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 endedNine months ended
In thousands, except per share amountsJuly 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 profit244,775253,488675,618723,587
 
Selling, general and administrative expense216,579225,788660,042680,213
Asset impairments 2,152  141  10,652  556 
 
Operating income26,04427,5594,92442,818
 
Interest expense20,19514,83450,99145,464
Foreign currency loss/(gain) 4,074  (2,242) 4,629  (4,701)
 
Income/(loss) before (benefit)/provision for income taxes1,77514,967(50,696)2,055
 
(Benefit)/provision for income taxes (49) 2,508  10,322  14,913 
 
Net income/(loss)1,82412,459(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:
Basic167,624164,518166,735163,930
Diluted190,568173,899166,735163,930
    
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 cash409,167-
Trade accounts receivable (net of allowance of $59,593 and $54,586, respectively)418,189398,522
Other receivables24,98031,444
Income taxes receivable2,779-
Inventories399,162391,052
Deferred income taxes - short-term28,08614,691
Prepaid expenses and other current assets 35,819  32,678 
Total Current Assets1,380,565950,290
 
Fixed assets, net227,997233,842
Intangible assets, net138,384136,745
Goodwill272,417258,815
Other assets54,56148,267
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 payable238,311233,523
Accrued liabilities107,001111,140
Current portion of long-term debt43,15344,640
Debt to be redeemed409,167-
Income taxes payable -  3,652 
Total Current Liabilities797,632407,987
 
Long-term debt, net of current portion807,094723,772
Other long-term liabilities 34,976  32,249 
Total Liabilities1,639,7021,164,008
 
Equity
Common stock1,7121,687
Additional paid-in capital567,601539,124
Treasury stock(6,778)(6,778)
Accumulated deficit(104,774)(47,680)
Accumulated other comprehensive income 75,659  66,976 
Total Quiksilver, Inc. Stockholders' Equity533,420553,329
Non-controlling interest 19,405  9,747 
Total Equity 552,825  563,076 
 
Total Liabilities and Equity$2,192,527 $1,727,084 
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QUIKSILVER, INC. AND SUBSIDIARIES
INFORMATION RELATED TO OPERATING SEGMENTS (UNAUDITED)
 
 
Three months endedNine months ended
In thousandsJuly 31,July 31,

2013

2012

2013

2012

Revenues, net:
Americas$267,997$286,136$682,984$712,519
EMEA163,796154,076500,160518,504
APAC63,35671,623200,132220,242
Corporate operations 615  604  2,254  3,008 
495,764512,4391,385,5301,454,273
 
Gross Profit:
Americas$114,327$126,101$287,882$311,738