Condensed Consolidating Financial Information

3 Months Ended

Jan. 31, 2012

Condensed Consolidating Financial Information [Abstract]

Condensed Consolidating Financial Information

13. Condensed Consolidating Financial Information

The Company has $400 million in publicly registered senior notes. Obligations under the Company’s senior notes are fully and unconditionally guaranteed by certain of its domestic subsidiaries. The Company is required to present condensed consolidating financial information for Quiksilver, Inc. and its domestic subsidiaries within the notes to the condensed consolidated financial statements in accordance with the criteria established for parent companies in the SEC’s Regulation S-X, Rule 3-10(f). The following condensed consolidating financial information presents the results of operations, financial position and cash flows of Quiksilver Inc., its guarantor subsidiaries, its non-guarantor subsidiaries and the eliminations necessary to arrive at the information for the Company on a consolidated basis as of January 31, 2012 and October 31, 2011 and for the three months ended January 31, 2012 and 2011. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. The Company has applied the estimated consolidated annual effective income tax rate to both the guarantor and non-guarantor subsidiaries, adjusting for any discrete items, for interim reporting purposes. In the Company’s consolidated financial statements for the fiscal year ending October 31, 2012, management will apply the actual income tax rates to both the guarantor and non-guarantor subsidiaries. These interim tax rates may differ from the actual annual effective income tax rates for both the guarantor and non-guarantor subsidiaries.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended January 31, 2012

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	116		$	171,377		$	305,027		$	(26,899	)	$	449,621
Cost of goods sold		—			105,206			136,183			(19,718	)		221,671
Gross profit		116			66,171			168,844			(7,181	)		227,950
Selling, general and administrative expense		16,916			77,497			143,045			(7,043	)		230,415
Operating (loss) income		(16,800	)		(11,326	)		25,799			(138	)		(2,465	)
Interest expense		7,240			1,294			6,511			—			15,045
Foreign currency gain		(126	)		(203	)		(1,521	)		—			(1,850	)
Equity in earnings		(1,309	)		—			—			1,309			—
(Loss) income before provision for income taxes		(22,605	)		(12,417	)		20,809			(1,447	)		(15,660	)
Provision for income taxes		—			216			5,034			—			5,250
Net (loss) income		(22,605	)		(12,633	)		15,775			(1,447	)		(20,910	)
Less: net income attributable to non-controlling interest		—			(1,315	)		(380	)		—			(1,695	)
Net (loss) income attributable to Quiksilver, Inc.	$	(22,605	)	$	(13,948	)	$	15,395		$	(1,447	)	$	(22,605	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended January 31, 2011

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	116		$	150,637		$	285,569		$	(9,872	)	$	426,450
Cost of goods sold		—			82,407			124,409			(3,836	)		202,980
Gross profit		116			68,230			161,160			(6,036	)		223,470
Selling, general and administrative expense		9,904			71,611			134,540			(5,619	)		210,436
Operating (loss) income		(9,788	)		(3,381	)		26,620			(417	)		13,034
Interest expense		7,211			849			20,908			—			28,968
Foreign currency (gain) loss		(51	)		140			(2,198	)		—			(2,109	)
Equity in earnings and other income		(680	)		—			—			680			—
(Loss) income before provision for income taxes		(16,268	)		(4,370	)		7,910			(1,097	)		(13,825	)
Provision for income taxes		—			55			1,196			—			1,251
Net (loss) income		(16,268	)		(4,425	)		6,714			(1,097	)		(15,076	)
Less: net income attributable to non-controlling interest		—			(1,192	)		—			—			(1,192	)
Net (loss) income attributable to Quiksilver, Inc.	$	(16,268	)	$	(5,617	)	$	6,714		$	(1,097	)	$	(16,268	)

CONDENSED CONSOLIDATING BALANCE SHEET

At January 31, 2012

In thousands	Quiksilver, Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	327	$	255		$	93,853		$	—		$	94,435
Trade accounts receivable, net		—		120,934			200,851			—			321,785
Other receivables		136		5,603			17,487			—			23,226
Inventories		—		134,433			279,846			(1,988	)		412,291
Deferred income taxes		—		(1,182	)		25,026			—			23,844
Prepaid expenses and other current assets		2,554		6,857			24,191			—			33,602
Total current assets		3,017		266,900			641,254			(1,988	)		909,183
Fixed assets, net		17,393		68,232			149,912			—			235,537
Intangible assets, net		2,996		48,519			85,849			—			137,364
Goodwill		—		112,216			154,915			—			267,131
Other assets		4,079		3,652			51,250			—			58,981
Deferred income taxes long-term		—		(16,682	)		125,151			—			108,469
Investment in subsidiaries		1,064,014		—			—			(1,064,014	)		—
Total assets	$	1,091,499	$	482,837		$	1,208,331		$	(1,066,002	)	$	1,716,665
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	—	$	—		$	6,267		$	—		$	6,267
Accounts payable		1,764		100,117			123,558			—			225,439
Accrued liabilities		12,682		26,056			70,444			—			109,182
Current portion of long-term debt		—		3,000			1,444			—			4,444
Income taxes payable		—		(2,207	)		16,760			—			14,553
Intercompany balances		101,564		(93,314	)		(8,250	)		—			—
Total current liabilities		116,010		33,652			210,223			—			359,885
Long-term debt, net of current portion		400,000		34,149			295,085			—			729,234
Other long-term liabilities		—		21,223			15,127			—			36,350
Total liabilities		516,010		89,024			520,435			—			1,125,469
Stockholders’/invested equity		575,489		380,297			685,705			(1,066,002	)		575,489
Non-controlling interest		—		13,516			2,191			—			15,707
Total liabilities and equity	$	1,091,499	$	482,837		$	1,208,331		$	(1,066,002	)	$	1,716,665

CONDENSED CONSOLIDATING BALANCE SHEET

At October 31, 2011

In thousands	Quiksilver, Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	17	$	1,331		$	108,405		$	—		$	109,753
Trade accounts receivable, net		—		150,782			246,307			—			397,089
Other receivables		122		5,918			17,150			—			23,190
Income taxes receivable		—		21,338			(17,073	)		—			4,265
Inventories		—		115,456			234,266			(1,965	)		347,757
Deferred income taxes		—		(1,182	)		33,990			—			32,808
Prepaid expenses and other current assets		2,378		8,525			14,526			—			25,429
Total current assets		2,517		302,168			637,571			(1,965	)		940,291
Fixed assets, net		17,602		64,943			155,562			—			238,107
Intangible assets, net		3,007		48,743			86,393			—			138,143
Goodwill		—		112,216			156,373			—			268,589
Other assets		4,457		3,936			47,421			—			55,814
Deferred income taxes long-term		—		(16,682	)		139,961			—			123,279
Investment in subsidiaries		1,082,427		—			—			(1,082,427	)		—
Total assets	$	1,110,010	$	515,324		$	1,223,281		$	(1,084,392	)	$	1,764,223
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	—	$	—		$	18,335		$	—		$	18,335
Accounts payable		2,510		88,280			112,233			—			203,023
Accrued liabilities		6,673		30,088			96,183			—			132,944
Current portion of long-term debt		—		3,000			1,628			—			4,628
Intercompany balances		90,729		(44,001	)		(46,728	)		—			—
Total current liabilities		99,912		77,367			181,651			—			358,930
Long-term debt, net of current portion		400,000		36,542			288,181			—			724,723
Other long-term liabilities		—		41,219			16,729			—			57,948
Total liabilities		499,912		155,128			486,561			—			1,141,601
Stockholders’/invested equity		610,098		347,995			736,397			(1,084,392	)		610,098
Non-controlling interest		—		12,201			323			—			12,524
Total liabilities and equity	$	1,110,010	$	515,324		$	1,223,281		$	(1,084,392	)	$	1,764,223

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended January 31, 2012

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(22,605	)	$	(12,633	)	$	15,775		$	(1,447	)	$	(20,910	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		636			4,607			7,719			—			12,962
Stock-based compensation		6,977			—			—			—			6,977
Provision for doubtful accounts		—			(2,600	)		918			—			(1,682	)
Equity in earnings		(1,309	)		—			(195	)		1,309			(195	)
Non-cash interest expense		366			527			170			—			1,063
Deferred income taxes		—			—			3,354			—			3,354
Other adjustments to reconcile net (loss) income		(125	)		5			(1,007	)		—			(1,127	)
Changes in operating assets and liabilities:
Trade accounts receivable		—			32,448			34,758			—			67,206
Inventories		—			(19,307	)		(51,984	)		138			(71,153	)
Other operating assets and liabilities		4,390			8,611			(5,620	)		—			7,381
Net cash (used in) provided by operating activities		(11,670	)		11,658			3,888			—			3,876
Cash flows from investing activities:
Capital expenditures		(434	)		(7,494	)		(8,558	)		—			(16,486	)
Business acquisitions, net of cash acquired		—			—			(9,117	)		—			(9,117	)
Net cash used in investing activities		(434	)		(7,494	)		(17,675	)		—			(25,603	)
Cash flows from financing activities:
Borrowings on lines of credit		—			—			—			—			—
Payments on lines of credit		—			—			(11,448	)		—			(11,448	)
Borrowings on long-term debt		—			18,000			29,442			—			47,442
Payments on long-term debt		—			(20,500	)		(2,128	)		—			(22,628	)
Stock option exercises and employee stock purchases		779			—			—			—			779
Intercompany		11,635			(2,740	)		(8,895	)		—			—
Net cash provided by (used in) financing activities		12,414			(5,240	)		6,971			—			14,145
Effect of exchange rate changes on cash		—			—			(7,736	)		—			(7,736	)
Net increase (decrease) in cash and cash equivalents		310			(1,076	)		(14,552	)		—			(15,318	)
Cash and cash equivalents, beginning of period		17			1,331			108,405			—			109,753
Cash and cash equivalents, end of period	$	327		$	255		$	93,853		$	—		$	94,435

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended January 31, 2011

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(16,268	)	$	(4,425	)	$	6,714		$	(1,097	)	$	(15,076	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		461			5,256			8,283			—			14,000
Stock-based compensation		2,410			—			—			—			2,410
Provision for doubtful accounts		—			485			973			—			1,458
Equity in earnings		(680	)		(158	)		(236	)		680			(394	)
Non-cash interest expense		341			425			15,394			—			16,160
Deferred income taxes		—			—			(244	)		—			(244	)
Other adjustments to reconcile net (loss) income		(51	)		31			293			—			273
Changes in operating assets and liabilities:
Trade accounts receivable		—			24,456			51,737			—			76,193
Inventories		—			(13,394	)		(29,226	)		417			(42,203	)
Other operating assets and liabilities		4,068			9,239			8,535			—			21,842
Net cash (used in) provided by operating activities		(9,719	)		21,915			62,223			—			74,419
Cash flows from investing activities:
Capital expenditures		(3,387	)		(6,918	)		(7,974	)		—			(18,279	)
Net cash used in investing activities		(3,387	)		(6,918	)		(7,974	)		—			(18,279	)
Cash flows from financing activities:
Borrowings on lines of credit		—			—			9,929			—			9,929
Payments on lines of credit		—			—			(16,976	)		—			(16,976	)
Borrowings on long-term debt		—			—			270,137			—			270,137
Payments on long-term debt		—			—			(257,138	)		—			(257,138	)
Payments of debt issuance costs		—			—			(6,155	)		—			(6,155	)
Stock option exercises, employee stock purchases and tax benefit on option exercises		2,842			—			—			—			2,842
Intercompany		10,788			(22,326	)		11,538			—			—
Net cash provided by (used in) financing activities		13,630			(22,326	)		11,335			—			2,639
Effect of exchange rate changes on cash		—			—			(2,180	)		—			(2,180	)
Net increase (decrease) in cash and cash equivalents		524			(7,329	)		63,404			—			56,599
Cash and cash equivalents, beginning of period		164			39,172			81,257			—			120,593
Cash and cash equivalents, end of period	$	688		$	31,843		$	144,661		$	—		$	177,192