Condensed Consolidating Financial Information

3 Months Ended

Apr. 30, 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 for the three and six months ended April 30, 2012 and 2011, the financial position as of April 30 2012 and October 31, 2011, and cash flows for the three and six month periods ended April 30, 2012 and 2011 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. 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 April 30, 2012

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	120		$	185,686		$	328,589		$	(22,182	)	$	492,213
Cost of goods sold		—			109,044			155,662			(14,642	)		250,064
Gross profit		120			76,642			172,927			(7,540	)		242,149
Selling, general and administrative expense		12,869			74,934			144,422			(8,215	)		224,010
Asset impairments		—			415			—			—			415
Operating (loss) income		(12,749	)		1,293			28,505			675			17,724
Interest expense		7,239			1,391			6,955			—			15,585
Foreign currency loss (gain)		13			212			(834	)		—			(609	)
Equity in earnings and other income		(14,881	)		—			—			14,881			—
(Loss) income before provision for income taxes		(5,120	)		(310	)		22,384			(14,206	)		2,748
Provision for income taxes		—			216			6,939			—			7,155
Net (loss) income		(5,120	)		(526	)		15,445			(14,206	)		(4,407	)
Less: net (income) loss attributable to non-controlling interest		—			(805	)		92			—			(713	)
Net (loss) income attributable to Quiksilver, Inc.	$	(5,120	)	$	(1,331	)	$	15,537		$	(14,206	)	$	(5,120	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Three Months Ended April 30, 2011

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	116		$	165,411		$	322,977		$	(10,411	)	$	478,093
Cost of goods sold		—			85,076			134,565			(3,717	)		215,924
Gross profit		116			80,335			188,412			(6,694	)		262,169
Selling, general and administrative expense		8,690			73,286			141,614			(6,842	)		216,748
Asset impairments		—			465			74,145			—			74,610
Operating (loss) income		(8,574	)		6,584			(27,347	)		148			(29,189	)
Interest expense		7,210			924			6,962			—			15,096
Foreign currency loss (gain)		108			261			(2,690	)		—			(2,321	)
Equity in earnings and other income		67,433			—			—			(67,433	)		—
(Loss) income before (benefit) provision for income taxes		(83,325	)		5,399			(31,619	)		67,581			(41,964	)
(Benefit) provision for income taxes		—			(1,894	)		41,584			—			39,690
Net (loss) income		(83,325	)		7,293			(73,203	)		67,581			(81,654	)
Less: net income attributable to non-controlling interest		—			(1,671	)		—			—			(1,671	)
Net (loss) income attributable to Quiksilver, Inc.	$	(83,325	)	$	5,622		$	(73,203	)	$	67,581		$	(83,325	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended April 30, 2012

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	236		$	357,063		$	633,616		$	(49,081	)	$	941,834
Cost of goods sold		—			214,250			291,845			(34,360	)		471,735
Gross profit		236			142,813			341,771			(14,721	)		470,099
Selling, general and administrative expense		29,785			152,431			287,467			(15,258	)		454,425
Asset impairments		—			415			—			—			415
Operating (loss) income		(29,549	)		(10,033	)		54,304			537			15,259
Interest expense		14,479			2,685			13,466			—			30,630
Foreign currency (gain) loss		(113	)		9			(2,355	)		—			(2,459	)
Equity in earnings and other income		(16,190	)		—			—			16,190			—
(Loss) income before provision for income taxes		(27,725	)		(12,727	)		43,193			(15,653	)		(12,912	)
Provision for income taxes		—			432			11,973			—			12,405
Net (loss) income		(27,725	)		(13,159	)		31,220			(15,653	)		(25,317	)
Less: net income attributable to non-controlling interest		—			(2,121	)		(287	)		—			(2,408	)
Net (loss) income attributable to Quiksilver, Inc.	$	(27,725	)	$	(15,280	)	$	30,933		$	(15,653	)	$	(27,725	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

Six Months Ended April 30, 2011

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	232		$	316,048		$	608,546		$	(20,283	)	$	904,543
Cost of goods sold		—			167,483			258,974			(7,553	)		418,904
Gross profit		232			148,565			349,572			(12,730	)		485,639
Selling, general and administrative expense		18,594			144,897			276,154			(12,461	)		427,184
Asset impairments		—			465			74,145			—			74,610
Operating (loss) income		(18,362	)		3,203			(727	)		(269	)		(16,155	)
Interest expense		14,421			1,773			27,870			—			44,064
Foreign currency loss (gain)		57			401			(4,888	)		—			(4,430	)
Equity in earnings and other income		66,753			—			—			(66,753	)		—
(Loss) income before (benefit) provision for income taxes		(99,593	)		1,029			(23,709	)		66,484			(55,789	)
(Benefit) provision for income taxes		—			(1,839	)		42,780			—			40,941
Net (loss) income		(99,593	)		2,868			(66,489	)		66,484			(96,730	)
Less: net income attributable to non-controlling interest		—			(2,863	)		—			—			(2,863	)
Net (loss) income attributable to Quiksilver, Inc.	$	(99,593	)	$	5		$	(66,489	)	$	66,484		$	(99,593	)

CONDENSED CONSOLIDATING BALANCE SHEET

At April 30, 2012

In thousands	Quiksilver, Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	23	$	1,933		$	77,221		$	—		$	79,177
Trade accounts receivable, net		—		126,304			244,670			—			370,974
Other receivables		3		5,024			21,223			—			26,250
Inventories		—		129,058			230,652			(795	)		358,915
Deferred income taxes, short-term		—		(1,182	)		18,934			—			17,752
Prepaid expenses and other current assets		2,487		10,676			18,534			—			31,697
Total current assets		2,513		271,813			611,234			(795	)		884,765
Fixed assets, net		17,983		69,831			152,610			—			240,424
Intangible assets, net		3,056		48,313			85,843			—			137,212
Goodwill		—		112,216			156,124			—			268,340
Other assets		3,598		3,581			47,769			—			54,948
Deferred income taxes, long-term		—		(16,682	)		127,434			—			110,752
Investment in subsidiaries		1,076,814		—			—			(1,076,814	)		—
Total assets	$	1,103,964	$	489,072		$	1,181,014		$	(1,077,609	)	$	1,696,441
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	—	$	—		$	13,517		$	—		$	13,517
Accounts payable		2,779		86,378			101,490			—			190,647
Accrued liabilities		4,308		26,134			78,328			—			108,770
Long-term debt, current portion		—		3,000			19,840			—			22,840
Income taxes payable		—		(5,818	)		8,886			—			3,068
Intercompany balances		122,356		(76,339	)		(46,017	)		—			—
Total current liabilities		129,443		33,355			176,044			—			338,842
Long-term debt, net of current portion		400,000		64,255			268,661			—			732,916
Other long-term liabilities		—		21,227			12,563			—			33,790
Total liabilities		529,443		118,837			457,268			—			1,105,548
Stockholders’/invested equity		574,521		355,914			721,695			(1,077,609	)		574,521
Non-controlling interest		—		14,321			2,051			—			16,372
Total liabilities and equity	$	1,103,964	$	489,072		$	1,181,014		$	(1,077,609	)	$	1,696,441

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, current portion		—		(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
Long-term debt, current portion		—		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

Six Months Ended April 30, 2012

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(27,725	)	$	(13,159	)	$	31,220		$	(15,653	)	$	(25,317	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		1,138			9,082			16,905			—			27,125
Stock-based compensation		12,400			—			—			—			12,400
Provision for doubtful accounts		—			(1,416	)		1,835			—			419
Asset impairments		—			310			105			—			415
Equity in earnings		(16,190	)		—			501			16,190			501
Non-cash interest expense		732			888			344			—			1,964
Deferred income taxes		—			—			9,295			—			9,295
Other adjustments to reconcile net (loss) income		(138	)		12			(586	)		—			(712	)
Changes in operating assets and liabilities:
Trade accounts receivable		—			25,895			(8,184	)		—			17,711
Inventories		—			(14,290	)		(3,695	)		(537	)		(18,522	)
Other operating assets and liabilities		(1,825	)		(11,645	)		(29,491	)		—			(42,961	)
Net cash (used in) provided by operating activities		(31,608	)		(4,323	)		18,249			—			(17,682	)
Cash flows from investing activities:
Capital expenditures		(1,559	)		(14,094	)		(18,676	)		—			(34,329	)
Business acquisitions, net of cash acquired		—			—			(9,117	)		—			(9,117	)
Net cash used in investing activities		(1,559	)		(14,094	)		(27,793	)		—			(43,446	)
Cash flows from financing activities:
Borrowings on lines of credit		—			—			8,464			—			8,464
Payments on lines of credit		—			—			(12,326	)		—			(12,326	)
Borrowings on long-term debt		—			62,500			29,477			—			91,977
Payments on long-term debt		—			(35,256	)		(12,100	)		—			(47,356	)
Stock option exercises and employee stock purchases		779			—			—			—			779
Intercompany		32,394			(8,225	)		(24,169	)		—			—
Net cash provided by (used in) financing activities		33,173			19,019			(10,654	)		—			41,538
Effect of exchange rate changes on cash		—			—			(10,986	)		—			(10,986	)
Net increase (decrease) in cash and cash equivalents		6			602			(31,184	)		—			(30,576	)
Cash and cash equivalents, beginning of period		17			1,331			108,405			—			109,753
Cash and cash equivalents, end of period	$	23		$	1,933		$	77,221		$	—		$	79,177

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Six Months Ended April 30, 2011

In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(99,593	)	$	2,868		$	(66,489	)	$	66,484		$	(96,730	)
Adjustments to reconcile net (loss) income to net Cash provided by (used in) operating activities:
Depreciation and amortization		826			10,156			16,488			—			27,470
Stock-based compensation		4,981			—			—			—			4,981
Provision for doubtful accounts		—			1,226			4,164			—			5,390
Asset impairments		—			465			74,145			—			74,610
Equity in earnings		66,753			(158	)		179			(66,753	)		21
Non-cash interest expense		681			841			15,565			—			17,087
Deferred income taxes		—			1,747			38,600			—			40,347
Other adjustments to reconcile net (loss) income		57			454			1,200			—			1,711
Changes in operating assets and liabilities:
Trade accounts receivable		—			29,813			3,851			—			33,664
Inventories		—			(14,605	)		7,725			269			(6,611	)
Other operating assets and liabilities		(2,981	)		(22,526	)		(4,465	)		—			(29,972	)
Net cash (used in) provided by operating activities		(29,276	)		10,281			90,963			—			71,968
Cash flows from investing activities:
Capital expenditures		(5,332	)		(12,108	)		(16,490	)		—			(33,930	)
Business acquisitions, net of cash acquired		—			(528	)		(5,050	)		—			(5,578	)
Net cash used in investing activities		(5,332	)		(12,636	)		(21,540	)		—			(39,508	)
Cash flows from financing activities:
Borrowings on lines of credit		—			—			9,929			—			9,929
Payments on lines of credit		—			—			(28,031	)		—			(28,031	)
Borrowings on long-term debt		—			—			270,475			—			270,475
Payments on long-term debt		—			—			(257,392	)		—			(257,392	)
Payments of debt issuance costs		—			—			(6,308	)		—			(6,308	)
Stock option exercises and employee stock purchases		3,074			—			—			—			3,074
Intercompany		31,415			(36,410	)		4,995			—			—
Net cash provided by (used in) financing activities		34,489			(36,410	)		(6,332	)		—			(8,253	)
Effect of exchange rate changes on cash		—			—			(6,208	)		—			(6,208	)
Net (decrease) increase in cash and cash equivalents		(119	)		(38,765	)		56,883			—			17,999
Cash and cash equivalents, beginning of period		164			39,172			81,257			—			120,593
Cash and cash equivalents, end of period	$	45		$	407		$	138,140		$	—		$	138,592