Crocs: Bad Debts in Real Financial Statements

Crocs sells many of its shoes to retailers and distributors (shoe stores, department stores) on credit. They pay weeks later.

Source: Crocs, Inc. Form 10-K, year ended December 31, 2024 (condensed^**; amounts in thousands) · sec.gov/Archives/edgar/data/1334036/000133403625000009/crox-20241231.htm

Crocs, Inc.

Consolidated Balance Sheets

	Dec 31, 2024	Dec 31, 2023
Cash and cash equivalents	$180,485	$149,288
Accounts receivable (gross)	289,236	333,338
Less: Allowance (ADA)^*	(31,579)	(27,591)
Accounts receivable, net	257,657	305,747
Inventories	356,254	385,054
Other current assets	77,873	70,615
Total current assets	872,269	910,704
Property, goodwill, brands and other	3,939,884	3,733,130
Total assets	$4,812,153	$4,643,834
Total current liabilities	$740,208	$698,296
Long-term liabilities	2,236,213	2,491,615
Total liabilities	2,976,421	3,189,911
Total stockholders’ equity	1,835,732	1,453,923
Total liabilities and equity	$4,812,153	$4,643,834

Crocs, Inc.

Consolidated Statement of Operations

	2024
Revenues	$4,102,108
Cost of sales	1,691,850
Gross profit	2,410,258
Selling, general and administrative expenses^‡	1,388,347
Income from operations	1,021,911
Interest expense and other, net	(111,326)
Income before income taxes	910,585
Income tax benefit	39,486
Net income	$950,071

Accounts & Terms

Accounts receivable (gross A/R): The total amount customers owe for goods sold on credit. An asset.
Allowance for doubtful accounts (ADA): The estimated total amount of A/R that will not be collected, as of the balance sheet date. A contra-asset subtracted from A/R.
Accounts receivable, net (net A/R): Gross A/R − ADA: the amount the company expects to collect.

Bad debt expense (BDE): An operating expense on the income statement: the amount needed to bring ADA up to the new estimate. For example, if ADA was $1,000 and the company now expects $3,000 of A/R will not be collected, it records $2,000 of BDE.
Allowance method (GAAP): Estimate BDE in the same period as the credit sales (matching principle).

Find it in the statements Write the amount ($ thousands, or %).

Answer as of December 31, 2024 (the end of 2024), unless a question says otherwise.

1In total, how much did customers owe Crocs at year-end?
2How much does Crocs estimate it will never collect?
3How much does Crocs actually expect to collect in cash?
4What percentage of what customers owe does Crocs expect never to collect?
5Out of every $100 customers owe, about how much does Crocs expect to collect?
6Assuming no accounts were written off during 2024, how much bad debt expense (BDE) did Crocs record in 2024?^†

^† You don’t have to think about write-offs too much now; we’ll cover them in class. For your information, a write-off removes a specific customer’s account from A/R once it is known to be uncollectible. It reduces both gross A/R and ADA.

^‡ Crocs’s 10-K: “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 and non-product assets and share-based compensation.” Bad debt expense is only a small portion of SG&A: well under 1% of Crocs’s $1.39 billion in 2024.

^* Crocs’s reported “allowances” also include reserves for customer returns and discounts; this worksheet treats the total as the allowance for doubtful accounts.

^** Accounts receivable (gross), other current assets, “property, goodwill, brands and other,” long-term liabilities, SG&A and “interest expense and other, net” are derived from reported totals.