EX-99.1 3 a50569exv99w1.htm EX-99.1 exv99w1
EX-99.01
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following pro forma consolidated financial information is based on the historical financial statements of Quiksilver, Inc. and its subsidiaries (the “Company”), including certain pro forma adjustments, and has been prepared to illustrate the pro forma effect of the disposition of the Cleveland Golf business and Rossignol group.  The Company has previously reported operating results of the Cleveland Golf business as discontinued operations in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2007 and in the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended January 31, 2008, April 30, 2008 and July 31, 2008. The Company also has previously reported operating results of the Rossignol group as discontinued operations in the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended April 30, 2008 and July 31, 2008.
In the fourth fiscal quarter of 2007, Quiksilver reported the operating results of the Cleveland Golf business as discontinued operations and restated the fiscal 2007, 2006, and 2005 operating results to show the effect on the consolidated financial statements as part of the Form 10-K disclosure requirements. The Company subsequently sold the Cleveland Golf business in the first fiscal quarter of 2008, thus the reported historical financial statements herein assume that the disposition of the Cleveland Golf business occurred prior to those periods.
The unaudited pro forma consolidated statements of operations for the nine months ended July 31, 2008 and for the fiscal years ended October 31, 2007, 2006 and 2005 assume that the disposition of the Rossignol group occurred prior to those periods. The statements of operations do not include any gain or loss on the sale or costs associated with the sale of the business. The unaudited pro forma consolidated balance sheet as of July 31, 2008 is presented as if the disposition of the Rossignol group had occurred as of that date.
The unaudited pro forma consolidated financial information has been prepared based upon available information and management estimates; actual amounts may differ from these estimated amounts. The unaudited pro forma consolidated financial statements are not necessarily indicative of the financial position or results of operations that might have occurred had the disposition occurred as of the dates stated above. The pro forma adjustments are described in the notes to the pro forma financial statements.
The unaudited pro forma consolidated financial information should be read in conjunction with the audited financial statements and notes and related Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2007 and unaudited interim financial statements and the related MD&A included in the July 31, 2008 Form 10-Q.

 

 

QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 2008
(In thousands, except per Common Share amounts)
                         
    As Reported     Unaudited     Unaudited  
    Unaudited Net     Pro Forma     Pro Forma  
    of Rossignol and     Adjustments     Statement of  
    Cleveland Golf     Rossignol     Operations  
Revenues, net
   $ 1,657,737     $ ¾     $ 1,657,737  
Cost of goods sold
     829,042       ¾       829,042  
 
                  
Gross profit
     828,695       ¾       828,695  
 
                        
Selling, general and administrative expense
     684,304       ¾       684,304  
Asset impairments
     350       ¾       350  
 
                  
Operating income
     144,041       ¾       144,041  
 
                        
Interest expense
     35,845       ¾       35,845  
Foreign currency gain
     (463 )     ¾       (463 )
Minority interest and other expense
     18       ¾       18  
 
                  
Income before provision for income taxes
     108,641       ¾       108,641  
 
                        
Provision for income taxes
     29,273       ¾       29,273  
 
                  
Net income from continuing operations
   $ 79,368     $ ¾     $ 79,368  
 
                  
 
                        
Income per share from continuing operations
   $ 0.63     $ ¾     $ 0.63  
 
                  
 
                        
Income per share from continuing operations, assuming dilution
   $ 0.61     $ ¾     $ 0.61  
 
                  
 
                        
Weighted average common shares outstanding
     125,511       ¾       125,511  
 
                  
Weighted average common shares outstanding, assuming dilution
     129,765       ¾       129,765  
 
                  

 

 

QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2007
(In thousands, except per Common Share amounts)
                         
            Unaudited     Unaudited  
            Pro Forma     Pro Forma  
    As Reported Net of     Adjustments     Statement of  
    Cleveland Golf     Rossignol     Operations  
Revenues, net
   $ 2,426,035     $ (378,963 )  a $ 2,047,072  
Cost of goods sold
     1,303,794       (241,767 )  a   1,062,027  
 
                  
Gross profit
     1,122,241       (137,196 )     985,045  
 
                        
Selling, general and administrative expense
     971,411       (189,148 )  a   782,263  
Asset impairments
     166,352       (166,352 )  a   ¾  
 
                  
Operating income
     (15,522 )     218,304       202,782  
 
                        
Interest expense
     57,023       (10,452 )  a   46,571  
Foreign currency loss
     1,777       3,080    a   4,857  
Minority interest and other expense
     121       ¾       121  
 
                  
Income before provision for income taxes
     (74,443 )     225,676       151,233  
 
                        
Provision for income taxes
     24,205       10,301    a   34,506  
 
                  
Net income from continuing operations
   $ (98,648 )   $ 215,375     $ 116,727  
 
                  
 
                        
(Loss) income per share from continuing operations
   $ (0.80 )   $ 1.74    a $ 0.94  
 
                  
 
                        
(Loss) income per share from continuing operations, assuming dilution
   $ (0.80 )   $ 1.70    a $ 0.90  
 
                  
 
                        
Weighted average common shares outstanding
     123,770       ¾       123,770  
 
                  
Weighted average common shares outstanding, assuming dilution
     123,770       5,936   b   129,706  
 
                  

 

 

QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2006
(In thousands, except per Common Share amounts)
                         
            Unaudited     Unaudited  
            Pro Forma     Pro Forma  
    As Reported Net of     Adjustments     Statement of  
    Cleveland Golf     Rossignol     Operations  
Revenues, net
   $ 2,200,234     $ (478,084 )  a $ 1,722,150  
Cost of goods sold
     1,193,938       (284,381 )  a   909,557  
 
                  
Gross profit
     1,006,296       (193,703 )     812,593  
 
                        
Selling, general and administrative expense
     827,025       (178,318 )  a   648,707  
 
                  
Operating income
     179,271       (15,385 )     163,886  
 
                        
Interest expense
     47,444       (6,127 )  a   41,317  
Foreign currency loss (gain)
     8       (299 )  a   (291 )
Minority interest and other expense
     303       ¾       303  
 
                  
Income before provision for income taxes
     131,516       (8,959 )     122,557  
 
                        
Provision for income taxes
     37,413       (4,232 )  a   33,181  
 
                  
Net income from continuing operations
   $ 94,103     $ (4,727 )   $ 89,376  
 
                  
 
                        
Income per share from continuing operations
   $ 0.77     $ (0.04 )  a $ 0.73  
 
                  
 
                        
Income per share from continuing operations, assuming dilution
   $ 0.74     $ (0.04 )  a $ 0.70  
 
                  
 
                        
Weighted average common shares outstanding
     122,074       ¾       122,074  
 
                  
Weighted average common shares outstanding, assuming dilution
     127,744       ¾       127,744  
 
                  

 

 

QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005
(In thousands, except per Common Share amounts)
                         
            Unaudited     Unaudited  
            Pro Forma     Pro Forma  
    As Reported Net of     Adjustments     Statement of  
    Cleveland Golf     Rossignol     Operations  
Revenues, net
   $ 1,734,528     $ (172,111 )  a $ 1,562,417  
Cost of goods sold
     945,982       (102,449 )  a   843,533  
 
                  
Gross profit
     788,546       (69,662 )     718,884  
 
                        
Selling, general and administrative expense
     607,450       (48,512 )  a   558,938  
 
                  
Operating income
     181,096       (21,150 )     159,946  
 
                        
Interest expense
     20,825       (3,880 )  a   16,945  
Foreign currency gain
     (160 )     30    a   (130 )
Minority interest and other expense
     365       23    a   388  
 
                  
Income before provision for income taxes
     160,066       (17,323 )     142,743  
 
                        
Provision for income taxes
     51,776       (5,188 )  a   46,588  
 
                  
Net income from continuing operations
   $ 108,290     $ (12,135 )   $ 96,155  
 
                  
 
                        
Income per share from continuing operations
   $ 0.91     $ (0.10 )  a $ 0.81  
 
                  
 
                        
Income per share from continuing operations, assuming dilution
   $ 0.87     $ (0.10 )  a $ 0.77  
 
                  
 
                        
Weighted average common shares outstanding
     118,920       ¾       118,920  
 
                  
Weighted average common shares outstanding, assuming dilution
     124,335       ¾       124,335  
 
                  

 

 

QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JULY 31, 2008
(In thousands)
                         
    As Reported     Unaudited        
    Unaudited Net     Pro Forma     Unaudited  
    of Rossignol and     Adjustments     Pro Forma  
    Cleveland Golf     Rossignol     Balance Sheet  
ASSETS
                        
Current assets:
                        
Cash and cash equivalents
   $ 99,491     $ 45,786   c $ 145,277  
Trade accounts receivable, net
     491,369       ¾       491,369  
Other receivables
     18,893       ¾       18,893  
Inventories
     358,646       ¾       358,646  
Deferred income taxes
     100,777       ¾       100,777  
Prepaid expenses and other current assets
     29,221       ¾       29,221  
Current assets held for sale
     358,832       (340,697 )  e   18,135  
 
                  
Total current assets
     1,457,229       (294,911 )     1,162,318  
 
                        
Fixed assets, net
     258,920       ¾       258,920  
Intangible assets, net
     146,862       ¾       146,862  
Goodwill
     417,486       ¾       417,486  
Other assets
     44,892       9,351   d   54,243  
Deferred income taxes long-term
     14,007       39,733   i   53,740  
 
                  
Total assets
   $ 2,339,396     $ (245,827 )   $ 2,093,569  
 
                  
 
                        
LIABILITIES AND STOCKHOLDERS’ EQUITY
                        
Current liabilities:
                        
Lines of credit
   $ 274,685     $ ¾     $ 274,685  
Accounts payable
     251,623       ¾       251,623  
Accrued liabilities
     129,803       8,379    f   138,182  
Current portion of long-term debt
     35,584       ¾       35,584  
Income taxes payable
     13,447       ¾       13,447  
Current liabilities related to assets held for sale
     144,882       (136,013)    e   8,869  
 
                  
Total current liabilities
     850,024       (127,634 )     722,390  
 
                        
Long-term debt, net of current portion
     744,127       ¾       744,127  
Other long-term liabilities
     37,164       ¾       37,164  
Non-current liabilities related to assets held for sale
     7,736       (7,736 )  e   ¾  
 
                  
Total liabilities
     1,639,051       (135,370 )     1,503,681  
 
                  
 
                        
Stockholders’ equity
                        
Preferred stock, $.01 par value, authorized shares – 5,000,000; issued and outstanding shares – none
     ¾       ¾       ¾  
Common stock, $.01 par value, authorized shares – 185,000,000; issued shares – 130,579,766
     1,306       ¾       1,306  
Additional paid-in capital
     331,269       ¾       331,269  
Treasury stock, 2,885,200 shares
     (6,778 )     ¾       (6,778 )
Retained earnings
     191,374       (60,130 )  h   131,244  
Accumulated other comprehensive income
     183,174       (50,327 )  g   132,847  
 
                  
Total stockholders’ equity
     700,345       (110,457 )     589,888  
 
                  
Total liabilities and stockholders’ equity
   $ 2,339,396     $ (245,827 )   $ 2,093,569  
 
                  

 

 

QUIKSILVER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
          The accompanying unaudited pro forma consolidated financial statements give effect to the pro forma adjustments necessary to reflect the disposition of the Cleveland Golf business and Rossignol group as if the disposition occurred at the beginning of the periods presented in the pro forma statements of earnings and as of October 31, 2007 in the pro forma balance sheet. In accordance with Regulation S-X under the Securities Act, the pro forma statements of earnings present earnings from continuing operations before nonrecurring charges and therefore exclude historical losses from discontinued operations of $304.7 million for the nine months ended July 31, 2008, historical losses from discontinued operations of $237.8 million for the fiscal year ended October 31, 2007 and historical earnings from discontinued operations of $3.6 million and $11.0 million for the fiscal years ended October 31, 2006 and 2005, respectively.
2. PRO FORMA ADJUSTMENTS
          The unaudited pro forma consolidated statements of earnings and balance sheet reflect the effect of the following pro forma adjustments:
  a)   Reduction of revenue and expenses are the result of the disposition of the Cleveland Golf business and the Rossignol group.
 
  b)   Because the adjusted statement of operations reflects net income after pro forma adjustments, this adjustment restores the dilutive effect of the weighted average common shares outstanding.
 
  c)   Cash proceeds received of €30 million net of purchase price adjustments and Rossignol debt assumed as part of the transaction included as a reduction cash as of July 31, 2008. The Company plans to use the net proceeds from the sale of the Rossignol group to pay down outstanding debt.
 
  d)   Seller’s note received of €10 million discounted to net present value and included as a long-term asset as of July 31, 2008.
 
  e)   The elimination of assets and liabilities associated with the Cleveland Golf and Rossignol businesses included in the Company’s historical consolidated financial statements.
 
  f)   The Company’s estimate of the total costs before taxes to be incurred in connection with the sale of the Rossignol group yet to be paid, which includes transaction costs, employee related costs, and other costs. The amount is reflected as an increase to accrued liabilities.
 
  g)   Foreign currency translation gains from the Rossignol group of approximately $50.5 million, partially offset by $0.2 million of losses on cash flow hedges and interest rate swaps. The amount is included as a reduction to accumulated other comprehensive income as of July 31, 2008.
 
  h)   Net loss on sale of the Rossignol group, reflected as a reduction of retained earnings as of July 31, 2008. The actual sale of the Rossignol group occurred on November 12, 2008. The excess of net working capital over net transaction value on the closing date will be recorded as a loss in the first quarter of fiscal 2009. This loss will be materially higher than the loss reflected in the pro forma balance sheet herein, based upon seasonality.
 
  i)   Reflects the tax benefit affecting the pro forma financial statements assuming the sale of the Rossignol group on July 31, 2008.