Quiksilver Reports Fiscal 2013 First Quarter Financial Results

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Quiksilver Reports Fiscal 2013 First Quarter Financial Results

HUNTINGTON BEACH, Calif.--(BUSINESS WIRE)-- Quiksilver, Inc. (NYS: ZQK) today announced operating results for the fiscal 2013 first quarter ended January 31, 2013.

"During the first quarter, we took a number of steps supporting our three core strategies of strengthening our brands, increasing sales and driving operating efficiencies," said Andy Mooney, President and Chief Executive Officer of Quiksilver, Inc. "We are revising our global organizational structure and transitioning toward global core processes led by experienced senior executives. We appointed heads of global supply chain, global footwear design and global apparel design, and we are actively recruiting a chief marketing officer. In addition, we made decisions to better focus the product line breadth of our three core global brands. We believe these actions will help lay the foundation for improved operating results.


"Net revenues in the first quarter were impacted by the closure of underperforming retail stores over the last year, as well as disappointing performances in our wholesale channel and in the Americas region," continued Mooney. "On the positive side, we saw continued growth in our emerging markets and e-commerce channel, a modest improvement in gross margin and lower operating expenses."

Please refer to the accompanying tables for a reconciliation of GAAP results to certain non-GAAP results for the first quarter, net revenues in historical and constant currency, and a definition of our emerging markets.

Fiscal 2013 First Quarter Review:

The following comparisons refer to the first quarter of fiscal 2013 versus the first quarter of fiscal 2012.

Net revenues were $431 million compared with $450 million, and were down 3%, or $15 million, in constant currency.

  • Americas net revenues decreased 9% to $186 million from $205 million, and were down 9% in constant currency.
  • EMEA net revenues increased 1% to $171 million from $169 million, and were up 2% in constant currency.
  • APAC net revenues decreased 2% to $73 million from $75 million, and were down 1% in constant currency.

Gross margin increased to 51.0% of net revenues compared with 50.7%, primarily driven by a net revenue mix shift toward our more profitable segments and distribution channels. The Americas segment and the wholesale distribution channel, which experienced the largest percentage decreases in net revenues, typically have lower gross margins compared to the Company's other segments and channels.

SG&A decreased to $225 million compared with $230 million, primarily due to the Company's ongoing expense reduction efforts which resulted in savings across several expense categories. These savings were partially offset by a $4 million increase in e-commerce expenses associated with the continuing growth of the Company's online business.

Asset impairments were $3 million compared with $0.

Foreign currency loss was $3 million versus foreign currency gain of $2 million.

Net loss attributable to Quiksilver, Inc. was $31 million, or $0.19 per share, compared with $23 million, or $0.14 per share.

Pro-forma loss, which excludes restructuring charges and asset impairments, net of tax, was $26 million and $20 million, or $0.16 per share and $0.12 per share, respectively.

Pro-forma Adjusted EBITDA was $13 million compared with $20 million, with the decline largely driven by the $5 million change in foreign currency loss noted above.

Fiscal 2013 Q1 Net Revenue Highlights:

Net revenues (in constant currency) by brand and channel for the first quarter of fiscal 2013 compared with the first quarter of fiscal 2012 were as follows.

Brands (constant currency):

  • Quiksilver was down 7% to $179 million;
  • Roxy decreased 7% to $115 million; and,
  • DC was up 1% to $109 million.

Distribution channels (constant currency):

  • Wholesale business was down 8% to $268 million;
  • Retail was down 1% to $129 million. First quarter same store sales in company-owned retail stores decreased 1% on a global basis; and,
  • E-commerce was up 39% to $33 million.

Emerging markets generated net revenue growth of 15%, in constant currency.

About Quiksilver:

Quiksilver, Inc. is one of the world's leading outdoor sports lifestyle companies. Quiksilver designs, produces and distributes a diversified mix of branded apparel, footwear and accessories. The company's apparel and footwear brands, inspired by the passion for outdoor action sports, represent a casual lifestyle for young-minded people who connect with its boardriding culture and heritage. The company's Quiksilver, Roxy, DC, Lib Tech and Hawk brands are synonymous with the heritage and culture of surfing, skateboarding and snowboarding. The company's products are sold in over 90 countries in a wide range of distribution, including surf shops, skate shops, snow shops, its proprietary Boardriders Club shops and other company-owned retail stores, other specialty stores, select department stores and through various e-commerce channels. Quiksilver's corporate headquarters are in Huntington Beach, California.

Forward-looking statements:

This press release contains forward-looking statements including but not limited to statements regarding the company's three core long-term initiatives and other future activities.These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially.Please refer to Quiksilver's SEC filings for more information on the risk factors that could cause actual results to differ materially from expectations, and specifically the sections titled "Risk Factors" and "Forward-Looking Statements" in Quiksilver's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

NOTE:For further information about Quiksilver, Inc., please visit our website atwww.quiksilverinc.com.We also invite you to explore our brand sites,www.quiksilver.com,www.roxy.com,www.dcshoes.com,www.lib-tech.comandwww.hawkclothing.com.

QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 
 Three months ended
In thousands, except per share amountsJanuary 31,

2013

 

2012

 
Revenues, net$431,018$449,621
Cost of goods sold 211,311  221,671 
 
Gross profit219,707227,950
 
Selling, general and administrative expense225,259230,415
Asset impairments 3,168  - 
 
Operating loss(8,720)(2,465)
 
Interest expense15,50715,045
Foreign currency loss (gain) 3,173  (1,850)
 
Loss before provision for income taxes(27,400)(15,660)
 
Provision for income taxes 3,224  5,250 
 
Net loss(30,624)(20,910)
Less: net income attributable to non-controlling interest (505) (1,695)
 
Net loss attributable to Quiksilver, Inc.$(31,129)$(22,605)
 
Net loss per share attributable to Quiksilver, Inc., basic and diluted$(0.19)$(0.14)
 
Weighted average common shares outstanding, basic and diluted165,767163,363
 
QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
In thousands January 31, 2013 January 31, 2012
 

ASSETS

Current Assets
Cash and cash equivalents$68,361$94,435
Trade accounts receivable (net of allowance of $46,378 and $44,126 respectively)339,580321,785
Other receivables31,86923,226
Income taxes receivable1,010-
Inventories419,191412,291
Deferred income taxes - short-term27,61223,844
Prepaid expenses and other current assets 37,915  33,602 
Total Current Assets925,538909,183
 
Fixed assets, net239,950235,537
Intangible assets, net140,090137,364
Goodwill277,250267,131
Other assets45,46358,981
Deferred income taxes - long-term 119,661  108,469 
Total Assets$1,747,952 $1,716,665 
 

LIABILITIES AND EQUITY

Current Liabilities
Lines of credit$11,897$6,267
Accounts payable221,696225,439
Accrued liabilities109,842109,182
Current portion of long-term debt42,3584,444
Income taxes payable -  14,553 
Total Current Liabilities385,793359,885
 
Long-term debt, net of current portion734,191729,234
Other long-term liabilities 37,592  36,350 
Total Liabilities1,157,5761,125,469
 
Equity
Common stock1,7021,683
Additional paid-in capital555,905539,387
Treasury stock(6,778)(6,778)
Accumulated deficit(74,450)(55,170)
Accumulated other comprehensive income 94,522  96,367 
Total Quiksilver, Inc. Stockholders' Equity570,901575,489
Non-controlling interest 19,475  15,707 
Total Equity 590,376  591,196 
 
Total Liabilities and Equity$1,747,952 $1,716,665 
 
QUIKSILVER, INC. AND SUBSIDIARIES
INFORMATION RELATED TO OPERATING SEGMENTS (UNAUDITED)
 
 
 Three months ended
In thousands31-Jan

2013

 

2012

Revenues, net:
Americas$186,284$205,408
EMEA171,174168,874
APAC72,87674,593
Corporate operations 684  746 
$431,018$449,621
 
Gross Profit:
Americas$80,859$87,928
EMEA98,889101,772
APAC39,27738,140
Corporate operations 682  110 
$219,707$227,950
 
SG&A Expense:
Americas$88,074$89,481
EMEA83,23486,096
APAC37,20637,239
Corporate operations 16,745  17,599 
$225,259$230,415
 
Asset Impairments:
Americas$1,621$-
EMEA1,547-
APAC--
Corporate operations -  - 
$3,168$-
 
Operating Income (Loss):
Americas$(8,836)$(1,553)
EMEA14,10815,676
APAC2,071901
Corporate operations (16,063) (17,489)
$(8,720)$(2,465)
 
The Company's references to emerging markets in this press release refer to net revenues generated in Brazil, Mexico, Korea, China, Indonesia, Taiwan and Russia collectively.
 
QUIKSILVER, INC. AND SUBSIDIARIES
GAAP TO PRO-FORMA RECONCILIATION (UNAUDITED)
 
 
 Three months ended
In thousands, except per share amountsJanuary 31,

2013

 

2012

 
Net loss attributable to Quiksilver, Inc.$(31,129)$(22,605)
Restructuring charges, net of tax of $404 and $200, respectively2,6012,276
Non-cash asset impairments, net of tax of $556, and $0, respectively 2,612  - 
 
Pro-forma loss$(25,916)$(20,329)
 

Pro-forma loss per share attributable to Quiksilver, Inc., basic and diluted

$(0.16)$(0.12)
 
Weighted average common shares outstanding, basic and diluted165,767163,363
 
QUIKSILVER, INC. AND SUBSIDIARIES
ADJUSTED EBITDA & PRO-FORMA ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
  
 
Three months ended
In thousandsJanuary 31,

2013

2012

 
Net loss attributable to Quiksilver, Inc.$(31,129)$(22,605)
Provision for income taxes3,2245,250
Interest expense15,50715,045
Depreciation and amortization12,21912,962
Non-cash stock-based compensation expense7,3366,977
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