Quiksilver Reports Fiscal 2013 First Quarter Financial Results

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 amounts

January 31,

2013

2012

Revenues, net

$

431,018

$

449,621

Cost of goods sold

211,311

221,671

Gross profit

219,707

227,950

Selling, general and administrative expense

225,259

230,415

Asset impairments

3,168

-

Operating loss

(8,720

)

(2,465

)

Interest expense

15,507

15,045

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 diluted

165,767

163,363

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)

339,580

321,785

Other receivables

31,869

23,226

Income taxes receivable

1,010

-

Inventories

419,191

412,291

Deferred income taxes - short-term

27,612

23,844

Prepaid expenses and other current assets

37,915

33,602

Total Current Assets

925,538

909,183

Fixed assets, net

239,950

235,537

Intangible assets, net

140,090

137,364

Goodwill

277,250

267,131

Other assets

45,463

58,981

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 payable

221,696

225,439

Accrued liabilities

109,842

109,182

Current portion of long-term debt

42,358

4,444

Income taxes payable

-

14,553

Total Current Liabilities

385,793

359,885

Long-term debt, net of current portion

734,191

729,234

Other long-term liabilities

37,592

36,350

Total Liabilities

1,157,576

1,125,469

Equity

Common stock

1,702

1,683

Additional paid-in capital

555,905

539,387

Treasury stock

(6,778

)

(6,778

)

Accumulated deficit

(74,450

)

(55,170

)

Accumulated other comprehensive income

94,522

96,367

Total Quiksilver, Inc. Stockholders' Equity

570,901

575,489

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 thousands

31-Jan

2013

2012

Revenues, net:

Americas

$

186,284

$

205,408

EMEA

171,174

168,874

APAC

72,876

74,593

Corporate operations

684

746

$

431,018

$

449,621

Gross Profit:

Americas

$

80,859

$

87,928

EMEA

98,889

101,772

APAC

39,277

38,140

Corporate operations

682

110

$

219,707

$

227,950

SG&A Expense:

Americas

$

88,074

$

89,481

EMEA

83,234

86,096

APAC

37,206

37,239

Corporate operations

16,745

17,599

$

225,259

$

230,415

Asset Impairments:

Americas

$

1,621

$

-

EMEA

1,547

-

APAC

-

-

Corporate operations

-

-

$

3,168

$

-

Operating Income (Loss):

Americas

$

(8,836

)

$

(1,553

)

EMEA

14,108

15,676

APAC

2,071

901

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 amounts

January 31,

2013

2012

Net loss attributable to Quiksilver, Inc.

$

(31,129

)

$

(22,605

)

Restructuring charges, net of tax of $404 and $200, respectively

2,601

2,276

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 diluted

165,767

163,363

QUIKSILVER, INC. AND SUBSIDIARIES

ADJUSTED EBITDA & PRO-FORMA ADJUSTED EBITDA RECONCILIATION (UNAUDITED)

Three months ended

In thousands

January 31,

2013

2012

Net loss attributable to Quiksilver, Inc.

$

(31,129

)

$

(22,605

)

Provision for income taxes

3,224

5,250

Interest expense

15,507

15,045

Depreciation and amortization

12,219

12,962

Non-cash stock-based compensation expense

7,336

6,977