EX-99.1 3 a57185exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(QUIKSILVER LOGO)
         
 
  Company Contact:   Bruce Thomas
 
      Vice President, Investor Relations
 
      Quiksilver, Inc.
 
      +1(714)889-2200
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
•   Net Revenues of $441 million versus $501 million in prior year
 
•   Pro-Forma Income from Continuing Operations of $0.08 per share versus $0.03 per share in prior year
 
•   Income from Continuing Operations of $0.05 per share versus $0.03 per share in prior year
Huntington Beach, California, September 2, 2010—Quiksilver, Inc. (NYSE:ZQK) today announced operating results for the third fiscal quarter ended July 31, 2010. Consolidated net revenues from continuing operations for the third quarter of fiscal 2010 were $441.5 million compared to $501.4 million in the third quarter of fiscal 2009. Pro-forma consolidated income from continuing operations for the third quarter of fiscal 2010 was $12.5 million, or $0.08 per share, compared to $3.7 million, or $0.03 per share, for the third quarter of fiscal 2009. Pro-forma income for the third quarter of fiscal 2010 excludes $2.6 million of asset impairment charges and $1.8 million in restructuring charges, consisting primarily of lease loss accruals. Including these amounts, income from continuing operations was $8.2 million, or $0.05 per share, compared to $3.4 million, or $0.03 per share, for the third quarter of fiscal 2009. A reconciliation of GAAP results to pro-forma results is included in the accompanying tables. Net revenues and income from continuing operations for all periods exclude the results of the Rossignol wintersports business, which was sold in November 2008 and is reported as discontinued operations.
Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc., commented, “We’re very pleased to again deliver financial results that exceeded our prior expectations. Our team executed well in an economic environment that continues to present significant challenges around the world. We’re also delighted to report substantial continued improvement to our capital structure, especially after completing the debt-for-equity exchange with Rhône in early August.”
Third Quarter Financial Highlights:
•   Pro-forma Adjusted EBITDA increased 22% to $53.5 million compared to $44.0 million in the third quarter of fiscal 2009 despite a 12% revenue decline.
 
•   Gross margin improved 560 basis points to 52.3% compared to 46.7% in the third quarter of fiscal 2009.
 
•   Operating income in the Americas region was 11.8% of revenues as gross margin improved 900 basis points to 46.7% from 37.7% in the third quarter of fiscal 2009.
 
•   Net debt at July 31, 2010, was $687 million, reduced by $183 million compared to $870 million at July 31, 2009.
Net revenues in the Americas decreased 9% during the third quarter of fiscal 2010 to $234.6 million from $256.8 million in the third quarter of fiscal 2009. As measured in U.S. dollars and reported in the financial statements, European net revenues decreased 20% during the third quarter of fiscal 2010 to $151.7 million from $189.0 million in the third quarter of fiscal 2009. In constant currency, European segment net revenues decreased 11% compared to the prior year. As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues decreased 1% to $54.5 million in the third quarter of fiscal 2010 from $55.1 million in the third quarter of fiscal 2009. In constant currency, Asia/Pacific segment net revenues decreased 10% compared to the prior year. Please refer

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 2 of 11
to the accompanying tables in order to better understand the impact of foreign currency exchange rates on revenue trends in our Europe and Asia/Pacific segments.
Consolidated inventories decreased 19% to $270.9 million at July 31, 2010 from $334.2 million at July 31, 2009. Consolidated trade accounts receivable decreased 20% to $340.9 million at July 31, 2010 from $424.2 million at July 31, 2009.
The Company reduced its total debt to approximately $843 million and had approximately $167 million of availability under its credit lines in addition to approximately $156 million of unrestricted cash at the end of the third quarter.
Shortly after the end of the third quarter the Company completed a debt-for-equity exchange with its investment partner Rhône Capital after receiving overwhelming support from stockholders in a special meeting vote. As a result of the transaction, the Company further reduced its quarter-end debt level by $140 million in exchange for approximately 31.1 million shares of Quiksilver common stock priced at $4.50 per share.
In a separate announcement today, the Company disclosed that it had amended and extended its asset-based line of credit in the Americas with Bank of America Merrill Lynch and GE Capital under substantially better terms.
Addressing its outlook for continuing operations, the Company stated that based on current trends, fourth quarter revenues are expected to be down in the mid-teens on a percentage basis compared to the same quarter a year ago and that it expects to generate earnings per share on a diluted basis in the mid-single-digit cents range.
About Quiksilver:
Quiksilver, Inc. (NYSE:ZQK) is the world’s leading outdoor sports lifestyle company, which designs, produces and distributes a diversified mix of branded apparel, footwear, accessories, snowboards and related products. The Company’s apparel and footwear brands represent a casual lifestyle for young-minded people that connect with its boardriding culture and heritage.
The reputation of Quiksilver’s brands is based on outdoor action sports. 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 and select department stores. Quiksilver’s corporate and Americas’ headquarters are in Huntington Beach, California, while its European headquarters are in St. Jean de Luz, France, and its Asia/Pacific headquarters are in Torquay, Australia.

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 3 of 11
Forward looking statements:
This press release contains forward-looking statements including but not limited to statements regarding the Company’s revenue guidance, diluted earnings per share guidance 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, 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., you are invited to take a look at our world at
www.quiksilver.com, www.roxy.com, www.dcshoes.com, www.lib-tech.com and www.hawkclothing.com.

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 4 of 11
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                 
    Three Months Ended July 31,  
In thousands, except per share amounts   2010     2009  
                 
Revenues, net
   $ 441,475     $ 501,394  
Cost of goods sold
     210,742       267,030  
 
            
Gross profit
     230,733       234,364  
 
                
Selling, general and administrative expense
     193,155       211,771  
Asset impairment
     3,225       —  
 
            
 
                
Operating income
     34,353       22,593  
 
                
Interest expense
     20,630       15,347  
Foreign currency loss
     213       3,473  
 
            
Income before provision for income taxes
     13,510       3,773  
 
                
Provision for income taxes
     5,096       396  
 
            
 
                
Income from continuing operations
     8,414       3,377  
Income (loss) from discontinued operations
     143       (2,067 )
 
            
Net income
     8,557       1,310  
Less: net (income) loss attributable to non-controlling interest
     (251 )     36  
 
            
Net income attributable to Quiksilver, Inc.
   $ 8,306     $ 1,346  
 
            
 
                
Income per share from continuing operations attributable to Quiksilver, Inc.
   $ 0.06     $ 0.03  
 
            
Income (loss) per share from discontinued operations attributable to Quiksilver, Inc.
   $ 0.00     $ (0.02 )
 
            
Net income per share attributable to Quiksilver, Inc.
   $ 0.06     $ 0.01  
 
            
 
                
Income per share from continuing operations attributable to Quiksilver, Inc., assuming dilution
   $ 0.05     $ 0.03  
 
            
Income (loss) per share from discontinued operations attributable to Quiksilver, Inc., assuming dilution
   $ 0.00     $ (0.02 )
 
            
Net income per share attributable to Quiksilver, Inc., assuming dilution
   $ 0.06     $ 0.01  
 
            
 
                
Weighted average common shares outstanding
     129,756       127,467  
 
            
 
                
Weighted average common shares outstanding, assuming dilution
     150,188       128,238  
 
            
 
                
Amounts attributable to Quiksilver, Inc.:
                
 
                
Income from continuing operations
   $ 8,163     $ 3,413  
Income (loss) from discontinued operations
     143       (2,067 )
 
            
Net income
   $ 8,306     $ 1,346  
 
            

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 5 of 11
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                 
    Nine Months Ended July 31,  
In thousands, except per share amounts   2010     2009  
                 
Revenues, net
   $ 1,342,501     $ 1,438,845  
Cost of goods sold
     640,332       764,200  
 
            
Gross profit
     702,169       674,645  
 
                
Selling, general and administrative expense
     609,731       621,178  
Asset impairment
     3,225       —  
 
            
 
                
Operating income
     89,213       53,467  
 
                
Interest expense
     63,542       43,053  
Foreign currency (gain) loss
     (6,380 )     6,829  
Other income
     —       (402 )
 
            
Income before provision for income taxes
     32,051       3,987  
 
                
Provision for income taxes
     18,189       60,505  
 
            
 
                
Income (loss) from continuing operations
   $ 13,862     $ (56,518 )
Income (loss) from discontinued operations
     821       (132,763 )
 
            
Net income (loss)
     14,683       (189,281 )
Less: net income attributable to non-controlling interest
     (2,307 )     (986 )
 
            
Net income (loss) attributable to Quiksilver, Inc.
   $ 12,376     $ (190,267 )
 
            
 
                
Income (loss) per share from continuing operations attributable to Quiksilver, Inc.
   $ 0.09     $ (0.45 )
 
            
Income (loss) per share from discontinued operations attributable to Quiksilver, Inc.
   $ 0.01     $ (1.04 )
 
            
Net income (loss) per share attributable to Quiksilver, Inc.
   $ 0.10     $ (1.49 )
 
            
 
                
Income (loss) per share from continuing operations attributable to Quiksilver, Inc., assuming dilution
   $ 0.08     $ (0.45 )
 
            
Income (loss) per share from discontinued operations attributable to Quiksilver, Inc., assuming dilution
   $ 0.01     $ (1.04 )
 
            
Net income (loss) per share attributable to Quiksilver, Inc., assuming dilution
   $ 0.09     $ (1.49 )
 
            
 
                
Weighted average common shares outstanding
     128,000       127,286  
 
            
 
                
Weighted average common shares outstanding, assuming dilution
     143,623       127,286  
 
            
 
                
Amounts attributable to Quiksilver, Inc.:
                
 
                
Income (loss) from continuing operations
   $ 11,555     $ (57,504 )
Income (loss) from discontinued operations
     821       (132,763 )
 
            
Net income (loss)
   $ 12,376     $ (190,267 )
 
            

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 6 of 11
CONSOLIDATED BALANCE SHEETS (Unaudited)
                 
    July 31,     July 31,  
In thousands   2010     2009  
                 
ASSETS
Current assets:
                
Cash and cash equivalents
   $ 155,653     $ 116,830  
Restricted cash
     —       50,054  
Trade accounts receivable, less allowance for doubtful accounts of $49,292 (2010) and $43,386 (2009)
     340,921       424,191  
Other receivables
     26,933       19,459  
Income taxes receivable
     5,249       —  
Inventories
     270,854       334,233  
Deferred income taxes — short-term
     39,871       101,807  
Prepaid expenses and other current assets
     41,968       39,874  
Current assets held for sale
     —       2,282  
 
            
Total current assets
     881,449       1,088,730  
 
                
Fixed assets, net
     217,528       237,069  
Intangible assets, net
     140,762       142,954  
Goodwill
     318,418       321,451  
Other assets
     67,568       62,271  
Deferred income taxes — long-term
     53,514       23,659  
 
            
Total assets
   $ 1,679,239     $ 1,876,134  
 
            
 
                
LIABILITIES & EQUITY
 
                
Current liabilities:
                
Lines of credit
   $ 24,651     $ 221,024  
Accounts payable
     208,515       219,536  
Accrued liabilities
     96,628       107,025  
Current portion of long-term debt
     59,089       82,363  
Income taxes payable
     —       28,313  
Current liabilities of assets held for sale
     799       579  
 
            
Total current liabilities
     389,682       658,840  
 
                
Long-term debt, net of current portion
     759,339       733,622  
Other long-term liabilities
     43,066       37,571  
 
            
Total liabilities
     1,192,087       1,430,033  
 
                
Equity:
                
Common stock
     1,357       1,312  
Additional paid-in capital
     379,538       366,852  
Treasury stock
     (6,778 )     (6,778 )
Retained earnings
     10,753       152  
Accumulated other comprehensive income
     92,620       79,065  
 
            
Total Quiksilver, Inc. stockholders’ equity
     477,490       440,603  
Non-controlling interest
     9,662       5,498  
 
            
Total equity
     487,152       446,101  
 
            
Total liabilities & equity
   $ 1,679,239     $ 1,876,134  
 
            

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 7 of 11
Information related to operating segments is as follows (unaudited):
                 
    Three Months Ended July 31,  
In thousands   2010     2009  
                 
Revenues, net:
                
Americas
   $ 234,630     $ 256,778  
Europe
     151,675       189,027  
Asia/Pacific
     54,504       55,090  
Corporate operations
     666       499  
 
            
 
   $ 441,475     $ 501,394  
 
            
 
                
Gross Profit:
                
Americas
   $ 109,594     $ 96,735  
Europe
     91,939       108,720  
Asia/Pacific
     28,728       29,603  
Corporate operations
     472       (694 )
 
            
 
   $ 230,733     $ 234,364  
 
            
 
                
SG&A Expense:
                
Americas
   $ 79,964     $ 92,273  
Europe
     76,215       83,732  
Asia/Pacific
     29,168       27,271  
Corporate operations
     7,808       8,495  
 
            
 
   $ 193,155     $ 211,771  
 
            
 
                
Asset Impairment:
                
Americas
   $ 1,939     $ —  
Europe
     100       —  
Asia/Pacific
     1,186       —  
Corporate operations
     —       —  
 
            
 
   $ 3,225     $ —  
 
            
 
                
Operating Income (Loss):
                
Americas
   $ 27,691     $ 4,462  
Europe
     15,624       24,988  
Asia/Pacific
     (1,626 )     2,332  
Corporate operations
     (7,336 )     (9,189 )
 
            
 
   $ 34,353     $ 22,593  
 
            

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 8 of 11
                 
    Nine Months Ended July 31,  
In thousands   2010     2009  
                 
Revenues, net:
                
Americas
   $ 621,324     $ 690,181  
Europe
     538,260       581,223  
Asia/Pacific
     180,201       164,979  
Corporate operations
     2,716       2,462  
 
            
 
   $ 1,342,501     $ 1,438,845  
 
            
 
                
Gross Profit:
                
Americas
   $ 283,606     $ 257,296  
Europe
     321,300       328,933  
Asia/Pacific
     97,171       89,142  
Corporate operations
     92       (726 )
 
            
 
   $ 702,169     $ 674,645  
 
            
 
                
SG&A Expense:
                
Americas
   $ 237,516     $ 273,300  
Europe
     247,979       241,557  
Asia/Pacific
     92,804       80,504  
Corporate operations
     31,432       25,817  
 
            
 
   $ 609,731     $ 621,178  
 
            
 
                
Asset Impairment:
                
Americas
   $ 1,939     $ —  
Europe
     100       —  
Asia/Pacific
     1,186       —  
Corporate operations
     —       —  
 
            
 
   $ 3,225     $ —  
 
            
 
                
Operating Income (Loss):
                
Americas
   $ 44,151     $ (16,004 )
Europe
     73,221       87,376  
Asia/Pacific
     3,181       8,638  
Corporate operations
     (31,340 )     (26,543 )
 
            
 
   $ 89,213     $ 53,467  
 
            

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 9 of 11
GAAP TO PRO-FORMA RECONCILIATION (Unaudited)
                 
    Three Months Ended  
    July 31,  
In thousands, except per share amounts   2010     2009  
                 
Income from continuing operations attributable to Quiksilver, Inc.
   $ 8,163     $ 3,413  
Restructuring charges, net of tax of $164 (2010) and $857 (2009)
     1,765       7,333  
Asset impairment, net of tax of $616 (2010) and $0 (2009)
     2,609       —  
Tax adjustment
     —       (7,003 )
 
            
Pro-forma income from continuing operations
   $ 12,537     $ 3,743  
 
            
 
                
Pro-forma income per share from continuing operations
   $ 0.10     $ 0.03  
 
            
 
                
Pro-forma income per share from continuing operations, assuming dilution
   $ 0.08     $ 0.03  
 
            
 
                
Weighted average common shares outstanding
     129,756       127,467  
 
            
 
                
Weighted average common shares outstanding, assuming dilution
     150,188       128,238  
 
            
                 
    Nine Months Ended  
    July 31,  
In thousands, except per share amounts   2010     2009  
                 
Income (loss) from continuing operations attributable to Quiksilver, Inc.
   $ 11,555     $ (57,504 )
Restructuring charges, net of tax of $271 (2010) and $1,416 (2009)
     7,612       15,105  
Asset impairment, net of tax of $616 (2010) and $0 (2009)
     2,609       —  
Stock compensation expense
     5,240       —  
Gain from sale of Raisins trademarks
     (1,252 )     —  
Tax adjustment
     —       (7,003 )
Effect of U.S. tax valuation allowance
     —       50,778  
 
            
Pro-forma income from continuing operations
   $ 25,764     $ 1,376  
 
            
 
                
Pro-forma income per share from continuing operations
   $ 0.20     $ 0.01  
 
            
 
                
Pro-forma income per share from continuing operations, assuming dilution
   $ 0.18     $ 0.01  
 
            
 
                
Weighted average common shares outstanding
     128,000       127,286  
 
            
 
                
Weighted average common shares outstanding, assuming dilution
     143,623       128,008  
 
            

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 10 of 11
ADJUSTED EBITDA and PRO-FORMA ADJUSTED EBITDA RECONCILIATION
(Unaudited)
                 
    Three Months Ended  
    July 31,  
In thousands   2010     2009  
                 
Income from continuing operations attributable to Quiksilver, Inc.
   $ 8,163     $ 3,413  
Provision for income taxes
     5,096       396  
Interest expense
     20,630       15,347  
Depreciation and amortization
     13,192       13,650  
Non-cash stock-based compensation expense
     1,279       3,047  
Non-cash asset impairment
     3,225       —  
 
            
Adjusted EBITDA
   $ 51,585     $ 35,853  
Restructuring and other special charges
     1,929       8,190  
 
            
Pro-forma Adjusted EBITDA
   $ 53,514     $ 44,043  
 
            
                 
    Nine Months Ended  
    July 31,  
In thousands   2010     2009  
                 
Income (loss) from continuing operations attributable to Quiksilver, Inc.
   $ 11,555     $ (57,504 )
Provision for income taxes
     18,189       60,505  
Interest expense
     63,542       43,053  
Depreciation and amortization
     40,215       40,388  
Non-cash stock-based compensation expense
     11,414       7,419  
Non-cash asset impairment
     3,225       —  
 
            
Adjusted EBITDA
   $ 148,140     $ 93,861  
Restructuring and other special charges
     6,631       16,521  
 
            
Pro-forma Adjusted EBITDA
   $ 154,771     $ 110,382  
 
            
Definition of Adjusted EBITDA:
Adjusted EBITDA is defined as income from continuing operations attributable to Quiksilver, Inc. before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) non-cash stock-based compensation expense and (v) asset impairments. Adjusted EBITDA is not defined under generally accepted accounting principles (“GAAP”), and it may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA, along with other GAAP measures, as a measure of profitability because Adjusted EBITDA helps us to compare our performance on a consistent basis by removing from our operating results the impact of our capital structure, the effect of operating in different tax jurisdictions, the impact of our asset base, which can differ depending on the book value of assets, the accounting methods used to compute depreciation and amortization, the existence or timing of asset impairments and the effect of non-cash stock-based compensation expense. We believe EBITDA is useful to investors as it is a widely used measure of performance and the adjustments we make to EBITDA provide further clarity on our profitability. We remove the effect of non-cash stock-based compensation from our earnings which can vary based on share price, share price volatility and expected life of the equity instruments we grant. In addition, this stock-based compensation expense does not result in cash payments by us. We remove the effect of asset impairments from

 

 

(QUIKSILVER LOGO)
Quiksilver, Inc. Reports Fiscal 2010 Third Quarter Financial Results
September 2, 2010
Page 11 of 11
Adjusted EBITDA for the same reason that we remove depreciation and amortization as it is part of the impact of our asset base. Adjusted EBITDA has limitations as a profitability measure in that it does not include the interest expense on our debts, our provisions for income taxes, the effect of our expenditures for capital assets and certain intangible assets, the effect of non-cash stock-based compensation expense and the effect of asset impairments.
SUPPLEMENTAL EXCHANGE RATE INFORMATION
(Unaudited)
In order to better understand growth rates in our foreign operating segments, we make reference to constant currency. Constant currency reporting improves visibility into actual growth rates as it adjusts for the effect of changing foreign currency exchange rates from period to period. Constant currency is calculated by taking the ending foreign currency exchange rate (for balance sheet items) or the average foreign currency exchange rate (for income statement items) used in translation for the current period and applying that same rate to the prior period. Our European segment is translated into constant currency using euros and our Asia/Pacific segment is translated into constant currency using Australian dollars as these are the primary functional currencies of each reporting segment. As such, this methodology does not account for movements in individual currencies within an operating segment (for example, non-euro currencies within our European segment). A constant currency translation methodology that accounts for movements in each individual currency could yield a different result compared to using only euros and Australian dollars. The following table presents revenues by segment in both historical currency and constant currency for the three months ended July 31, 2009 and 2010 (in thousands):
                                         
Historical currency (as reported)   Americas   Europe   Asia/Pacific   Corporate   Total
                                         
July 31, 2009
   $ 256,778     $ 189,027     $ 55,090     $ 499     $ 501,394  
July 31, 2010
     234,630       151,675       54,504       666       441,475  
Percentage decrease
     (9 %)     (20 %)     (1 %)             (12 %)
 
                                        
Constant currency (current year exchange rates)
                                        
 
                                        
July 31, 2009
     256,778       170,342       60,588       499       488,207  
July 31, 2010
     234,630       151,675       54,504       666       441,475  
Percentage decrease
     (9 %)     (11 %)     (10 %)             (10 %)