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 existing domestic subsidiaries.

The Company is required to present condensed consolidating financial information for Quiksilver, Inc. and its domestic subsidiaries within the notes to the 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 100% owned 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, 2013 and October 31, 2012 and for the first quarter of fiscal 2013 and 2012. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions. Certain immaterial balances have been reclassified in the January 31, 2012 condensed consolidating financial information to conform to the current year presentation. 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 fiscal 2013, 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, 2013


In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	116		$	165,746		$	297,344		$	(32,188	)	$	431,018
Cost of goods sold		—			103,732			133,685			(26,106	)		211,311

Gross profit		116			62,014			163,659			(6,082	)		219,707
Selling, general and administrative expense		15,975			74,188			142,154			(7,058	)		225,259
Asset impairments		—			1,335			1,833			—			3,168

Operating (loss)/income		(15,859	)		(13,509	)		19,672			976			(8,720	)
Interest expense		7,269			1,468			6,770			—			15,507
Foreign currency loss		154			165			2,854			—			3,173
Equity in earnings and other expense/(income)		7,847			(204	)		—			(7,643	)		—

(Loss)/income before provision for income taxes		(31,129	)		(14,938	)		10,048			8,619			(27,400	)
(Benefit)/provision for income taxes		—			(1,187	)		4,411			—			3,224

Net (loss)/income		(31,129	)		(13,751	)		5,637			8,619			(30,624	)
Less: net income attributable to non-controlling interest		—			—			(505	)		—			(505	)

Net (loss)/income attributable to Quiksilver, Inc.	$	(31,129	)	$	(13,751	)	$	5,132		$	8,619		$	(31,129	)

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 and other (income)/expense		(1,309	)		1,251			—			58			—

(Loss)/income before provision for income taxes		(22,605	)		(13,668	)		20,809			(196	)		(15,660	)
Provision for income taxes		—			216			5,034			—			5,250

Net (loss)/income		(22,605	)		(13,884	)		15,775			(196	)		(20,910	)
Less: net income attributable to non-controlling interest		—			—			(1,695	)		—			(1,695	)

Net (loss)/income attributable to Quiksilver, Inc.	$	(22,605	)	$	(13,884	)	$	14,080		$	(196	)	$	(22,605	)

CONDENSED CONSOLIDATING BALANCE SHEET

At January 31, 2013


In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	419		$	292		$	67,650		$	—		$	68,361
Trade accounts receivable, net		—			121,059			218,521			—			339,580
Other receivables		(29	)		7,461			24,437			—			31,869
Income taxes receivable		—			(656	)		1,666			—			1,010
Inventories		—			136,978			281,239			974			419,191
Deferred income taxes		—			5,209			22,403			—			27,612
Prepaid expenses and other current assets		3,842			10,360			23,713			—			37,915

Total current assets		4,232			280,703			639,629			974			925,538
Fixed assets, net		19,698			61,768			158,484			—			239,950
Intangible assets, net		3,516			48,526			88,048			—			140,090
Goodwill		—			112,216			165,034			—			277,250
Other assets		2,329			2,398			40,736			—			45,463
Deferred income taxes long-term		—			(23,550	)		143,211			—			119,661
Investment in subsidiaries		1,095,771			5,550			—			(1,101,321	)		—

Total assets	$	1,125,546		$	487,611		$	1,235,142		$	(1,100,347	)	$	1,747,952

LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	—		$	—		$	11,897		$	—		$	11,897
Accounts payable		4,443			96,400			120,853			—			221,696
Accrued liabilities		11,027			23,327			75,488			—			109,842
Current portion of long-term debt		—			7,094			35,264			—			42,358
Intercompany balances		139,175			(108,829	)		(30,346	)		—			—

Total current liabilities		154,645			17,992			213,156			—			385,793
Long-term debt, net of current portion		400,000			62,000			272,191			—			734,191
Other long-term liabilities		—			24,347			13,245			—			37,592

Total liabilities		554,645			104,339			498,592			—			1,157,576
Stockholders’/invested equity		570,901			383,272			717,075			(1,100,347	)		570,901
Non-controlling interest		—			—			19,475			—			19,475

Total liabilities and equity	$	1,125,546		$	487,611		$	1,235,142		$	(1,100,347	)	$	1,747,952

CONDENSED CONSOLIDATING BALANCE SHEET

At October 31, 2012


In thousands	Quiksilver, Inc.		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	324	$	135		$	41,364		$	—		$	41,823
Trade accounts receivable, net		—		181,945			251,798			—			433,743
Other receivables		20		6,158			26,640			—			32,818
Inventories		—		107,722			237,465			(441	)		344,746
Deferred income taxes		—		5,209			21,159			—			26,368
Prepaid expenses and other current assets		2,277		9,548			14,546			—			26,371

Total current assets		2,621		310,717			592,972			(441	)		905,869
Fixed assets, net		18,802		64,496			155,015			—			238,313
Intangible assets, net		3,228		47,746			88,475			—			139,449
Goodwill		—		112,216			160,951			—			273,167
Other assets		2,753		2,677			42,359			—			47,789
Deferred income taxes long-term		—		(23,550	)		137,203			—			113,653
Investment in subsidiaries		1,087,924		5,028			—			(1,092,952	)		—

Total assets	$	1,115,328	$	519,330		$	1,176,975		$	(1,093,393	)	$	1,718,240

LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	—	$	—		$	18,147		$	—		$	18,147
Accounts payable		6,995		95,355			101,222			—			203,572
Accrued liabilities		6,189		28,343			80,359			—			114,891
Current portion of long-term debt		—		8,594			10,053			—			18,647
Income taxes payable		—		(117	)		1,476			—			1,359
Intercompany balances		118,834		(95,809	)		(23,025	)		—			—

Total current liabilities		132,018		36,366			188,232			—			356,616
Long-term debt, net of current portion		400,000		60,700			260,475			—			721,175
Other long-term liabilities		—		25,241			12,972			—			38,213

Total liabilities		532,018		122,307			461,679			—			1,116,004
Stockholders’/invested equity		583,310		397,023			696,370			(1,093,393	)		583,310
Non-controlling interest		—		—			18,926			—			18,926

Total liabilities and equity	$	1,115,328	$	519,330		$	1,176,975		$	(1,093,393	)	$	1,718,240

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Three Months Ended January 31, 2013


In thousands	Quiksilver, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss)/income	$	(31,129	)	$	(13,751	)	$	5,637		$	8,619		$	(30,624	)
Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities:
Depreciation and amortization		445			4,080			7,694			—			12,219
Stock-based compensation		7,336			—			—			—			7,336
Provision for doubtful accounts		—			(1,171	)		2,502			—			1,331
Equity in earnings		7,847			(204	)		(11	)		(7,643	)		(11	)
Asset impairments		—			1,335			1,833			—			3,168
Non-cash interest expense		393			330			188			—			911
Deferred income taxes		—			—			1,135			—			1,135
Other adjustments to reconcile net income/(loss)		154			(105	)		2,707			—			2,756
Changes in operating assets and liabilities:
Trade accounts receivable		—			62,058			37,603			—			99,661
Inventories		—			(29,118	)		(38,385	)		(976	)		(68,479	)
Other operating assets and liabilities		1,707			(7,401	)		(393	)		—			(6,087	)

Net cash (used in)/provided by operating activities		(13,247	)		16,053			20,510			—			23,316
Cash flows from investing activities:
Capital expenditures		(1,708	)		(3,097	)		(7,973	)		—			(12,778	)

Net cash used in investing activities		(1,708	)		(3,097	)		(7,973	)		—			(12,778	)
Cash flows from financing activities:
Borrowings on lines of credit		—			—			1,963			—			1,963
Payments on lines of credit		—			—			(8,042	)		—			(8,042	)
Borrowings on long-term debt		—			23,000			24,879			—			47,879
Payments on long-term debt		—			(23,200	)		—			—			(23,200	)
Stock option exercises and employee stock purchases		3,319			—			—			—			3,319
Intercompany		11,731			(12,599	)		868			—			—

Net cash provided by/(used in) financing activities		15,050			(12,799	)		19,668			—			21,919
Effect of exchange rate changes on cash		—			—			(5,919	)		—			(5,919	)

Net increase in cash and cash equivalents		95			157			26,286			—			26,538
Cash and cash equivalents, beginning of period		324			135			41,364			—			41,823

Cash and cash equivalents, end of period	$	419		$	292		$	67,650		$	—		$	68,361

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	)	$	(13,884	)	$	15,775		$	(196	)	$	(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	)		1,251			(195	)		58			(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