Quiksilver Reports Fiscal 2013 Third Quarter Financial Results

Quiksilver Reports Fiscal 2013 Third Quarter Financial Results

--Company Continues to Drive Efficiencies; SG&A Down Significantly--

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


"Our third quarter results reflect progress on our path toward improving operating efficiencies," said Andy Mooney, President and Chief Executive Officer of Quiksilver, Inc. "Pro-forma adjusted EBITDA increased by $4 million, selling, general and administrative expenses were reduced by $9 million and we continued to right-size our organization worldwide. In addition, our EMEA region returned to sales growth, and our global e-commerce channel and emerging markets contributed meaningful revenue increases. While global net revenues were down for our DC and Quiksilver brands, we believe that the product development plans we have in place will deliver improved sales over time.

"We are pleased with the advancements on our Profit Improvement Plan. We completed assembling our senior management team, refinanced debt to extend maturities and increase liquidity, reduced headcount, narrowed our athletes and events roster, began re-engineering supply chain processes and continued to close underperforming retail stores. Our plan is on track and we remain confident that our initiatives will lead to improved efficiency and profitability."

Please refer to the accompanying tables for a reconciliation of GAAP results to certain non-GAAP results, including pro-forma income/(loss), pro-forma income/(loss) per share attributable to Quiksilver, Inc., adjusted EBITDA and pro-forma adjusted EBITDA, for the third quarter and nine months ended July 31, 2013 and 2012, net revenues in historical and constant currency, and a definition of our emerging markets.

Fiscal 2013 Third Quarter Review:

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

Net revenues were $496 million compared with $512 million, and were down 3%, or $14 million, in constant currency.

  • Americas net revenues decreased 6% to $268 million from $286 million, and were down 6% in constant currency.

  • EMEA net revenues increased 6% to $164 million from $154 million, and were up 3% in constant currency.

  • APAC net revenues decreased 12% to $63 million from $72 million, and were down 1% in constant currency.

Gross margin was in line with last year at 49.4% of net revenues compared with 49.5%, with gross margin declines on DC brand sales in the Americas wholesale channel, largely offset by gross margin improvement in the EMEA wholesale channel.

SG&A decreased $9 million to $217 million from $226 million, primarily due to reduced expenses related to compensation, athletes and events, and administrative costs.

Non-cash asset impairments were $2.2 million compared with $0.1 million.

Foreign currency loss was $4.1 million versus foreign currency gain of $2.2 million.

Net income attributable to Quiksilver, Inc. was $2 million, or $0.01 per diluted share, compared with $13 million, or $0.07 per diluted share.

Pro-forma income, which excludes the after-tax impact of restructuring charges, non-cash asset impairments and non-cash interest charges from net income attributable to Quiksilver, Inc., was $18 million and $17 million, or $0.10 per diluted share in both years.

Pro-forma Adjusted EBITDA increased $4 million to $56 million from $52 million.

Fiscal 2013 Q3 Net Revenue Highlights:

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

Brands (constant currency):

  • Quiksilver decreased 10% to $172 million;

  • Roxy increased 1% to $130 million; and,

  • DC decreased 1% to $166 million.

Distribution channels (constant currency):

  • Wholesale revenues decreased 6% to $345 million;

  • Retail revenues increased 1% to $120 million. Third quarter same-store sales in company-owned retail stores increased 2% on a global basis. Company-owned retail stores totaled 562; and,

  • E-commerce revenues grew 33% to $31 million.

Emerging markets generated net revenue growth of 21% in constant currency.

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 sales, efficiency and profitability in the future. 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.comandwww.dcshoes.com.

QUIKSILVER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three months ended

Nine months ended

In thousands, except per share amounts

July 31,

July 31,

2013

2012

2013

2012

Revenues, net

$

495,764

$

512,439

$

1,385,530

$

1,454,273

Cost of goods sold

250,989

258,951

709,912

730,686

Gross profit

244,775

253,488

675,618

723,587

Selling, general and administrative expense

216,579

225,788

660,042

680,213

Asset impairments

2,152

141

10,652

556

Operating income

26,044

27,559

4,924

42,818

Interest expense

20,195

14,834

50,991

45,464

Foreign currency loss/(gain)

4,074

(2,242

)

4,629

(4,701

)

Income/(loss) before (benefit)/provision for income taxes

1,775

14,967

(50,696

)

2,055

(Benefit)/provision for income taxes

(49

)

2,508

10,322

14,913

Net income/(loss)

1,824

12,459

(61,018

)

(12,858

)

Less: net loss/(income) attributable to non-controlling interest

247

151

(435

)

(2,257

)

Net income/(loss) attributable to Quiksilver, Inc.

$

2,071

$

12,610

$

(61,453

)

$

(15,115

)

Net income/(loss) per share attributable to Quiksilver, Inc.:

Basic

$

0.01

$

0.08

$

(0.37

)

$

(0.09

)

Diluted

$

0.01

$

0.07

$

(0.37

)

$

(0.09

)

Weighted average common shares outstanding:

Basic

167,624

164,518

166,735

163,930

Diluted

190,568

173,899

166,735

163,930

QUIKSILVER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

In thousands

July 31, 2013

July 31, 2012

ASSETS

Current Assets

Cash and cash equivalents

$

62,383

$

81,903

Restricted cash

409,167

-

Trade accounts receivable (net of allowance of $59,593 and $54,586, respectively)

418,189

398,522

Other receivables

24,980

31,444

Income taxes receivable

2,779

-

Inventories

399,162

391,052

Deferred income taxes - short-term

28,086

14,691

Prepaid expenses and other current assets

35,819

32,678

Total Current Assets

1,380,565

950,290

Fixed assets, net

227,997

233,842

Intangible assets, net

138,384

136,745

Goodwill

272,417

258,815

Other assets

54,561

48,267

Deferred income taxes - long-term

118,603

99,125

Total Assets

$

2,192,527

$

1,727,084

LIABILITIES AND EQUITY

Current Liabilities

Lines of credit

$

-

$

15,032

Accounts payable

238,311

233,523

Accrued liabilities

107,001

111,140

Current portion of long-term debt

43,153

44,640

Debt to be redeemed

409,167

-

Income taxes payable

-

3,652

Total Current Liabilities

797,632

407,987

Long-term debt, net of current portion

807,094

723,772

Other long-term liabilities

34,976

32,249

Total Liabilities

1,639,702

1,164,008

Equity

Common stock

1,712

1,687

Additional paid-in capital

567,601

539,124

Treasury stock

(6,778

)

(6,778

)

Accumulated deficit

(104,774

)

(47,680

)

Accumulated other comprehensive income

75,659

66,976

Total Quiksilver, Inc. Stockholders' Equity

533,420

553,329

Non-controlling interest

19,405

9,747

Total Equity

552,825

563,076

Total Liabilities and Equity

$

2,192,527

$

1,727,084

QUIKSILVER, INC. AND SUBSIDIARIES

INFORMATION RELATED TO OPERATING SEGMENTS (UNAUDITED)

Three months ended

Nine months ended

In thousands

July 31,

July 31,

2013

2012

2013

2012

Revenues, net:

Americas

$

267,997

$

286,136

$

682,984

$

712,519

EMEA

163,796

154,076

500,160

518,504

APAC

63,356

71,623

200,132

220,242

Corporate operations

615

604

2,254

3,008

495,764

512,439

1,385,530

1,454,273

Gross Profit:

Americas

$

114,327

$

126,101

$

287,882

$

311,738