’s lease portfolio consists primarily of real estate assets, which includes retail, warehouse, distribution center, and office spaces. Some of our retail lease agreements include variable payments based on a percentage of retail sales over contractual amounts, and others include periodic payment adjustment for inflation. Some of our leases also require us to pay maintenance, utilities, real estate taxes, insurance, and other operating expenses associated with the leased space. Based upon the nature of the items leased and the structure of the leases, substantially all of the Company’s leases are classified as operating leases and will continue to be operating leases under the new accounting standard discussed below.

In February 2016, the FASB issued authoritative guidance intended to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new guidance, lessees will be required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with terms greater than twelve months. Additionally, this guidance requires disclosures to help investors and other financial statement users to better understand the amount, timing, and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. This guidance and related amendments are effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted.

In July 2017, the Company established an implementation team and engaged external advisers and solution providers to develop a multi-phase plan to assess the Company’s leasing arrangements, as well as any changes to accounting policies, processes, or necessary systems. The Company procured the necessary software and services to facilitate adoption of the guidance, completed a detailed review of its leases and other contractual arrangements, assessed its systems and business processes, and related accounting procedures and controls requirements. The Company selected and implemented new software to support adoption of the new standard.

The Company has elected all of the available transition practical expedients, including the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. The Company has elected not to apply ‘hindsight’ when adopting the standard for determining the reasonably certain lease term and in assessing impairments. The Company has elected the short-term lease exemption, which means the Company will not recognize a right-of-use asset or liability for leases that qualify for the short-term exemption and will recognize those lease expenses on a straight-line basis over the lease term in its consolidated statements of operations. Further, the Company has elected to not separate lease and non-lease components for all of its leases. The Company will also take a portfolio approach in applying its incremental borrowing rate based upon the information available to the Company at the adoption date to calculate the present value of the lease liabilities over the lease terms.

The Company will adopt this new lease standard on January 1, 2019. Additionally, the Company will elect the modified retrospective method of adoption with the cumulative-effect recognized through retained earnings upon adoption and will not restate prior periods. While the Company has not completed its evaluation of impairment of right-of-use assets upon adoption, the Company expects that the rationalization of the company-operated retail stores and impairments incurred in the historical periods prior to adoption will result, at a minimum, in an impairment of retail store right-of use-assets recognized through retained earnings upon adoption. The Company will finalize its accounting assessment and quantitative impact of the adoption during the first quarter of fiscal year 2019. The Company is finalizing its implementation related to policies, processes and internal controls over lease recognition to assist in the application of the new lease standard as well as completing the implementation of new software to address the new lease guidance requirements.

We expect that this standard will have a material effect on our financial statements. While we continue to assess all of the effects of the new standard, we expect adoption to result in recognition of significant new right-of-use assets and lease liabilities in the Company’s consolidated balance sheet, and significant new disclosures in the footnotes to the Company’s consolidated financial statements. We are unable to quantify the impact at this time. The Company does not expect that adoption of the standard will have a significant effect on the consolidated operating income or the cash flows of the Company. The Company's bank covenants under our Senior Revolving Credit Facility will not be affected by the adoption of this new standard.

We have also entered into additional real estate leases that will commence in 2019 that will be accounted for under the new lease guidance. Future undiscounted obligations related to our real estate leases in effect as of December 31, 2018, as well as those real estate leases entered into prior to December 31, 2018 that contain lease commencement dates after January 1, 2019, are included in the table of future obligations disclosed in Note 14 — Commitments and Contingencies.

Implementation Costs Incurred in Cloud Computing Arrangements

In August 2018, the FASB issued authoritative guidance related to the treatment of implementation costs incurred in a hosting arrangement that is considered a service contract. This guidance becomes effective for annual reporting periods beginning after December 15, 2019, including interim periods within those periods, with early adoption permitted, and will be applied prospectively to all implementation costs incurred after the date of adoption. The Company does not expect this standard to have a material impact on its consolidated financial statements.

Other Pronouncements

Other new pronouncements issued but not effective until after December 31, 2018 are not expected to have a material impact on the Company’s consolidated financial statements.

Property and Equipment, Net

12 Months Ended

Dec. 31, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

PROPERTY AND EQUIPMENT, NET

‘Property and equipment, net’ consists of the following:



	December 31,
	2018			2017
	(in thousands)
Leasehold improvements	$	63,702		$	72,961
Machinery and equipment	20,054			33,109
Furniture, fixtures, and other	16,779			19,776
Construction-in-progress	2,632			992
Property and equipment	103,167			126,838
Less: Accumulated depreciation and amortization	(80,956		)	(91,806		)
Property and equipment, net	$	22,211		$	35,032

Asset Retirement Obligations

The Company is contractually obligated under certain of its lease agreements to restore certain retail and office facilities back to their original condition. At lease inception, the estimated fair value of these liabilities is recorded along with a related asset. At December 31, 2018 and 2017, liabilities for asset retirement obligations were $2.0 million and $3.1 million, respectively, and are reported in ‘Accrued expenses and other liabilities’ in the consolidated balance sheets.

Depreciation and Amortization Expense

Depreciation and amortization expense related to property and equipment, reported in ‘Cost of sales’ and ‘Selling, general and administrative expenses’ was:



	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Cost of sales	$	1,422	$	2,278	$	1,755
Selling, general and administrative expenses	11,180		12,723		13,312
Total depreciation and amortization expense	$	12,602	$	15,001	$	15,067

Asset Impairments

During the years ended December 31, 2018, 2017, and 2016, the Company recorded impairments of $0.9 million, $0.5 million, and $2.7 million, respectively, for underperforming retail stores. During the year ended December 31, 2018, the Company recorded impairment expenses of $1.3 million to reduce the carrying values of certain supply chain assets related to the closure of our Mexico and Italy manufacturing and distribution facilities, included in ‘Other businesses,’ to their estimated fair values. Impairments for retail stores by reportable operating segment, were:



	Year Ended December 31,
	2018			2017			2016
	Asset Impairment		Number of Stores	Asset Impairment		Number of Stores	Asset Impairment		Number of Stores
	(in thousands, except store count data)
Americas	$	138	1	$	455	3	$	1,703	12
Asia Pacific ⁽¹⁾	760		12	—		—	573		19
EMEA ⁽¹⁾	—		—	75		1	437		11
Total	$	898	13	$	530	4	$	2,713	42

⁽¹⁾In the third quarter of 2018, certain revenues and expenses previously reported within the ‘Asia Pacific’ segment were shifted to the ‘EMEA’ segment. The previously reported amounts for asset impairment for retail stores for the years ended December 31, 2016 have also been revised to conform to the current period presentation. See ‘Impacts of segment composition change’ table below for more information.

Impacts of segment composition change:



	Year Ended December 31, 2016
	Increase (Decrease)
Impacts on retail store asset impairment:
Asia Pacific	$	(99	)
EMEA	99

Impacts on number of retail stores impaired:
Asia Pacific	(2		)
EMEA	2

Goodwill and Intangible Assets, Net

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

GOODWILL AND INTANGIBLE ASSETS, NET

Goodwill

All of our goodwill is in the EMEA segment. The changes in goodwill for the years ended December 31, 2018 and 2017 were:



	Goodwill
	(in thousands)
Balance at January 1, 2017	$	1,480
Foreign currency translation	208
Balance at December 31, 2017	1,688
Foreign currency translation	(74		)
Balance at December 31, 2018	$	1,614

Accumulated goodwill impairment at December 31, 2018 was $0.8 million.

Intangible Assets, Net

‘Intangible assets, net’ reported in the consolidated balance sheets consist of the following:



	December 31, 2018							December 31, 2017
	Gross		Accum. Amortiz.			Net		Gross		Accum. Amortiz.			Net
	(in thousands)
Intangible assets subject to amortization:
Capitalized software	$	138,857	$	(97,900	)	$	40,957	$	143,275	$	(90,219	)	$	53,056
Patents, copyrights, and trademarks	5,338		(4,588		)	750		5,636		(4,969		)	667
Other	—		—			—		214		(214		)	—
Intangible assets not subject to amortization:
In progress ⁽¹⁾	3,906		—			3,906		2,378		—			2,378
Trademarks and other	77		—			77		326		—			326
Total	$	148,178	$	(102,488	)	$	45,690	$	151,829	$	(95,402	)	$	56,427

⁽¹⁾ In the year ended December 31, 2017, we recorded a write-off of $4.8 million for a discontinued project.

At December 31, 2018, the weighted average remaining useful life of intangibles subject to amortization was approximately 6.6 years.

Amortization Expense

Amortization expense related to definite-lived intangible assets, reported in ‘Cost of sales’ and ‘Selling, general and administrative expenses’ was:



	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Cost of sales	$	3,889	$	4,550	$	5,127
Selling, general and administrative expenses	12,759		13,579		13,849
Total amortization expense	$	16,648	$	18,129	$	18,976

Estimated future annual amortization expense of intangible assets is:



	As of December 31, 2018
	(in thousands)
2019	$	14,368
2020	12,142
2021	11,893
2022	1,446
2023	928
Thereafter	930
Total	$	41,707

Accrued Expenses And Other Liabilities

12 Months Ended

Dec. 31, 2018

Payables and Accruals [Abstract]

Accrued Expenses And Other Liabilities

ACCRUED EXPENSES AND OTHER LIABILITIES

Amounts reported in ‘Accrued expenses and other liabilities’ in the consolidated balance sheets were:



	December 31,
	2018		2017
	(in thousands)
Accrued compensation and benefits	$	43,970	$	34,955
Fulfillment, freight, and duties	12,234		6,921
Professional services	11,124		10,835
Accrued rent and occupancy	6,956		8,535
Return liabilities ⁽¹⁾	6,429		—
Sales/use and value added taxes payable	5,601		3,509
Royalties payable and deferred revenue	3,356		6,193
Other ⁽²⁾	12,501		13,512
Total accrued expenses and other liabilities	$	102,171	$	84,460

⁽¹⁾Return liabilities are presented within ‘Accrued expenses and other liabilities’ upon adoption of new authoritative guidance on revenue recognition effective January 1, 2018, as described in Note 2 — Recent Accounting Pronouncements.

⁽²⁾Includes accrued payments to induce conversion of Series A Preferred at December 31, 2018 and accrued dividends for Series A Preferred at December 31, 2017.

Fair Value Measurements

12 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

The financial assets and liabilities that are measured and recorded at fair value on a recurring basis consist of the Company’s derivative instruments. The Company’s derivative instruments are forward foreign currency exchange contracts. The Company manages credit risk of its derivative instruments on the basis of its net exposure with its counterparty. All of the Company’s derivative instruments are classified as Level 2 of the fair value hierarchy and are reported in the consolidated balance sheets within ‘Accrued expenses and other liabilities’ at December 31, 2018 and 2017. The fair values of the Company’s derivative instruments were liabilities of $1.3 million and $0.4 million at December 31, 2018 and 2017, respectively. See Note 7 — Derivative Financial Instruments for more information.

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

The Company’s borrowing instruments are recorded at their carrying values in the consolidated balance sheets, which may differ from their respective fair values. The fair values of the Company’s outstanding borrowings approximate their carrying values at December 31, 2018 and 2017, based on interest rates currently available to the Company for similar borrowings and were:



	December 31, 2018				December 31, 2017
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Borrowings	$	120,000	$	120,000	$	662	$	662

Non-Financial Assets and Liabilities

The Company’s non-financial assets, which primarily consist of property and equipment, 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 were determined 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. The Company recorded impairments as follows:



	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Supply chain assets impairment	$	1,284	$	—	$	—
Retail store assets impairment	898		530		2,713
Discontinued project	—		4,754		—
Goodwill impairment	—		—		431
Total asset impairments	$	2,182	$	5,284	$	3,144

The Company’s goodwill is reported within its EMEA operating segment.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Derivative Financial Instruments

12 Months Ended

Dec. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

DERIVATIVE FINANCIAL INSTRUMENTS

The Company transacts business in various foreign countries and is 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, the Company enters into forward contracts to buy and sell foreign currency. By policy, the Company does not enter into these contracts for trading purposes or speculation.

Counterparty default risk is considered low because the forward contracts that the Company enters into are over-the-counter instruments transacted with highly-rated financial institutions. The Company was not required to and did not post collateral as of December 31, 2018 or 2017.

The Company’s derivative instruments are recorded at fair value as a derivative asset or liability in the consolidated balance sheets. The Company reports 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 consolidated statements of operations. For the consolidated statements of cash flows, the Company classifies 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 ‘Accrued expenses and other liabilities’ in the consolidated balance sheets were:



	December 31, 2018						December 31, 2017
	Derivative Assets			Derivative Liabilities			Derivative Assets			Derivative Liabilities
	(in thousands)
Forward foreign currency exchange contracts	$	943		$	(2,256	)	$	1,241		$	(1,647	)
Netting of counterparty contracts	(943		)	943			(1,241		)	1,241
Foreign currency forward contract derivatives	$	—		$	(1,313	)	$	—		$	(406	)

The notional amounts of outstanding forward foreign currency exchange contracts shown below report the total U.S. Dollar equivalent position and the net contract fair values for each foreign currency position.



	December 31, 2018					December 31, 2017
	Notional		Fair Value			Notional		Fair Value
	(in thousands)
Euro	$	34,959	$	(92	)	$	37,718	$	(122	)
Singapore Dollar	34,584		254			73,455		364
Japanese Yen	25,561		(178		)	30,688		(89		)
British Pound Sterling	22,185		183			13,233		80
South Korean Won	9,408		63			15,888		(134		)
Other currencies	67,885		(1,543		)	53,698		(505		)
Total	$	194,582	$	(1,313	)	$	224,680	$	(406	)

Latest maturity date	January 2019					January 2018

Amounts reported in ‘Foreign currency gains (losses), net’ in the consolidated statements of operations include both realized and unrealized gains (losses) from foreign currency transactions and derivative contracts and were as follows:



	Year Ended December 31,
	2018		2017			2016
	(in thousands)
Foreign currency transaction gains	$	552	$	2,284		$	10,814
Foreign currency forward exchange contracts gains (losses)	766		(1,721		)	(13,268		)
Foreign currency gains (losses), net	$	1,318	$	563		$	(2,454	)

Revolving Credit Facility and Bank Borrowings

12 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Revolving Credit Facility and Bank Borrowings

REVOLVING CREDIT FACILITY AND BANK BORROWINGS

The Company’s borrowings were as follows:



	December 31,
	2018		2017
	(in thousands)
Revolving credit facilities	$	120,000	$	—
Notes payable	—		662
Total borrowings	120,000		662
Less: Current portion of borrowings	—		662
Total long-term borrowings	$	120,000	$	—

The weighted average interest rate on outstanding borrowings as of December 31, 2018 and 2017 was 4.69% and 2.30%, respectively.

Senior Revolving Credit Facility

In December 2011, the Company entered into a revolving credit facility (the “Facility”), pursuant to an 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. The Credit Agreement contains certain covenants that restrict certain actions by the Company, including (i) stock repurchases to an aggregate of $250.0 million per year, subject to certain restrictions; and (ii) capital expenditures and commitments to $70.0 million per year. The Credit Agreement also permits intercompany loans of up to $375.0 million and requires the Company to meet certain financial covenant ratios that become effective when average outstanding borrowings under the Credit Agreement, including letters of credit, exceed the lesser of $40.0 million or 40% of the total commitments during certain periods or if the outstanding borrowings exceed the borrowing base. If the financial covenant ratios are in effect, the Company must maintain a minimum fixed charge coverage ratio of 1.10 to 1.00, and a maximum leverage ratio of (i) 3.00 to 1.00 at December 31, 2018 and March 31, 2019, (ii) 2.75 to 1.00 at June 30, 2019, and (iii) 2.50 to 1.00 at September 30, 2019 and the last day of each quarter thereafter. As of December 31, 2018, the Company was in compliance with all financial covenants under the Credit Agreement.

The Facility, as amended, provides for borrowings of up to $250.0 million through February 2021. Borrowings under the Facility for domestic base rate loans, including swing loans, bear interest at a daily base rate plus a margin of 0.75%. Domestic London Interbank Borrowing Rate (“LIBOR”) loans bear interest equal to a LIBOR rate plus a margin of 1.75% as of December 31, 2018.

As of December 31, 2018, the total commitments available from the lenders under the Facility were $250.0 million. At December 31, 2018, the Company had $120.0 million in outstanding borrowings, used to partially fund the repurchase of Series A Preferred, which are due in February 2021, and $0.6 million in outstanding letters of credit under the Facility, which reduces amounts available for borrowing under the Facility. As of December 31, 2018 and 2017, the Company had $129.4 million and $99.4 million, respectively, of available borrowing capacity under the Facility.

On February 6, 2019, the Company entered into the Eighteenth Amendment to the Amended and Restated Credit Agreement which increased the total commitments under the Credit Agreement to $300.0 million from $250.0 million.

The Company also has revolving credit facilities in Asia, from which the Company had no borrowings during the years ended December 31, 2018 and 2017 or outstanding at December 31, 2018 or 2017.

Revenues

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenues

REVENUES

The Company adopted authoritative guidance related to the recognition of revenue from contracts with customers effective January 1, 2018 using the modified retrospective method. The comparative information presented in the condensed consolidated financial statements was not restated and is reported under the accounting standards in effect for the periods presented. See ‘Revenue Recognition’ in Note 2 — Recent Accounting Pronouncements for a discussion of the significant changes resulting from adoption of the guidance. The adoption of the guidance did not have a significant impact on revenues.

Revenues by reportable operating segment and by channel were:



	Year Ended December 31, 2018
	Americas		Asia Pacific		EMEA		Other Businesses		Total
	(in thousands)
Wholesale	$	216,797	$	203,110	$	154,992	$	3,145	$	578,044
Retail	204,806		87,264		35,358		—		327,428
E-commerce	98,589		54,224		29,920		—		182,733
Total revenues	$	520,192	$	344,598	$	220,270	$	3,145	$	1,088,205

Revenues are recognized in the amount expected to be received in exchange when control of the products transfers to customers, and excludes various forms of promotions, which range from contractually-fixed percentage price reductions to sales returns, discounts, rebates, and other incentives that may vary in amount and must be estimated. Variable amounts are estimated based on an analysis of historical experience and adjusted as better estimates become available. During the year ended December 31, 2018, the Company recognized a net increase of $0.8 million to wholesale revenues due to changes in estimates related to products transferred to customers in prior periods. There were no changes to estimates in retail and e-commerce channels during the year ended December 31, 2018.

The Company elected to exclude from revenues taxes assessed by governmental authorities, including value-added and other sales-related taxes, that are imposed on and concurrent with revenue-producing activities, and as a result there is no change in presentation from prior comparative periods.

The following is a description of our principal revenue-generating activities by distribution channel. The Company has three reportable operating segments and sells its products using three primary distribution channels. For more detailed information about reportable operating segments, see Note 15 — Operating Segments and Geographic Information.

Wholesale Channel

For the majority of wholesale customers, control transfers and revenues are recognized when the product is shipped or delivered from a manufacturing facility or distribution center to the wholesale customer. In certain cases, control of the product transfers and revenues are recognized when the customer receives the product at the designated delivery point. For certain customers, primarily in the Asia Pacific region, cash payment from customers is required in advance of delivery and revenues are recognized upon the later of cash receipt or delivery of the product. For a small number of customers in the Asia Pacific region, products are sold on consignment and revenues are recognized on a sell-through basis. Wholesale customers are invoiced when products are shipped or delivered.

The Company has arrangements that grant certain wholesale customers exclusive licenses, concurrent with the terms of the related distribution agreements, to use the Company’s intellectual property in exchange for a sales-based royalty. Sales-based royalty revenues are recognized over the terms of the related license agreements as sales are made by the wholesalers.

Retail Channel

The Company transfers control of products and recognizes revenues at Company-operated retail stores at the point of sale, in exchange for cash or other payment, primarily debit or credit card. A portion of the transaction price charged to our customers is variable, primarily due to promotional discounts or allowances, and terms that permit retail customers to exchange or return products for a full refund within a limited period of time. When recognizing revenues, the amount of revenues associated with expected sales returns is estimated based on historical experience, and adjustments to our estimates are made when the most likely amount of consideration we expect to receive changes.

E-commerce Channel

In the e-commerce channel, the Company transfers control and recognizes revenues when the product is shipped from the distribution centers. Payment from customers is primarily through debit and credit card and is made at the time the customer order is shipped.

Similar to the retail channel, a portion of the amount of revenue is variable, primarily due to sales returns, discounts, and other promotional allowances offered to our customers. When recognizing revenues, the amount of revenues associated with expected sales returns is estimated based on historical experience, and adjustments are made when the most likely amount of consideration changes.

Contract Liabilities

Contract liabilities consist of advance cash deposits received from wholesale customers to secure product orders in connection with selling seasons, and payments received in advance of delivery. As products are shipped and control transfers, the Company recognizes the deferred revenue in ‘Revenues’ in the consolidated statements of operations. At January 1 and December 31, 2018, $1.3 million and $1.6 million, respectively, of deferred revenues associated with advance customer deposits were reported in ‘Accrued expenses and other liabilities’ in the consolidated balance sheets. Deferred revenues of $2.5 million, including the balance recorded at adoption on January 1, 2018 of $1.3 million, were recognized in revenues during the year ended December 31, 2018. The deferred revenues at December 31, 2018 are expected to be recognized in revenues during the first quarter of 2019 as products are shipped or delivered.

Refund Liabilities

Refund liabilities, primarily associated with product sales returns, retrospective volume rebates, and early payment discounts are estimated based on an analysis of historical experience, and adjustments to revenues made when the most likely amount of consideration expected changes. At January 1 and December 31, 2018, $3.4 million and $6.4 million, respectively, of refund liabilities, primarily associated with product returns, were reported in ‘Accrued expenses and other liabilities’ in the consolidated balance sheets.

Share-based Compensation

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based Compensation

SHARE-BASED COMPENSATION

The Company’s share-based compensation awards are issued under the 2015 Equity Incentive Plan (“2015 Plan”) and predecessor plan, the 2007 Equity Incentive Plan (“2007 Plan”). Any awards that expire or are forfeited under the 2007 Plan become available for issuance under the 2015 Plan. The Company accounts for forfeitures as they occur when calculating share-based compensation expense. The aforementioned plans provide for the issuance of previously unissued common stock in connection with the exercise of stock options and conversion of other share-based awards. As of December 31, 2018, 2.4 million shares of common stock remained available for future issuance under all plans, subject to adjustment for future stock splits, stock dividends, and similar changes in capitalization.

Share-Based Compensation Expense

Pre-tax share-based compensation expense reported in the Company’s consolidated statements of operations was:



	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Cost of sales	$	362	$	379	$	488
Selling, general and administrative expenses	12,743		9,394		10,199
Total share-based compensation expense	$	13,105	$	9,773	$	10,687

Stock Option Activity

Stock option activity during the year ended December 31, 2018 was:



	Shares		Weighted Average Exercise Price		Weighted Average Contractual Life (Years)	Aggregate Intrinsic Value
	(in thousands, except exercise price and years)
Outstanding as of December 31, 2017	541		$	11.00	5.37	$	1,918
Granted	—		—
Exercised	(152	)	8.36
Forfeited or expired	(27	)	25.09
Outstanding as of December 31, 2018	362		$	11.05	5.68	$	5,407
Exercisable at December 31, 2018	226		$	13.40	4.08	$	2,846
Vested and expected to vest at December 31, 2018	362		$	11.05	5.68	$	5,407

No stock options were granted during 2018 or 2016. During the year ended December 31, 2017, stock options were valued using a Black Scholes option pricing model using the following assumptions.



	Year Ended December 31, 2017
Expected volatility	40.7%
Dividend yield	—
Risk-free interest rate	1.76%
Expected life (in years)	4.0

The weighted average grant date fair value of stock options granted during the year ended December 31, 2017 was approximately $2.37 per share. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018, 2017, and 2016 was $1.7 million, $0.1 million, and $0.5 million, respectively. During the years ended December 31, 2018, 2017, and 2016, the Company received $1.3 million, $0.1 million, and $0.4 million cash in connection with the exercise of stock options.

As of December 31, 2018, the Company had $0.2 million of total unrecognized share-based compensation expense related to unvested options, which is expected to be amortized over the remaining weighted average period of 1.4 years.

Stock options under the 2015 Plan and 2007 Plan generally vest ratably over four years with the first vesting occurring one year from the date of grant, followed by monthly vesting for the remaining three years, and expire ten years after the date of grant.

Restricted Stock Awards and Restricted Stock Units Activity

From time to time, the Company grants RSAs and RSUs. RSAs and RSUs generally vest over three years, depending on the terms of the grant. Holders of unvested RSAs have the same rights as those of common stockholders including voting rights and non-forfeitable dividend rights. However, ownership of unvested RSAs cannot be transferred until vested. Holders of unvested RSUs have a contractual right to receive a share of common stock upon vesting. RSUs have dividend equivalent rights which accrue over the term of the award and are paid if and when the RSUs vest, but RSU holders have no voting rights. The Company grants service-condition RSUs, performance-condition RSUs, and market-condition RSUs.

Service-condition RSUs are typically granted on an annual basis and vest over time in three equal annual installments, beginning one year after the grant date. During the years ended December 31, 2018, 2017, and 2016, the Company granted 0.4 million, 1.1 million, and 1.0 million service-condition RSUs, respectively.

Performance-condition RSUs are typically granted on an annual basis and consist of a performance-based and service-based component. The performance targets and vesting conditions for performance-condition RSUs are based on achievement of multiple weighted performance goals. The number of performance-condition RSUs ultimately awarded may be between 0% and 200%, based on performance. These RSUs vest in three equal annual installments beginning one year after the grant date, pending certification of performance achievement by the Compensation Committee and continued service. The fair value of performance-condition awards is based on the closing market price of our common stock on the grant date. Compensation expense, net of forfeitures, is updated for the Company’s expected performance level against performance goals at the end of each reporting period. The Company also periodically grants market-condition RSUs to certain executives. The grant date fair value and derived service period for market-condition RSUs are estimated using a Monte Carlo simulation valuation model. During the years ended December 31, 2018, 2017, and 2016, the Company granted 1.0 million, 1.3 million, and 1.2 million performance- and market-condition RSUs, respectively.

RSA and RSU activity during the year ended December 31, 2018 was:



	Restricted Stock Awards ⁽¹⁾				Restricted Stock Units
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
	(in thousands, except fair value data)
Unvested at December 31, 2017	17		$	6.84	3,791		$	7.99
Granted	13		18.61		1,404		14.34
Vested	(24	)	10.09		(1,123	)	8.60
Forfeited	—		—		(1,320	)	7.67
Unvested at December 31, 2018	6		$	18.61	2,752		$	11.58

⁽¹⁾ Excludes shares granted to members of the Board for annual equity awards.

The weighted average grant date fair value of RSAs granted during the years ended December 31, 2018, 2017, and 2016 was $18.61, $6.84, and $10.28 per share. RSAs vested during the years ended December 31, 2018, 2017, and 2016 consisted entirely of service-based awards. The total grant date fair value of RSAs vested was $0.2 million in each of the years ended December 31, 2018, 2017, and 2016.

As of December 31, 2018, unrecognized share-based compensation expense for RSAs was $0.1 million, which is expected to amortize over a remaining weighted average period of 0.4 years.

The weighted average grant date fair value of RSUs granted during the years ended December 31, 2018, 2017, and 2016 was $14.34, $6.84, and $9.16 per share. RSUs vested during the year ended December 31, 2018 consisted of 0.9 million service-condition awards and 0.2 million performance- and market-condition awards. RSUs vested during the year ended December 31, 2017 consisted of 0.7 million service-condition awards and 0.1 million performance- and market-condition awards. RSUs vested during the year ended December 31, 2016 consisted of 0.6 million service-condition awards and less than 0.1 million performance- and market-condition awards. The total grant date fair value of RSUs vested during the years ended December 31, 2018, 2017, and 2016 was $9.7 million, $8.3 million and $8.0 million, respectively.

As of December 31, 2018, unrecognized share-based compensation expenses for service-condition RSUs were $7.7 million and for performance- and market-condition RSUs were $6.4 million, and are expected to amortize over remaining weighted average periods of 1.3 years and 2.4 years, respectively.

Equity	12 Months Ended
Equity	Dec. 31, 2018
Equity [Abstract]
Equity	EQUITY Common Stock The Company has one class of common stock with a par value of $0.001 per share. There are 250 million shares of common stock authorized for issuance. Holders of common stock are entitled to one vote per share on all matters presented to common stockholders. Common Stock Repurchase Program On February 20, 2018, the Board of Directors approved an increase in our repurchase authorization, allowing for repurchase of up to $500.0 million of our common stock. The number, price, and timing of the repurchases are at the Company’s sole discretion, subject to certain restrictions on repurchases under the Company’s Senior Revolving Credit Facility, and may be made depending on market conditions, liquidity needs, or other factors. The Company’s Board of Directors may suspend, modify, or terminate the program at any time without prior notice. Share repurchases may be made in the open market or in privately negotiated transactions. The repurchase authorization does not have an expiration date and does not obligate the Company to acquire any amount of its common stock. Under Delaware state law, these shares are not retired, and the issuer has the right to resell any of the shares repurchased. The Company repurchased 3.6 million shares of its common stock at a cost of $63.1 million, including commissions, and 5.7 million shares of its common stock at a cost of $50.0 million, including commissions, during the years ended December 31, 2018 and 2017, respectively. The Company did not repurchase any of its common stock during the year ended December 31, 2016. As of December 31, 2018, the Company had remaining authorization to repurchase approximately $155.7 million of its common stock, subject to restrictions under its Credit Agreement. Preferred Stock The Company has authorized and available for issuance 4.0 million shares of preferred stock. Of these preferred shares, 1.0 million were authorized and none were issued and outstanding as of December 31, 2018. Series A Convertible Preferred Stock The Company is authorized to issue up to 1.0 million shares of Series A Preferred, par value $0.001 per share, none of which were issued and outstanding as of December 31, 2018. Prior to the December 5, 2018 repurchase and conversion discussed below, the previously outstanding Series A Preferred participated on a pro rata if converted basis in earnings attributable to common stockholders, but did not participate in net losses attributable to common stockholders. Repurchase and Conversion On December 5, 2018, all of the outstanding Series A Preferred shares were repurchased or converted to common stock. As a result, the Company recognized the remaining unamortized original issue discount and beneficial conversion feature accretion of $14.7 million, and settled the beneficial conversion feature related to the repurchased Series A Preferred of $6.1 million, resulting in a net increase of $8.6 million in ‘Dividend equivalents on Series A convertible preferred stock related to redemption value accretion and beneficial conversion feature’ in the statement of operations. The Company repurchased 100,000 shares of Series A Preferred with a carrying value of $100.0 million in exchange for a cash payment of $183.7 million. The repurchase payment in excess of the carrying value of $83.7 million is reported within ‘Dividends on Series A convertible preferred stock’ in the statement of operations. The remaining 100,000 shares of Series A Preferred were converted to 6,896,548 shares common stock. In connection with the conversion, the Company paid $15.0 million in cash to induce conversion, of which $12.0 million was paid at closing, with the remaining $3.0 million paid in January 2019. In addition, the Company paid other costs associated with this transaction of $0.5 million. The $15.0 million inducement dividend and the $0.5 million of other costs are reported within ‘Dividends on Series A convertible preferred stock’ in the statement of operations. Participation Rights and Dividends Prior to the repurchase and conversion of the Series A Preferred, holders of Series A Preferred were entitled to cumulative preferred dividends payable quarterly in cash at a rate of 6.0% per annum. As of December 31, 2018, the Company had accrued payments to induce conversion of $3.0 million, which were reported in ‘Accrued expenses and other liabilities’ in the consolidated balance sheet. As of December 31, 2017, the Company had accrued preferred dividends of $3.0 million, which were reported in ‘Accrued expenses and other liabilities’ in the consolidated balance sheet. These accrued dividends were paid in cash in January 2018.

Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

As a result of the Tax Act, we recorded provisional estimates in accordance with SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, during the year ended December 31, 2017 in relation to the revaluation of our net deferred tax assets at the lower U.S. corporate income tax rate and the additional tax expense associated with the deemed repatriation tax. During the year ended December 31, 2018, we recorded measurement period adjustments related to the provisional estimates. While we consider our accounting for the Tax Act to be complete, we continue to evaluate new guidance and legislation as it is issued. We have not changed our indefinite reinvestment assertion, and we have elected to account for the impact of global intangible low tax income based on the period cost method.

The following table sets forth income before taxes and the expense for income taxes:



	Year Ended December 31,
	2018		2017			2016
	(in thousands)
Income (loss) before taxes:
U.S.	$	10,088	$	(34,406	)	$	(55,617	)
Foreign	55,069		52,586			48,404
Total income (loss) before taxes	$	65,157	$	18,180		$	(7,213	)
Income tax expense:
Current income taxes:
U.S. federal	$	1,156	$	1,383		$	49
U.S. state	246		127			126
Foreign	12,359		9,525			9,494
Total current income taxes	13,761		11,035			9,669
Deferred income taxes:
U.S. federal	276		1,300			263
U.S. state	—		—			—
Foreign	683		(4,393		)	(651		)
Total deferred income taxes	959		(3,093		)	(388		)
Total income tax expense	$	14,720	$	7,942		$	9,281

The following table sets forth income reconciliations of the statutory federal income tax rate to actual rates based on income or loss before income taxes:



	Year Ended December 31,
	2018					2017					2016
	(in thousands)
Income tax expense and rate attributable to:
Federal	$	13,683		21.0	%	$	6,363		35.0	%	$	(2,524	)	(35.0	)%
State, net of federal benefit	1,271			2.0	%	53			0.3	%	(202		)	(2.8	)%
Foreign differential	7,630			11.6	%	(11,768		)	(64.7	)%	(12,624		)	(175.0	)%
Enacted changes in tax law	495			0.8	%	17,645			97.1	%	—			—	%
GILTI, net	3,443			5.3	%	—			—	%	—			—	%
Non-deductible / non-taxable items	3,602			5.5	%	6,006			33.0	%	2,694			37.4	%
Change in valuation allowance	(5,304		)	(8.1	)%	24,400			134.2	%	16,041			222.4	%
U.S. tax on foreign earnings	—			—	%	(32,427		)	(178.4	)%	23,130			320.6	%
Foreign tax credits	(7,709		)	(11.9	)%	(7,980		)	(43.9	)%	(18,581		)	(257.6	)%
Uncertain tax positions	(1,696		)	(2.6	)%	1,054			5.8	%	19			0.3	%
Audit settlements	183			0.3	%	354			1.9	%	253			3.5	%
Share-based compensation	764			1.2	%	882			4.9	%	2,120			29.4	%
Deferred income tax account adjustments	(25		)	—	%	2,679			14.7	%	(842		)	(11.7	)%
Other	(1,617		)	(2.5	)%	681			3.8	%	(203		)	(2.8	)%
Effective income tax expense and rate	$	14,720		22.6	%	$	7,942		43.7	%	$	9,281		128.7	%

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. We recorded a provisional adjustment to our U.S. deferred income taxes as of December 31, 2017 to reflect the reduction in the U.S. statutory tax rate from 35% to 21% resulting from the Tax Act. The following table sets forth deferred income tax assets and liabilities as of the date shown:



	December 31,
	2018			2017
	(in thousands)
Non-current deferred tax assets:
Share-based compensation expense	$	2,051		$	2,940
Accruals, reserves, and other expenses	18,734			20,728
Net operating loss	37,727			42,956
Intangible assets	1,363			1,620
Future uncertain tax position offset	654			498
Unrealized loss on foreign currency	—			119
Foreign tax credit	66,321			67,655
Other	2,957			2,792
Valuation allowance	(113,237		)	(119,494		)
Total non-current deferred tax assets	$	16,570		$	19,814
Non-current deferred tax liabilities:
Intangible assets	$	(164	)	$	—
Property and equipment	(7,332		)	(9,640		)
Other	(411		)	—
Total non-current deferred tax liabilities	$	(7,907	)	$	(9,640	)

During 2018, valuation allowances on deferred tax assets that are not anticipated to be realized decreased by $6.3 million. The change in the valuation allowance includes $5.3 million related to income tax expense and $1.0 million which does not impact the tax provision because this amount reflects the impact of unrecorded tax attributes related to changes in cumulative translation adjustment. During 2017, additional valuation allowances of $28.6 million were recorded. The change in the 2017 valuation allowance includes $24.4 million related to income tax expense and $4.2 million which does not impact the tax provision because this amount reflects the cumulative impact of unrecorded tax attributes related to changes in cumulative translation adjustment.

Our deferred tax valuation allowances are primarily the result of uncertainties regarding the future realization of recorded tax benefits on tax loss and credit carryforwards from operations 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. Based on this analysis, we have determined that the valuation allowances recorded in each period presented are appropriate.

During 2018, we recorded additional tax loss carryforwards in certain foreign jurisdictions which aggregate to $8.5 million, primarily driven by operational losses recognized based on local statutory accounting requirements. As these carryforwards were generated in jurisdictions where we have historically had book losses or do not have strong future projections related to those operations, we concluded that it was more likely than not that the associated net operating losses would not be realized, and thus recorded a valuation allowance on the majority of the associated deferred tax assets. As of December 31, 2018, the Company maintained a valuation allowance of $113.2 million.

The Company recorded deferred tax assets related to U.S. federal tax carryforwards, including foreign tax credits and net operating losses, which expire at various dates between 2023 and 2038 of $46.6 million and $48.6 million at December 31, 2018 and 2017, respectively. The Company recorded deferred tax assets related to U.S. state tax net operating loss carryforwards which expire at various dates between 2019 and 2038 of $11.1 million and $12.5 million at December 31, 2018 and 2017, respectively. The Company recorded deferred tax assets related to foreign tax carryforwards, including foreign tax credits and net operating losses, which expire starting in 2020 and those which do not expire of $47.7 million and $49.9 million as of December 31, 2018 and 2017, respectively.

We annually receive cash from our foreign subsidiaries’ current year earnings. The transition tax in the Tax Act imposed a tax on undistributed and previously untaxed foreign earnings at various tax rates. This tax largely eliminated the differences between the financial reporting and income tax basis of foreign undistributed earnings. Furthermore, as of December 31, 2018, foreign withholding taxes have not been provided on unremitted earnings of subsidiaries operating outside of the U.S. as these amounts are considered to be indefinitely reinvested.

The following table sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits:



	Year Ended December 31,
	2018			2017			2016
	(in thousands)
Unrecognized tax benefit as of January 1	$	6,204		$	4,750		$	4,957
Additions in tax positions in prior period	250			683			646
Reductions in tax positions in prior period	(690		)	—			(634		)
Additions in tax positions in current period	461			966			245
Settlements	(621		)	(123		)	(238		)
Lapse of statute of limitations	(1,045		)	(414		)	(196		)
Cumulative foreign currency translation adjustment	(48		)	342			(30		)
Unrecognized tax benefit as of December 31	$	4,511		$	6,204		$	4,750

The Company recorded a net benefit of $1.7 million related to decreases in 2018 unrecognized tax benefits combined with amounts effectively settled under audit. Unrecognized tax benefits as of December 31, 2018 relate to tax years that are currently open under the statute of limitation. The primary impact of uncertain tax positions on the rate reconciliation includes audit settlements, net increases in position changes, and accrued interest expense.

Interest and penalties related to income tax liabilities are included in ‘Income tax expense’ in the consolidated statements of operations. For the years ended December 31, 2018, 2017, and 2016, the Company recorded approximately $0.2 million, $0.2 million, and $0.2 million, respectively, of penalties and interest. During the year ended December 31, 2018, Crocs released $0.2 million of interest from settlements, lapse of statutes, and change in certainty. The cumulative accrued balance of penalties and interest was $0.6 million, $0.7 million, and $0.6 million, as of December 31, 2018, 2017, and 2016, respectively.

Unrecognized tax benefits of $4.5 million, $6.2 million and $4.8 million as of December 31, 2018, 2017, and 2016, respectively, if recognized, would reduce the annual effective tax rate offset by deferred tax assets recorded for uncertain tax positions.

The following table sets forth the tax years subject to examination for the major jurisdictions where we conduct business as of December 31, 2018:



The Netherlands	2005 to 2018
Canada	2011 to 2018
Japan	2012 to 2018
China	2008 to 2018
Singapore	2014 to 2018
United States	2010 to 2018

The Company is currently under audit in Japan and Taiwan. U.S. state tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various state jurisdictions for a period up to two years after formal notification to the states. As such, U.S. state income tax returns for the Company are generally subject to examination for the years 2013 to 2018.

Earnings Per Share

12 Months Ended

Dec. 31, 2018

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

Basic and diluted EPS for the years ended December 31, 2018, 2017, and 2016 were as follows:



	Year Ended December 31,
	2018			2017			2016
	(in thousands, except per share data)
Numerator:
Net loss attributable to common stockholders ⁽¹⁾	$	(69,216	)	$	(5,294	)	$	(31,738	)
Denominator:
Weighted average common shares outstanding - basic and diluted	68,421			72,255			73,371

Net loss per common share:
Basic	$	(1.01	)	$	(0.07	)	$	(0.43	)
Diluted	$	(1.01	)	$	(0.07	)	$	(0.43	)

⁽¹⁾ Net loss attributable to common stockholders for the year ended December 31, 2018 reflects the repurchase and conversion of Series A Preferred.

For the years ended December 31, 2018, 2017 and 2016, all outstanding shares issued under share-based compensation awards were excluded from the calculation of diluted EPS because the effect was anti-dilutive. For the years ended December 31, 2017 and 2016, all potentially convertible Series A Preferred shares were excluded from the calculation of diluted EPS because the effect was anti-dilutive. See Note 9 — Equity for additional information regarding the repurchase and conversion of Series A Preferred.

Commitments And Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments And Contingencies

COMMITMENTS AND CONTINGENCIES

Rental Commitments and Contingencies

The Company rents primarily real estate, which includes retail, warehouse, distribution center, and office spaces, under operating leases expiring at various dates through 2033. Rent expense for leases with escalations or rent holidays is recognized on a straight-line basis over the lease term beginning on the lease inception date. Certain leases also provide for contingent rents, which are generally determined as a percent of sales in excess of specified amounts. A contingent rent liability is recognized together with the corresponding rent expense when specified amounts have been achieved or when the Company determines that achieving the specified amounts during the period is probable.

Future minimum lease payments under operating leases were:



	As of December 31, 2018
	(in thousands)
2019	$	42,455
2020	36,299
2021	29,714
2022	20,721
2023	15,334
Thereafter	54,149
Total minimum lease payments ⁽¹⁾	$	198,672

⁽¹⁾ Includes future minimum lease payments of $25.4 million related to the new distribution center in Dayton, Ohio.

Rent expense under operating leases was as follows:



	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Minimum rentals⁽¹⁾	$	66,049	$	78,779	$	87,995
Contingent rentals	14,297		14,294		14,596
Total rent expense	$	80,346	$	93,073	$	102,591

⁽¹⁾ Minimum rentals include all lease payments as well as fixed and variable common area maintenance, parking, and storage fees, which were approximately $9.3 million, $10.0 million, and $10.2 million during the years ended December 31, 2018, 2017, and 2016, respectively.

Purchase Commitments

As of December 31, 2018 and 2017, the Company had purchase commitments to its third-party manufacturers, primarily for materials and supplies used in the manufacture of the Company’s products, for an aggregate of $165.3 million and $122.7 million, respectively.

Other

As of December 31, 2018, the Company had commitments of $23.1 million related to its investment in the new distribution center in Dayton, Ohio, in addition to the related future minimum lease payments disclosed above.

In January 2019, the Company entered into a lease for its new corporate headquarters and regional office in Broomfield, Colorado. The contractual commitment related to this lease, with payments beginning in March 2020 and continuing through August 2030, is approximately $20.4 million.

The Company is regularly subject to, and is currently undergoing, audits by various tax authorities in the U.S. and several foreign jurisdictions, including customs duties, import and other taxes for prior tax years.

During its normal course of business, the Company may make certain indemnities, commitments, and guarantees under which it may be required to make payments in relation to certain matters. The Company cannot determine a range of estimated future payments and has not recorded any liability for such payments in the accompanying consolidated balance sheets.

See Note 16 — Legal Proceedings for further details regarding potential loss contingencies related to government tax audits and other current legal proceedings.

Operating Segments and Geographic Information

12 Months Ended

Dec. 31, 2018

Segment Reporting [Abstract]

Operating Segments and Geographic Information

OPERATING SEGMENTS AND GEOGRAPHIC INFORMATION

The Company has three reportable operating segments: the Americas, Asia Pacific, and Europe, Middle East, and Africa (“EMEA”). ‘Other businesses’ aggregates insignificant operating segments that do not meet the reportable segment threshold, including company-operated manufacturing operations and corporate operations.

Each of the reportable operating segments derives its revenues from the sale of footwear and accessories to external customers. Revenues for ‘Other businesses’ include non-footwear product sales to external customers that are excluded from the measurement of segment operating revenues and income.

Segment performance is evaluated based on segment results without allocating corporate expenses, or indirect general, administrative, and other expenses. Segment profits or losses include adjustments to eliminate inter-segment sales. Reconciling items between segment income from operations and income (loss) from operations consist of other businesses and unallocated corporate expenses, as well as inter-segment eliminations. The following tables set forth information related to reportable operating segments:



	Year Ended December 31,
	2018			2017			2016
	(in thousands)
Revenues:
Americas	$	520,192		$	480,146		$	467,006
Asia Pacific⁽¹⁾	344,598			336,073			355,284
EMEA⁽¹⁾	220,270			206,424			213,238
Segment revenues	1,085,060			1,022,643			1,035,528
Other businesses	3,145			870			745
Total consolidated revenues	$	1,088,205		$	1,023,513		$	1,036,273
Income from operations: ⁽²⁾
Americas ⁽³⁾	$	138,940		$	96,740		$	72,689
Asia Pacific ⁽¹⁾⁽⁴⁾	82,780			72,950			67,077
EMEA ⁽¹⁾⁽⁵⁾	59,539			37,185			34,114
Segment income from operations	281,259			206,875			173,880
Reconciliation of segment income from operations to income (loss) before income taxes:
Other businesses ⁽⁶⁾	(55,583		)	(22,861		)	(26,935		)
Unallocated corporate ⁽²⁾⁽⁷⁾	(162,732		)	(166,678		)	(153,099		)
Total consolidated income (loss) from operations	62,944			17,336			(6,154		)
Foreign currency gains (losses), net	1,318			563			(2,454		)
Interest income	1,281			870			692
Interest expense	(955		)	(869		)	(836		)
Other income	569			280			1,539
Income (loss) before income taxes	$	65,157		$	18,180		$	(7,213	)
Depreciation and amortization:
Americas	$	4,640		$	5,473		$	5,787
Asia Pacific ⁽⁸⁾	2,049			3,405			3,974
EMEA ⁽⁸⁾	1,252			1,937			2,423
Total segment depreciation and amortization	7,941			10,815			12,184
Other businesses	5,256			6,748			6,830
Unallocated corporate	16,053			15,567			15,029
Total consolidated depreciation and amortization	$	29,250		$	33,130		$	34,043

⁽¹⁾In the third quarter of 2018, certain revenues and expenses previously reported within the ‘Asia Pacific’ segment were shifted to the ‘EMEA’ segment. The previously reported amounts for revenues and income from operations for the years ended December 31, 2017 and 2016 have also been revised to conform to the current period presentation. See ‘Impacts of segment composition change’ table below for more information.

⁽²⁾ In 2018, certain global marketing expenses previously reported within the operating segments are managed and reported within ‘Unallocated corporate and other’. The previously reported amounts for income from operations for the years ended December 31, 2017 and 2016 have been revised to conform to the current year presentation. See ‘Impacts of global marketing expense realignment’ table below for more information.

⁽³⁾ Includes $0.1 million, $0.5 million, and $1.7 million of asset impairment charges related to 1, 3, and 12 underperforming retail locations for the years ended December 31, 2018, 2017 and 2016, respectively.

⁽⁴⁾ Includes $0.8 million and $0.6 million of asset impairment charges related to 12 and 19 underperforming retail locations for the years ended December 31, 2018 and 2016, respectively.

⁽⁵⁾ Includes less than $0.1 million and $0.4 million of asset impairment charges related to 1 and 11 underperforming retail locations for the years ended December 31, 2017 and 2016, respectively. Additionally in the year ended December 31, 2016, the Company recorded $0.4 million in impairment charges related to goodwill in our EMEA operating segment.

⁽⁶⁾ “Other businesses” increases are primarily due to costs incurred in conjunction with the closure of company-operated manufacturing and distribution facilities, which ceased operations in 2018, increased variable compensation associated with higher revenues, and other expenses as a result of outsourcing, and other supply chain cost changes.

⁽⁷⁾ Includes a $4.8 million write-off related to a discontinued project for the year ended December 31, 2017. Also includes corporate support and administrative functions, costs associated with share-based compensation, research and development, marketing, legal, depreciation and amortization of corporate and other assets not allocated to operating segments, and intersegment eliminations.

⁽⁸⁾In the third quarter of 2018, certain revenues and expenses previously reported within the ‘Asia Pacific’ segment were shifted to the ‘EMEA’ segment. The previously reported amounts for depreciation and amortization for the years ended December 31, 2017 and 2016 have also been revised to conform to the current period presentation. See ‘Impacts of segment composition change’ table below for more information.

Impacts of segment composition change:



		Year Ended December 31,
		2017			2016
		Increase (Decrease)
	(in thousands)
Impacts on revenues:
Asia Pacific		$	(33,594	)	$	(39,794	)
EMEA		33,594			39,794
Impacts on income from operations:
Asia Pacific		(10,166		)	(13,451		)
EMEA		10,166			13,451
Impacts on depreciation and amortization:
Asia Pacific		(59		)	(290		)
EMEA		59			290

Impacts of global marketing expense realignment:



		Year Ended December 31,
		2017			2016
		Increase (Decrease)
	(in thousands)
Impacts on income from operations:
Americas		$	9,860		$	13,845
Asia Pacific		3,843			1,621
EMEA		1,283			2,906
Unallocated corporate and other		(14,986		)	(18,372		)

The following table sets forth asset information related to reportable operating segments as of the dates shown:



	December 31,
	2018		2017
	(in thousands)
Long-lived assets:
Americas	$	12,977	$	17,129
Asia Pacific	1,831		4,171
EMEA	3,125		4,609
Total segment long-lived assets	17,933		25,909
Supply Chain	11,996		17,396
Corporate and other	39,586		49,842
Total long-lived assets	$	69,515	$	93,147

Total consolidated assets:
Americas	$	157,016	$	158,641
Asia Pacific ⁽¹⁾	139,679		144,384
EMEA ⁽¹⁾	66,021		93,799
Total segment assets	362,716		396,824
Supply Chain	31,108		37,793
Corporate and other	75,077		109,078
Total consolidated assets	$	468,901	$	543,695

⁽¹⁾In the third quarter of 2018, certain revenues and expenses previously reported within the ‘Asia Pacific’ segment were shifted to the ‘EMEA’ segment. The previously reported amount for consolidated assets for the year ended December 31, 2017 has also been revised to conform to the current period presentation. See ‘Impacts of segment composition change’ table below for more information.

Impacts of segment composition change:



	Year Ended December 31,
	2017
	Increase (Decrease)
	(in thousands)
Impacts on consolidated assets:
Asia Pacific	$	(17,262	)
EMEA	17,262

There were no customers who represented 10% or more of consolidated revenues during the years ended December 31, 2018, 2017 and 2016. The following table sets forth certain geographical information regarding Crocs’ revenues for the periods as shown:



	Year Ended December 31,
	2018		2017		2016
	(in thousands)
Location:
United States	$	442,544	$	388,847	$	384,939
International ⁽¹⁾	645,661		634,666		651,334
Total revenues	$	1,088,205	$	1,023,513	$	1,036,273

⁽¹⁾ For the year ended December 31, 2016, sales in Japan represented approximately 10.6% of consolidated revenues.

The following table sets forth geographical information regarding property and equipment assets as of the dates shown:



	December 31,
	2018		2017
	(in thousands)
Location:
United States	$	17,489	$	23,396
International	4,722		11,636
Total property and equipment, net	$	22,211	$	35,032

Legal Proceedings	12 Months Ended
Legal Proceedings	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Legal Proceedings	LEGAL PROCEEDINGS The Company was subjected to an audit by the Brazilian Federal Tax Authorities related to imports of footwear from China between 2010 and 2014. On January 13, 2015, the Company was notified about the issuance of assessments totaling 14.4 million Brazilian Real (“BRL”), or approximately $3.7 million, plus interest and penalties, for the period January 2010 through May 2011. The Company has disputed these assessments and asserted defenses to the claims. On February 25, 2015, the Company received additional assessments totaling 33.3 million BRL, or approximately $8.6 million, plus interest and penalties, related to the remainder of the audit period. The Company has also disputed these assessments and asserted defenses to these claims in administrative appeals. On August 29, 2017, the Company received a favorable ruling on its appeal of the first assessment, which dismissed all fines, penalties, and interest. The tax authorities have requested a special appeal to that decision. If the appeal is accepted, Crocs will have the opportunity to both defend the appeal as well as challenge it procedurally. Should the Brazilian Tax Authority prevail in this final administrative appeal, Crocs may still challenge the assessments through the court system, which would likely require the posting of a bond. Additionally, the second appeal for the remaining assessments was heard on March 22, 2018. That decision was partially favorable and resulted in an approximately 38% reduction in principal, penalties, and interest, leaving approximately $5.3 million, plus interest and penalties, at risk for those assessments. The tax authorities have appealed that decision. Crocs filed a response to the tax authorities’ appeal as well as a separate appeal against the unfavorable portion of the ruling. We have not recorded these items within the consolidated financial statements as it is not possible at this time to predict the timing or outcome of this matter or to estimate a potential amount of loss, if any. For all other claims and disputes, the Company has accrued estimated losses of $0.2 million within ‘Accrued expenses and other liabilities’ in its consolidated balance sheet as of December 31, 2018. Where the Company is able to estimate reasonably possible losses or a range of reasonably possible losses, the Company estimates that as of December 31, 2018, reasonably possible losses associated with these claims and other disputes are immaterial. Although the Company is subject to other litigation from time to time in the ordinary course of business, including employment, intellectual property and product liability claims, the Company is not party to any other pending legal proceedings that it believes would reasonably have a material adverse impact on its business, financial results, and cash flows.

Employee Benefit Plan	12 Months Ended
Employee Benefit Plan	Dec. 31, 2018
Retirement Benefits [Abstract]
Employee Benefit Plan	EMPLOYEE BENEFIT PLAN Defined Contribution Plan The Company sponsors a qualified defined contribution benefit plan (the “Plan”), covering substantially all of its U.S. employees. The Plan includes a savings plan feature under Section 401(k) of the Internal Revenue Code. The Company makes matching contributions to the plans equal to 100% of the first 3%, and up to 50% of the next 2% of salary contributed by an eligible employee. Participants are vested 100% in the Company’s matching contributions when made. Contributions made by the Company under the Plan were $5.4 million, $5.5 million and $5.8 million for the years ended December 31, 2018, 2017, and 2016, respectively.

Unaudited Quarterly Consolidated Financial Information

12 Months Ended

Dec. 31, 2018

Quarterly Financial Information Disclosure [Abstract]

Unaudited Quarterly Consolidated Financial Information

UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION



	For the Quarter Ended
	March 31, 2018		June 30, 2018		September 30, 2018		December 31, 2018
	(in thousands, except per share data)
Revenues ⁽¹⁾	$	283,148	$	328,004	$	261,064	$	215,989
Gross profit	139,873		181,400		139,059		99,822
Income (loss) from operations	25,922		37,064		13,895		(13,937		)
Net income (loss)	16,454		34,377		10,492		(10,886		)
Net income (loss) attributable to common shareholders ⁽²⁾	12,523		30,426		6,520		(118,685		)
Basic income (loss) per common share	$	0.15	$	0.37	$	0.08	$	(1.72	)
Diluted income (loss) per common share	$	0.15	$	0.35	$	0.07	$	(1.72	)

⁽¹⁾ Due to the seasonal nature of our products, we experience decreased revenues in the fourth quarter of the year relative to the other quarters.

⁽²⁾ The balance in ‘Net income (loss) attributable to common shareholders’ for the three months ended December 31, 2018 was impacted by the repurchase and conversion of Series A Convertible Preferred Stock. See Note 9 — Equity and the consolidated statement of operations for more information.



	For the Quarter Ended
	March 31, 2017		June 30, 2017		September 30, 2017			December 31, 2017
	(in thousands, except per share data)
Revenues⁽¹⁾	$	267,907	$	313,221	$	243,273		$	199,112
Gross profit	133,584		169,807		123,463			90,367
Income (loss) from operations⁽²⁾	15,582		29,446		2,685			(30,377		)
Net income (loss)	11,010		21,960		1,629			(24,361		)
Net income (loss) attributable to common shareholders	7,155		18,086		(2,263		)	(28,272		)
Basic income (loss) per common share	$	0.08	$	0.21	$	(0.03	)	$	(0.41	)
Diluted income (loss) per common share	$	0.08	$	0.20	$	(0.03	)	$	(0.41	)

⁽¹⁾ Due to the seasonal nature of our products, we experience decreased revenues in the fourth quarter of the year relative to the other quarters.

⁽²⁾ ‘Income (loss) from operations’ for the three months ended December 31, 2017 includes additional charges of $6.3 million related to a non-cash write-off and contract termination fee for a discontinued project.

Schedule II - Valuation and Qualifying Accounts

12 Months Ended

Dec. 31, 2018

SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract]

Schedule II - Valuation and Qualifying Accounts

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

CROCS, INC. AND SUBSIDIARIES



	Balance at Beginning of Period		Charged to Costs and Expenses		Deductions ⁽¹⁾			Balance at End of Period
	(in thousands)
Year Ended December 31, 2018
Allowance for doubtful accounts	$	18,325	$	711	$	(8,077	)	$	10,959
Reserve for sales returns and allowances	4,983		71,865		(74,107		)	2,741
Reserve for unapplied rebates	8,081		8,604		(9,908		)	6,777
Total	$	31,389	$	81,180	$	(92,092	)	$	20,477
Year Ended December 31, 2017
Allowance for doubtful accounts	$	32,856	$	1,235	$	(15,766	)	$	18,325
Reserve for sales returns and allowances	6,121		65,562		(66,700		)	4,983
Reserve for unapplied rebates	9,161		9,318		(10,398		)	8,081
Total	$	48,138	$	76,115	$	(92,864	)	$	31,389
Year Ended December 31, 2016
Allowance for doubtful accounts	$	36,368	$	6,079	$	(9,591	)	$	32,856
Reserve for sales returns and allowances	4,639		72,995		(71,513		)	6,121
Reserve for unapplied rebates	8,357		9,036		(8,232		)	9,161
Total	$	49,364	$	88,110	$	(89,336	)	$	48,138

⁽¹⁾ Deductions include accounts written off, net of recoveries, and the effects of foreign currency translation, as well as the impact of the adoption of the new revenue recognition guidance on ‘Accounts receivable, net’ on the Company’s consolidated balance sheet, as described in Note 2 — Recent Accounting Pronouncements.

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Unless otherwise noted in this report, any description of the “Company,” “Crocs,” “we,” “us,” or “our” includes Crocs, Inc. and its consolidated subsidiaries within our reportable operating segments and corporate operations. The Company is engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for men, women, 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.

Basis of Consolidation

Basis of Presentation and Consolidation

The Company’s consolidated financial statements include its accounts and those of its wholly-owned subsidiaries, and reflect all adjustments which are necessary for a fair statement of 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”). All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require 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, uncertain tax positions, income tax expense, share-based compensation expense, the assessment of lower of cost or net realizable value on inventory, useful lives assigned to long-lived assets, depreciation, and provisions for contingencies are reasonable based on information available at the time they are made. Management also makes estimates in the assessments of potential losses in relation to tax matters and threatened or pending legal proceedings (see Note 12 — Income Taxes and Note 16 — Legal Proceedings).To the extent there are differences between these estimates and actual results, our consolidated financial statements may be materially affected.

Reclassifications

The Company has reclassified certain amounts on the consolidated balance sheets, the consolidated statements of cash flows, and Note 2 — Recent Accounting Pronouncements, Note 5 — Accrued Expenses and Other Liabilities, Note 6 — Fair Value Measurements, Note 8 — Revolving Credit Facility and Bank Borrowings, Note 12 — Income Taxes, and Note 14 — Commitments and Contingencies to conform to current period presentation.

Transactions with Affiliates

The Company receives services from three subsidiaries of Blackstone Capital Partners VI L.P. (“Blackstone”). Blackstone and certain of its permitted transferees beneficially owned all the outstanding shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred”) until December 5, 2018, the closing date of an agreement with Blackstone and certain of its permitted transferees, whereby: (i) the Company repurchased 100,000 shares of Series A Preferred for an aggregate purchase price of $183.7 million; (ii) the Series A Preferred holders converted the remaining 100,000 shares of Series A Preferred into 6,896,548 shares of common stock; and (iii) the Company paid the holders $15.0 million to induce conversion, of which $12.0 million was paid at closing, with the remaining $3.0 million paid in January 2019.

The Company applied the accounting prescribed in Appendix D, Topic No. D-42 “The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock,” as summarized in Emerging Issues Task Force abstracts for the repurchase and conversion. For accounting purposes, the repurchase was categorized as a redemption and the payments to induce conversion were treated as deemed dividends. For more information on the repurchase and conversion, see Note 9 — Equity. For more information on the earnings per share impact of the repurchase and conversion, see Note 13 — Earnings per Share.

Certain Blackstone subsidiaries provide various services to the Company, including inventory count services, cybersecurity and consulting, and workforce management services. The Company incurred expenses of $0.8 million, $0.7 million, and $0.8 million for the years ended December 31, 2018, 2017, and 2016 respectively, for these services, which are reported in ‘Selling, general and administrative expenses’ in the consolidated statements of operations.

Revenue Recognition, Shipping and Handling Costs and Fees and Cost of Sales

Cost of Sales

Our cost of sales includes costs incurred to design, produce, procure, and ship our footwear. These costs include our raw materials, both direct and indirect labor, shipping and handling including freight costs, utilities, maintenance costs, depreciation, packaging, and other manufacturing overheads and costs.

Revenue Recognition

Revenues are recognized in the amount expected to be received in exchange for goods when control of the products transfers to customers, and excludes various forms of promotions, which range from contractually-fixed percentage price reductions to sales returns, discounts, rebates, and other incentives that may vary in amount and must be estimated. Variable amounts are estimated based on an analysis of historical experience and adjusted as better estimates become available. We also may accept returns from our wholesale customers, on an exception basis, to ensure that our products are merchandised in the proper assortments. The estimated costs of sales incentives, discounts, returns, price promotions, rebates, and loyalty and coupon programs are reported as a reduction of revenues.

Shipping and Handling Costs and Fees

Shipping and handling costs are expensed as incurred and are included in ‘Cost of sales’ in the consolidated statements of operations. Shipping and handling fees billed to customers are included in revenues.

Taxes Assessed by Governmental Authorities

Taxes assessed by governmental authorities that are directly imposed on a revenue transaction, including value added tax, are recorded on a net basis and are therefore excluded from revenues.

Research, Design and Development Expenses

Research, Design, and Development Expenses

We continue to dedicate significant resources to product design and development based on opportunities we identify in the marketplace. We incurred expenses of $14.1 million, $13.4 million, and $11.9 million in research, design, and development activities for the years ended December 31, 2018, 2017, and 2016, respectively, which are expensed as incurred and are reported in ‘Selling, general and administrative expenses’ in the consolidated statements of operations.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses include media advertising (television, radio, print, social, digital), tactical advertising (signs, banners, point-of-sale materials) and promotional costs. Advertising production costs are expensed when the advertising is first run. Advertising communication costs are expensed in the periods that the communications occur. Certain of the Company’s promotional expenses result from payments under endorsement contracts. Expenses under endorsement contracts are expensed on a straight-line basis over the related annual contract terms.

Total marketing expenses, inclusive of advertising, production, promotion, and agency expenses, including variable marketing expenses, were $68.6 million, $59.1 million, and $56.0 million for the years ended December 31, 2018, 2017, and 2016, respectively. Prepaid advertising and promotional endorsement expenses of $7.5 million and $7.0 million, were included in ‘Prepaid expenses and other assets’ in the consolidated balance sheets at December 31, 2018 and 2017, respectively.

Selling, general and administrative expenses consist primarily of labor and outside services, rent expense, bad debt expense, legal costs, amortization of intangible assets, as well as certain depreciation costs related to corporate, non-product, and non-manufacturing assets and share-based compensation. Selling, general and administrative expenses also include costs for our marketing and sales organizations, and other functions including finance, legal, human resources and information technology.

Other Income, Net

Other income, net primarily includes gains and losses associated with activities not directly related to making and selling footwear, as well as certain gains or losses on sales of non-operating assets.

Foreign Currency Gain (Loss), Net and Foreign Currency Translation and Remeasurement

Foreign Currency Translation and Remeasurement

The financial position and operating results of the Company’s foreign subsidiaries are reported using their respective local currency as the functional currency. The Company recognizes and reports remeasurement gains and losses within ‘Foreign currency gains (losses), net’ in the consolidated statements of operations. Cumulative translation gain and losses are reported within ‘Other comprehensive income (loss)’.

Foreign Currency Gains (Losses), Net

Foreign currency gains (losses), net includes realized and unrealized foreign exchange gains and losses resulting from remeasurement and settlement of foreign-currency transactions denominated in a currency other than the functional currency of an entity, and realized and unrealized gains and losses on forward foreign currency exchange derivative contracts. Realized foreign exchange gains and losses are reported in the operating segment in which they occur. Foreign exchange gains and losses on intercompany balances and forward foreign exchange derivative contracts are reported within corporate operations.

Other Comprehensive Income (Loss)

Our foreign subsidiaries use their foreign currency as their functional currency. Functional currency assets and liabilities are translated into U.S. dollars using exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average exchange rates during the period. Resulting translation gains and losses are reported in other comprehensive income (loss), until the substantial disposition of a subsidiary, at which time accumulated translation gains or losses are reclassified into net income.

Income Taxes and Taxes Assessed by Governmental Authorities

Income Taxes

Income taxes are accounted for using the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of other assets and liabilities. We provide for income taxes at the current and future enacted tax rates and laws applicable in each taxing jurisdiction. We account for the tax effects of global intangible low-taxed income (“GILTI”) as a component of income tax expense in the period the tax arises, to the extent applicable. We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. We recognize interest and penalties related to income tax matters in income tax expense in the consolidated statement of operations. See Note 12 — Income Taxes for further discussion.

Cash and Cash Equivalents

Cash and cash equivalents represent cash and short-term, highly-liquid investments with maturities of three months or less at the date of purchase. The Company reports receivables from credit card companies, if expected to be received within five days, in cash and cash equivalents.

Restricted Cash

Restricted cash primarily consists of funds to secure certain retail store leases, certain customs requirements, and other contractual arrangements.

Accounts Receivable, net

Accounts Receivable, Net

Accounts receivable are recorded at invoiced amounts, net of reserves and allowances. The Company reduces the carrying value for estimated uncollectible accounts based on a variety of factors including the length of time receivables are past due, economic trends and conditions affecting the Company’s customer base, and historical collection experience. Specific provisions are recorded for individual receivables when the Company becomes aware of a customer’s inability to meet its financial obligations. The Company writes off accounts receivable to the reserves when they are deemed uncollectible or, in certain jurisdictions, when legally able to do so. See Item 15, Schedule II for more information.

Inventories

Inventories are stated at the lower of cost or net realizable value. Effective January 1, 2018, the Company completed implementation of a new inventory costing system for approximately 95% of its inventories. In connection with the implementation, the Company changed its method of inventory costing from a moving average cost method to a first-in-first-out method. The Company believes this change in accounting principle is preferable because it results in more precision and consistency in global and regional inventory costs, more efficient analysis and better matching of inventory costs with revenues, better matches the physical flow of inventories, and improves comparability with industry peers. The change from the Company’s former inventory cost method did not have a material effect on inventory or cost of sales, and, as a result, prior comparative financial statements have not been restated.

We estimate the market value of inventory based on an analysis of historical sales trends of our individual product lines, the impact of market trends and economic conditions, and a forecast of future demand, giving consideration to the value of current orders in-house for future sales of inventory, as well as plans to sell discontinued or end-of-life inventory through our outlet stores, among other off-price channels. Estimates may differ from actual results due to the quantity, quality, and mix of products in inventory, consumer and retailer preferences, and market conditions. If the estimated market value is less than its carrying value, the carrying value is adjusted to the market value and the difference is recorded in ‘Cost of sales’ in our consolidated statements of operations.

Reserves for the risk of physical loss of inventory are estimated based on historical experience and are adjusted based upon physical inventory counts, and recorded within ‘Cost of sales’ in our consolidated statements of operations.

As of December 31, 2018 and 2017, our finished goods inventories accounted for approximately 100.0% and 97.5%, respectively, of our consolidated inventories, and the remaining balance consisted of raw materials and work-in-process.

Property and Equipment, Net

Property, equipment, furniture, and fixtures are stated at original cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful asset lives, which are reviewed periodically and have the following ranges: machinery and equipment: 2 to 5 years; furniture, fixtures, and other: 2 to 10 years. Leasehold improvements are stated at cost and amortized on a straight-line basis over their estimated economic useful lives or the lease term, whichever is shorter. Costs of enhancements or modifications that substantially extend the capacity or useful life of an asset are capitalized and depreciated accordingly. Ordinary repairs and maintenance are expensed as incurred. Depreciation of manufacturing assets is included in cost of sales in our consolidated statements of operations for 2016, 2017, and through the third quarter of 2018 when all manufacturing was transferred to third-party manufacturers. Depreciation related to corporate, non-product, and non-manufacturing assets is included in ‘Selling, general and administrative expenses’ in our consolidated statements of operations. When property is retired or otherwise disposed of, the cost and accumulated depreciation are removed from our consolidated balance sheets and the resulting gain or loss, if any, is reflected in ‘Income (loss) from operations’ in the consolidated statements of operations.

Goodwill and Other Intangible Assets, net

Goodwill and Other Intangible Assets, Net

We evaluate the carrying value of our goodwill and indefinite-lived intangible assets for impairment at the reporting unit level at least annually or when an interim triggering event has occurred indicating potential impairment. Our annual test is performed as of the last day of our fiscal fourth quarter. We continuously monitor the performance of our definite-lived intangible assets and evaluate for impairment when evidence exists that certain events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Significant judgments and assumptions are required in such impairment evaluations. Definite-lived intangible assets are stated at cost, less accumulated amortization. Amortization is recorded using the straight-line method over the estimated lives of the assets.

Direct costs of acquiring or developing internal-use computer software, including costs of employees, are capitalized and classified within intangible assets. Software maintenance and training costs are expensed in the period incurred. Initial costs associated with internally-developed-and-used software are expensed until it is determined that the project has reached the application development stage, after which subsequent additions, modifications, or upgrades are capitalized to the extent that they add functionality. The Company’s capitalized software consists primarily of enterprise resource system software, warehouse management software, and point of sale software. Amortization for software is provided using the straight-line method over the estimated useful asset lives, which are reviewed periodically and range from 2 to 8 years. Amortization of capitalized software used in manufacturing activities is included in ‘Cost of sales’ in the consolidated statements of operations for 2016, 2017, and through the third quarter of 2018 when all manufacturing was transferred to third-party manufacturers. Amortization related to corporate, non-product, and non-manufacturing assets, such as the Company’s global information systems, is included in ‘Selling, general, and administrative expenses’ in the consolidated statements of operations.

Amortization for patents, copyrights, and trademarks is provided using the straight-line method over the estimated useful asset lives, which are reviewed periodically and range from 7 to 25 years.

Impairment of Long-Lived Assets

Long-lived assets to be held and used are evaluated for impairment when events or circumstances indicate the carrying value of a long-lived asset or asset group is less than the undiscounted cash flows from its use and eventual disposition over its remaining economic life. The Company assesses recoverability by comparing the sum of projected undiscounted cash flows from the use and eventual disposition over the remaining economic life of a long-lived asset or asset group to its carrying value, and records a loss from impairment if the carrying value is more than its undiscounted cash flows. For assets involved in Crocs’ retail business, the asset group is at the retail store level. As retail store performance will vary in new and existing markets due to many factors, including maturity of the market and brand recognition, we periodically evaluate the fixed assets and leasehold improvements related to our retail locations for impairment. Assets or asset groups to be abandoned or from which no future benefit is expected are written down to zero in the period it is determined they will no longer be used and are removed entirely from service.

Share-based Compensation

Share-Based Compensation

Share-based compensation expense associated with manufacturing and retail employees is included in ‘Cost of sales’ in the consolidated statements of operations. Share-based compensation expense associated with selling, marketing, and administrative employees is included in ‘Selling, general and administrative expenses’ in the consolidated statements of operations.

Stock Options

Stock options are granted with exercise prices equal to the fair market value of our common stock on the date of grant. We use the Black-Scholes option-pricing model to estimate the grant date fair value of stock options, which requires the use of assumptions, including the expected term of the option, expected volatility of our stock price, our expected dividend yield, and the risk-free interest rate, among others. These assumptions reflect our best estimates, however; they involve inherent uncertainties including market conditions and employee behavior that are generally outside of our control. We expense all share-based compensation awarded based on the grant date fair value of the awards using the straight-line method over the requisite service period, adjusted for forfeitures.

Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”)

The Company grants RSAs, service-condition RSUs, performance-condition RSUs, and market-condition RSUs. The grant date fair values of RSAs and service-condition and performance-condition RSUs are based on the closing market price of our common stock on the grant date; the grant date fair value and derived service period of market-condition RSUs is estimated using a Monte Carlo simulation valuation model. Our service-condition RSUs vest based on continued service; our performance-condition RSUs vest based on achievement of multiple weighted performance goals, certification of performance achievement by the Compensation Committee of the Board of Directors, and continued service; our market-condition RSUs vest based on the market price of the Company’s stock. Compensation expense, net of forfeitures, is recognized on a straight-line basis over the requisite service period. For performance-condition RSUs, compensation expense is updated for the Company’s expected performance level against performance goals at the end of each reporting period, which involves judgment as to achievement of certain performance metrics.

Earnings per Share

Basic and diluted earnings per common share (“EPS”) is presented using the two-class method. Participating securities are included in the computation of EPS on a pro-rata, if-converted basis. Diluted EPS reflects the potential dilution to common shareholders from securities that could share in the Company’s earnings. The dilutive effect of each participating security, if any, is calculated using the more dilutive of the two-class method described above. Anti-dilutive securities are excluded from diluted EPS.

Derivative Foreign Currency Contracts

The Company enters into forward foreign currency exchange contracts (“contracts”) to mitigate the potential impact of foreign currency exchange rate risk. By policy, the Company does not enter into these contracts for trading purposes or speculation. The fair value of the contracts is reported either as an asset or liability in our consolidated balance sheets. Changes in the fair value of our contracts are recorded in ‘Foreign currency gains (losses), net’ in our consolidated statements of operations. The Company did not designate any derivative instruments for hedge accounting during any of the periods presented.

The Company’s derivative instruments are recorded at fair value as a derivative asset or liability in the consolidated balance sheets. The Company reports 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 consolidated statements of operations. For the consolidated statements of cash flows, the Company classifies 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.

Fair Value

U.S. GAAP for fair value establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques (market approach, income approach, and cost approach). The Company utilizes a combination of market and income approaches to value derivative instruments. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels of the hierarchy and the related inputs are as follows:



Level		Inputs
1		Unadjusted quoted prices in active markets for identical assets and liabilities.
2		Unadjusted quoted prices in active markets for similar assets and liabilities;
		Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active; or
		Inputs other than quoted prices that are observable for the asset or liability.
3		Unobservable inputs for the asset or liability.

The Company categorizes fair value measurements within the fair value hierarchy based upon the lowest level of the most significant inputs used to determine fair value.

The Company’s non-financial assets, which primarily consist of property and equipment, goodwill, and other intangible assets, are not required to be carried at fair value on a recurring basis and are reported at carrying value. However, on a periodic basis or whenever events or changes in circumstances indicate that their carrying value may not be fully recoverable (and at least annually for goodwill and indefinite-lived intangible assets), non-financial instruments are assessed for impairment and, if applicable, written down to and recorded at fair value.

Recently Accounting Pronouncements

New Accounting Pronouncement Adopted

Income Tax Accounting Implications of the Tax Cuts and Jobs Act

In March 2018, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on the income tax accounting implications of the U.S. Tax Cuts and Job Act (“Tax Act”), addressing the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. As a result of the Tax Act, we recorded provisional estimates in accordance with Staff Accounting Bulletin No. 118 ("SAB 118"), Income Tax Accounting Implications of the Tax Cuts and Jobs Act, during the year ended December 31, 2017 in relation to the revaluation of our net deferred tax assets at the lower U.S. corporate income tax rate and the additional tax expense associated with the deemed repatriation tax. During the year ended December 31, 2018, we recorded measurement period adjustments related to the provisional estimates. We now consider our accounting for the Tax Act complete. For more information, see Note 12 — Income Taxes.

Stock Compensation Scope of Modification Accounting

In May 2017, the FASB issued authoritative guidance intended to clarify those changes to terms and conditions of share-based compensation awards that are required to be accounted for as modifications of existing share-based awards. The Company adopted this guidance as of January 1, 2018. The adoption did not have an impact on our consolidated financial position or results of operations.

Statements of Cash Flows - Classification and Change in Restricted Cash

In August 2016, the FASB issued authoritative guidance intended to clarify how entities should classify certain cash receipts and cash payments in the statements of cash flows. In November 2016, the FASB issued additional guidance requiring that restricted cash be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts reported in the statements of cash flows. The guidance is applied retrospectively to all periods presented and is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods. The Company adopted this guidance as of January 1, 2018. As a result of the adoption, the Company changed the presentation in its statements of cash flows for all periods presented.

Prepaid Stored-Value Products

In March 2016, the FASB issued guidance related to the recognition of breakage for certain prepaid stored-value products. The standard is effective for annual periods (including interim periods) beginning after December 15, 2017. The Company adopted this guidance as of January 1, 2018. The adoption did not have a significant impact on our consolidated financial position or results of operations.

Revenue Recognition

In May 2014, the FASB issued authoritative guidance related to revenue recognition from contracts with customers. On January 1, 2018, the Company adopted the guidance using the modified retrospective method. The comparative information presented in the consolidated financial statements was not restated and is reported under the accounting standards in effect for the periods presented. The adoption of this guidance did not have, and is not expected to have, a significant impact on our reported revenues, gross margins, income from operations, or cash flows from operations.

Substantially all of the Company’s revenues are recognized when control of product passes to customers when the products are shipped or delivered. Effective January 1, 2018, the Company changed its balance sheet presentation for expected product returns by reporting a product return asset for the right to receive returned products and a returns liability for amounts expected to be refunded to customers as a result of product returns. The product return asset is reported within ‘Prepaid expenses and other assets’ in the consolidated balance sheet. The returns liability and payments received from customers for future delivery of products are reported within ‘Accrued liabilities and other expenses’ in the consolidated balance sheet.

The Company elected to account for shipping and handling costs associated with outbound freight after control of product passes to customers as fulfillment costs, which are expensed as incurred and included in ‘Cost of sales’ in our consolidated statements of operations. There is no change to the Company’s comparative reporting of shipping and handling costs as a result of adoption.

The Company elected to expense incremental costs to obtain customer contracts, consisting primarily of commission incentives, when incurred and reports these costs within ‘Selling, general and administrative expenses’ in its consolidated statement of operations. There is no change to the Company’s comparative reporting of incremental costs to obtain customer contracts as a result of adoption.

The impact of adoption on the January 1, 2018 consolidated balance sheet was:



	December 31, 2017		Impact of Adoption ⁽¹⁾		January 1, 2018
	(in thousands)
Assets:
Accounts receivable, net	$	83,518	$	1,801	$	85,319
Prepaid expenses and other assets	22,596		1,555		24,151

Liabilities:
Accrued expenses and other liabilities	84,460		3,356		87,816

⁽¹⁾ Prior to adoption, product return assets and return liabilities were reported within ‘Accounts receivable, net’, within the allowance for doubtful accounts. As of the adoption date, the product return assets were reclassified and reported as a component of ‘Prepaid expenses and other assets’, and return liabilities were reclassified to ‘Accrued expenses and other liabilities’ in the Company’s consolidated balance sheet.

The impact of the new revenue recognition guidance on our consolidated balance sheet as of December 31, 2018 was:



	December 31, 2018
	Balances Without Adoption		Effects of New Guidance ⁽¹⁾		As Reported
	(in thousands)
Assets:
Accounts receivable, net	$	93,994	$	3,633	$	97,627
Prepaid expenses and other assets	19,327		2,796		22,123

Liabilities:
Accrued expenses and other liabilities	95,742		6,429		102,171