Quiksilver Reports Fiscal 2013 Second Quarter Financial Results

Quiksilver Reports Fiscal 2013 Second Quarter Financial Results

Company Provides Updated Guidance for Fiscal 2013

HUNTINGTON BEACH, Calif.--(BUSINESS WIRE)-- Quiksilver, Inc. (NYS: ZQK) today announced operating results for the fiscal 2013 second quarter ended April 30, 2013.


"We recently announced a multi-year profit improvement plan designed to enhance the performance of our three flagship brands, Quiksilver, Roxy and DC, and accelerate our path to sustained profitable growth," said Andy Mooney, President and Chief Executive Officer of Quiksilver, Inc. "With a reorganized management structure and our new leadership team largely in place, we have begun working toward globalizing key functions and gaining efficiencies to reap the benefits of our size and scale. We believe that, over time, our new focus and structure will allow us to significantly improve profitability, working capital efficiency and competitive positioning.

"Our second quarter performance reflects net revenue declines primarily within our EMEA wholesale channel, along with lower gross margins across all three flagship brands, particularly within DC," continued Mooney. "We continued to liquidate prior seasons' inventory and meaningfully lowered operating expenses."

Please refer to the accompanying tables for a reconciliation of GAAP results to certain non-GAAP results for the second quarter and first half ended April 30, 2013 and 2012, net revenues in historical and constant currency, and a definition of our emerging markets.

Fiscal 2013 Second Quarter Review:
The following comparisons refer to the second quarter of fiscal 2013 versus the second quarter of fiscal 2012.

Net revenues were $459 million compared with $492 million, and were down 5%, or $25 million, in constant currency.

  • Americas net revenues increased 3% to $229 million from $221 million, and were up 4% in constant currency.

  • EMEA net revenues decreased 16% to $165 million from $196 million, and were down 14% in constant currency.

  • APAC net revenues decreased 14% to $64 million from $74 million, and were down 9% in constant currency.

Gross margin decreased to 46.0% of net revenues compared with 49.2%, primarily driven by increased discounting and clearance of DC product, increased discounting in Europe across the company's three flagship brands, and inventory write downs related to certain brands and product categories which were discontinued in the second quarter.

SG&A decreased to $218 million compared with $224 million, primarily due to the company's ongoing expense reduction efforts which resulted in savings across several expense categories.

Non-cash asset impairments were $5.3 million compared with $0.4 million.

Foreign currency gain was $2.6 million compared with $0.6 million.

Net loss attributable to Quiksilver, Inc. was $32 million, or $0.19 per share, compared with $5 million, or $0.03 per share.

Pro-forma loss, which excludes the after-tax impact of restructuring and other special charges and non-cash asset impairments from net loss attributable to Quiksilver, Inc., was $20 million and $2 million, or $0.12 per share and $0.01 per share, respectively.

Pro-forma Adjusted EBITDA was $19 million compared with $41 million, with the decline largely driven by gross margin and net revenue declines.

Fiscal 2013 Q2 Net Revenue Highlights:
Net revenues (in constant currency) by brand and channel for the second quarter of fiscal 2013 compared with the second quarter of fiscal 2012 were as follows.

Brands (constant currency):

  • Quiksilver decreased 10% to $182 million;

  • Roxy decreased 4% to $129 million; and,

  • DC increased 1% to $129 million.

Distribution channels (constant currency):

  • Wholesale decreased 7% to $344 million;

  • Retail decreased 5% to $91 million. Second quarter same store sales in company-owned retail stores decreased 4% on a global basis. Company-owned retail stores totaled 564 compared with 549 at the end of fiscal 2012 second quarter; and,

  • E-commerce was up 31% to $23 million.

Emerging markets generated net revenue growth of 13% in constant currency.

Guidance for Fiscal 2013:
Based on its current outlook, the company revised its fiscal 2013 financial guidance as follows:

  • Pro-forma adjusted EBITDA for the second half of fiscal 2013 is expected to be greater than the $91 million achieved during the second half of fiscal 2012;

  • Capital expenditures for fiscal 2013 are expected to decrease by at least 10% from the $66 million recorded in fiscal 2012.

The foregoing guidance updates and supersedes the company's prior guidance for fiscal 2013.

About Quiksilver:

Quiksilver, Inc., one of the world's leading outdoor sports lifestyle companies, designs, produces and distributes branded apparel, footwear and accessories. The company's apparel and footwear brands, inspired by a 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, and DC brands have authentic roots and heritage in surf, snow and skate. The company's products are sold in more than 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 management's expectations for improved profitability, working capital efficiency, and competitive positioning as well as management's current expectations regarding pro-forma adjusted EBITDA and capital expenditures for the second half of fiscal 2013, and other future activities. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. Quiksilver undertakes no obligation to update these statements, which are made only as of the date of this press release. For the factors that could cause actual results to differ materially from expectations, please refer to Quiksilver's SEC filings and specifically the sections titled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" 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 and www.moskova.com.

FINANCIAL TABLES FOLLOW

QUIKSILVER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Second quarter ended

First half ended

April 30,

April 30,

2013

2012

2013

2012

In thousands, except per share amounts

Revenues, net

$

458,748

$

492,213

$

889,766

$

941,834

Cost of goods sold

247,612

250,064

458,923

471,735

Gross profit

211,136

242,149

430,843

470,099

Selling, general and administrative expense

218,204

224,010

443,463

454,425

Asset impairments

5,332

415

8,500

415

Operating (loss) income

(12,400

)

17,724

(21,120

)

15,259

Interest expense

15,289

15,585

30,796

30,630

Foreign currency (gain) loss

(2,618

)

(609

)

555

(2,459

)

(Loss) income before provision for income taxes

(25,071

)

2,748

(52,471

)

(12,912

)

Provision for income taxes

7,147

7,155

10,371

12,405

Net loss

(32,218

)

(4,407

)

(62,842

)

(25,317

)

Less: net income attributable to non-controlling interest

(177

)

(713

)

(682

)

(2,408

)

Net loss attributable to Quiksilver, Inc.

$

(32,395

)

$

(5,120

)

$

(63,524

)

$

(27,725

)

Net loss per share attributable to Quiksilver, Inc. (basic and diluted):

$

(0.19

)

$

(0.03

)

$

(0.38

)

$

(0.17

)

Weighted average common shares outstanding (basic and diluted):

166,815

163,953

166,282

163,655

QUIKSILVER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

April 30, 2013

April 30, 2012

In thousands

ASSETS

Current Assets

Cash and cash equivalents

$

47,893

$

79,177

Trade accounts receivable (net of allowance of $57,134 and $53,593, respectively)

375,336

370,974

Other receivables

31,933

26,250

Inventories

366,304

358,915

Deferred income taxes - short-term

25,696

17,752

Prepaid expenses and other current assets

33,457

31,697

Total Current Assets

880,619

884,765

Fixed assets, net

232,955

240,424

Intangible assets, net

138,749

137,212

Goodwill

272,764

268,340

Other assets

43,759

54,948

Deferred income taxes - long-term

114,391

110,752

Total Assets

$

1,683,237

$

1,696,441

LIABILITIES AND EQUITY

Current Liabilities

Lines of credit

$

-

$

13,517

Accounts payable

185,570

190,647

Accrued liabilities

102,480

108,770

Current portion of long-term debt

44,834

22,840

Income taxes payable

451

3,068

Total Current Liabilities

333,335

338,842

Long-term debt, net of current portion

769,108

732,916

Other long-term liabilities

34,958

33,790

Total Liabilities

1,137,401

1,105,548

Equity

Common stock

1,705

1,684

Additional paid-in capital

560,303

544,809

Treasury stock

(6,778

)

(6,778

)

Accumulated deficit

(106,845

)

(60,290

)

Accumulated other comprehensive income

77,799

95,096

Total Quiksilver, Inc. Stockholders' Equity

526,184

574,521

Non-controlling interest

19,652

16,372

Total Equity

545,836

590,893

Total Liabilities and Equity

$

1,683,237

$

1,696,441

QUIKSILVER, INC. AND SUBSIDIARIES

INFORMATION RELATED TO OPERATING SEGMENTS (UNAUDITED)

Second quarter ended

First half ended

In thousands

April 30,

April 30,

2013

2012

2013

2012

Revenues, net:

Americas

$

228,703

$

220,975

$

414,987

$

426,383

EMEA

165,189

195,554

336,364

364,428

APAC

63,900

74,026

136,776

148,619

Corporate operations

956

1,658

1,639

2,404

458,748

492,213

889,766

941,834

Gross Profit:

Americas

$

92,696

$

97,709

$

173,555

$

185,637

EMEA

87,961

108,997

186,850

210,769

APAC

31,634

35,963

70,911

74,103

Corporate operations

(1,155

)

(520

)

(473

)

(410

)

211,136

242,149

430,843

470,099

SG&A Expense:

Americas

$

84,999

$