Quiksilver Reports Fiscal 2013 Second Quarter Financial Results

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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 endedFirst 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 profit211,136242,149430,843470,099
 
Selling, general and administrative expense218,204224,010443,463454,425
Asset impairments 5,332  415  8,500  415 
 
Operating (loss) income(12,400)17,724(21,120)15,259
 
Interest expense15,28915,58530,79630,630
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):166,815163,953166,282163,655
 
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)375,336370,974
Other receivables31,93326,250
Inventories366,304358,915
Deferred income taxes - short-term25,69617,752
Prepaid expenses and other current assets 33,457  31,697 
Total Current Assets880,619884,765
 
Fixed assets, net232,955240,424
Intangible assets, net138,749137,212
Goodwill272,764268,340
Other assets43,75954,948
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 payable185,570190,647
Accrued liabilities102,480108,770
Current portion of long-term debt44,83422,840

Income taxes payable

 451  3,068 
Total Current Liabilities333,335338,842
 
Long-term debt, net of current portion769,108732,916
Other long-term liabilities 34,958  33,790 
Total Liabilities1,137,4011,105,548
 
Equity
Common stock1,7051,684
Additional paid-in capital560,303544,809
Treasury stock(6,778)(6,778)
Accumulated deficit(106,845)(60,290)
Accumulated other comprehensive income 77,799  95,096 
Total Quiksilver, Inc. Stockholders' Equity526,184574,521
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 endedFirst half ended
In thousandsApril 30,April 30,

2013

2012

2013

2012

Revenues, net:
Americas$228,703$220,975$414,987$426,383
EMEA165,189195,554336,364364,428
APAC63,90074,026136,776148,619
Corporate operations 956  1,658  1,639  2,404 
458,748492,213889,766941,834
 
Gross Profit:
Americas$92,696$97,709$173,555$185,637
EMEA87,961108,997186,850210,769
APAC31,63435,96370,91174,103
Corporate operations (1,155) (520) (473) (410)
211,136242,149430,843470,099
 
SG&A Expense:
Americas$84,999$ Read Full Story

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