UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 6, 2013
Quiksilver, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 001-14229 | 33-0199426 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification Number) | ||
15202 Graham Street, Huntington Beach, CA | 92649 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code:
(714) 889-2200
_____________________________________
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On June 6, 2013, Quiksilver, Inc. issued a press release announcing its financial results for the three and six months ended April 30, 2013. The press release is attached hereto as Exhibit 99.1.
In addition to Quiksilvers GAAP financial information, the press release furnished with this report as Exhibit 99.1 reports pro forma loss, pro forma loss per share, adjusted EBITDA, pro forma adjusted EBITDA, and constant currency measures, all of which are considered non-GAAP financial measures. Quiksilver believes these non-GAAP financial measures are useful to investors as they provide consistency and comparability with its past financial reports, as well as useful information to enable investors to perform additional analyses of past, present and future operating performance and as a supplemental means to evaluate Quiksilvers operations. These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from non-GAAP or other pro forma measures used by other companies.
The information in this Form 8-K and Exhibit 99.1 shall not be deemed filed for purposes of Section 18 of Securities Exchange Act of 1934, as amended (the Exchange Act) or otherwise subject to the liability of that section, and, shall not be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
The following exhibit is being furnished herewith:
Exhibit No. |
Exhibit Title or Description | |
99.1 | Press Release dated June 6, 2013, issued by Quiksilver, Inc. |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: June 6, 2013 | Quiksilver, Inc. (Registrant) | |||||
By: | /s/ Richard Shields | |||||
Richard Shields | ||||||
Chief Financial Officer |
3
INDEX TO EXHIBITS
Exhibit No. |
Exhibit Title or Description | |
99.1 | Press Release, dated June 6, 2013, issued by Quiksilver, Inc. |
4
Exhibit 99.1
Contact: | Robert Jaffe Investor Relations 424-288-4098 zqk@quiksilver.com |
Quiksilver Reports Fiscal 2013 Second Quarter Financial Results
Company Provides Updated Guidance for Fiscal 2013
Huntington Beach, California, June 6, 2013Quiksilver, Inc. (NYSE:ZQK) today announced operating results for the fiscal 2013 second quarter ended April 30, 2013.
We recently announced a multi-year profit improvement plan designed to enhance the performance of our three flagship brands, Quiksilver, Roxy and DC, and accelerate our path to sustained profitable growth, said Andy Mooney, President and Chief Executive Officer of Quiksilver, Inc. With a reorganized management structure and our new leadership team largely in place, we have begun working toward globalizing key functions and gaining efficiencies to reap the benefits of our size and scale. We believe that, over time, our new focus and structure will allow us to significantly improve profitability, working capital efficiency and competitive positioning.
Our second quarter performance reflects net revenue declines primarily within our EMEA wholesale channel, along with lower gross margins across all three flagship brands, particularly within DC, continued Mooney. We continued to liquidate prior seasons inventory and meaningfully lowered operating expenses.
Please refer to the accompanying tables for a reconciliation of GAAP results to certain non-GAAP results for the second quarter and first half ended April 30, 2013 and 2012, net revenues in historical and constant currency, and a definition of our emerging markets.
Fiscal 2013 Second Quarter Review:
The following comparisons refer to the second quarter of fiscal 2013 versus the second quarter of fiscal 2012.
Net revenues were $459 million compared with $492 million, and were down 5%, or $25 million, in constant currency.
| Americas net revenues increased 3% to $229 million from $221 million, and were up 4% in constant currency. |
| EMEA net revenues decreased 16% to $165 million from $196 million, and were down 14% in constant currency. |
| APAC net revenues decreased 14% to $64 million from $74 million, and were down 9% in constant currency. |
Gross margin decreased to 46.0% of net revenues compared with 49.2%, primarily driven by increased discounting and clearance of DC product, increased discounting in Europe across the companys three flagship brands, and inventory write downs related to certain brands and product categories which were discontinued in the second quarter.
SG&A decreased to $218 million compared with $224 million, primarily due to the companys ongoing expense reduction efforts which resulted in savings across several expense categories.
Quiksilver, Inc. Reports Second Quarter Fiscal 2013 Financial Results
June 6, 2013
Page 2 of 3
Non-cash asset impairments were $5.3 million compared with $0.4 million.
Foreign currency gain was $2.6 million compared with $0.6 million.
Net loss attributable to Quiksilver, Inc. was $32 million, or $0.19 per share, compared with $5 million, or $0.03 per share.
Pro-forma loss, which excludes the after-tax impact of restructuring and other special charges and non-cash asset impairments from net loss attributable to Quiksilver, Inc., was $20 million and $2 million, or $0.12 per share and $0.01 per share, respectively.
Pro-forma Adjusted EBITDA was $19 million compared with $41 million, with the decline largely driven by gross margin and net revenue declines.
Fiscal 2013 Q2 Net Revenue Highlights:
Net revenues (in constant currency) by brand and channel for the second quarter of fiscal 2013 compared with the second quarter of fiscal 2012 were as follows.
Brands (constant currency):
| Quiksilver decreased 10% to $182 million; |
| Roxy decreased 4% to $129 million; and, |
| DC increased 1% to $129 million. |
Distribution channels (constant currency):
| Wholesale decreased 7% to $344 million; |
| Retail decreased 5% to $91 million. Second quarter same store sales in company-owned retail stores decreased 4% on a global basis. Company-owned retail stores totaled 564 compared with 549 at the end of fiscal 2012 second quarter; and, |
| E-commerce was up 31% to $23 million. |
Emerging markets generated net revenue growth of 13% in constant currency.
Guidance for Fiscal 2013:
Based on its current outlook, the company revised its fiscal 2013 financial guidance as follows:
| Pro-forma adjusted EBITDA for the second half of fiscal 2013 is expected to be greater than the $91 million achieved during the second half of fiscal 2012; |
| Capital expenditures for fiscal 2013 are expected to decrease by at least 10% from the $66 million recorded in fiscal 2012. |
The foregoing guidance updates and supersedes the companys prior guidance for fiscal 2013.
Quiksilver, Inc. Reports Second Quarter Fiscal 2013 Financial Results
June 6, 2013
Page 3 of 3
About Quiksilver:
Quiksilver, Inc., one of the worlds leading outdoor sports lifestyle companies, designs, produces and distributes branded apparel, footwear and accessories. The companys apparel and footwear brands, inspired by a passion for outdoor action sports, represent a casual lifestyle for young-minded people who connect with its boardriding culture and heritage. The companys Quiksilver, Roxy, and DC brands have authentic roots and heritage in surf, snow and skate. The companys products are sold in more than 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, select department stores and through various e-commerce channels. Quiksilvers corporate headquarters are in Huntington Beach, California.
Forward looking statements:
This press release contains forward-looking statements including, but not limited to, statements regarding managements expectations for improved profitability, working capital efficiency, and competitive positioning as well as managements current expectations regarding pro-forma adjusted EBITDA and capital expenditures for the second half of fiscal 2013, and other future activities. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. Quiksilver undertakes no obligation to update these statements, which are made only as of the date of this press release. For the factors that could cause actual results to differ materially from expectations, please refer to Quiksilvers SEC filings and specifically the sections titled Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and Forward-Looking Statements in Quiksilvers Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
* * * * *
NOTE: For further information about Quiksilver, Inc., please visit our website at www.quiksilverinc.com. We also invite you to explore our brand sites, www.quiksilver.com, www.roxy.com, www.dcshoes.com and www.moskova.com.
FINANCIAL TABLES FOLLOW
QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Second quarter ended April 30, |
First half ended April 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
In thousands, except per share amounts | ||||||||||||||||
Revenues, net |
$ | 458,748 | $ | 492,213 | $ | 889,766 | $ | 941,834 | ||||||||
Cost of goods sold |
247,612 | 250,064 | 458,923 | 471,735 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
211,136 | 242,149 | 430,843 | 470,099 | ||||||||||||
Selling, general and administrative expense |
218,204 | 224,010 | 443,463 | 454,425 | ||||||||||||
Asset impairments |
5,332 | 415 | 8,500 | 415 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating (loss) income |
(12,400 | ) | 17,724 | (21,120 | ) | 15,259 | ||||||||||
Interest expense |
15,289 | 15,585 | 30,796 | 30,630 | ||||||||||||
Foreign currency (gain) loss |
(2,618 | ) | (609 | ) | 555 | (2,459 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
(Loss) income before provision for income taxes |
(25,071 | ) | 2,748 | (52,471 | ) | (12,912 | ) | |||||||||
Provision for income taxes |
7,147 | 7,155 | 10,371 | 12,405 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
(32,218 | ) | (4,407 | ) | (62,842 | ) | (25,317 | ) | ||||||||
Less: net income attributable to non-controlling interest |
(177 | ) | (713 | ) | (682 | ) | (2,408 | ) | ||||||||
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|
|
|
|
|
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|
|||||||||
Net loss attributable to Quiksilver, Inc. |
$ | (32,395 | ) | $ | (5,120 | ) | $ | (63,524 | ) | $ | (27,725 | ) | ||||
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|
|
|
|
|
|
|
|||||||||
Net loss per share attributable to Quiksilver, Inc. (basic and diluted): |
$ | (0.19 | ) | $ | (0.03 | ) | $ | (0.38 | ) | $ | (0.17 | ) | ||||
Weighted average common shares outstanding (basic and diluted): |
166,815 | 163,953 | 166,282 | 163,655 |
QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
April 30, 2013 | April 30, 2012 | |||||||
In thousands | ||||||||
ASSETS |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 47,893 | $ | 79,177 | ||||
Trade accounts receivable (net of allowance of $57,134 and $53,593, respectively) |
375,336 | 370,974 | ||||||
Other receivables |
31,933 | 26,250 | ||||||
Inventories |
366,304 | 358,915 | ||||||
Deferred income taxes - short-term |
25,696 | 17,752 | ||||||
Prepaid expenses and other current assets |
33,457 | 31,697 | ||||||
|
|
|
|
|||||
Total Current Assets |
880,619 | 884,765 | ||||||
Fixed assets, net |
232,955 | 240,424 | ||||||
Intangible assets, net |
138,749 | 137,212 | ||||||
Goodwill |
272,764 | 268,340 | ||||||
Other assets |
43,759 | 54,948 | ||||||
Deferred income taxes - long-term |
114,391 | 110,752 | ||||||
|
|
|
|
|||||
Total Assets |
$ | 1,683,237 | $ | 1,696,441 | ||||
|
|
|
|
|||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities |
||||||||
Lines of credit |
$ | | $ | 13,517 | ||||
Accounts payable |
185,570 | 190,647 | ||||||
Accrued liabilities |
102,480 | 108,770 | ||||||
Current portion of long-term debt |
44,834 | 22,840 | ||||||
Income taxes payable |
451 | 3,068 | ||||||
|
|
|
|
|||||
Total Current Liabilities |
333,335 | 338,842 | ||||||
Long-term debt, net of current portion |
769,108 | 732,916 | ||||||
Other long-term liabilities |
34,958 | 33,790 | ||||||
|
|
|
|
|||||
Total Liabilities |
1,137,401 | 1,105,548 | ||||||
Equity |
||||||||
Common stock |
1,705 | 1,684 | ||||||
Additional paid-in capital |
560,303 | 544,809 | ||||||
Treasury stock |
(6,778 | ) | (6,778 | ) | ||||
Accumulated deficit |
(106,845 | ) | (60,290 | ) | ||||
Accumulated other comprehensive income |
77,799 | 95,096 | ||||||
|
|
|
|
|||||
Total Quiksilver, Inc. Stockholders Equity |
526,184 | 574,521 | ||||||
Non-controlling interest |
19,652 | 16,372 | ||||||
|
|
|
|
|||||
Total Equity |
545,836 | 590,893 | ||||||
|
|
|
|
|||||
Total Liabilities and Equity |
$ | 1,683,237 | $ | 1,696,441 | ||||
|
|
|
|
QUIKSILVER, INC. AND SUBSIDIARIES
INFORMATION RELATED TO OPERATING SEGMENTS (UNAUDITED)
In thousands | Second quarter ended April 30, |
First half ended April 30, |
||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues, net: |
||||||||||||||||
Americas |
$ | 228,703 | $ | 220,975 | $ | 414,987 | $ | 426,383 | ||||||||
EMEA |
165,189 | 195,554 | 336,364 | 364,428 | ||||||||||||
APAC |
63,900 | 74,026 | 136,776 | 148,619 | ||||||||||||
Corporate operations |
956 | 1,658 | 1,639 | 2,404 | ||||||||||||
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|
|
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|
|
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|
|||||||||
458,748 | 492,213 | 889,766 | 941,834 | |||||||||||||
Gross Profit: |
||||||||||||||||
Americas |
$ | 92,696 | $ | 97,709 | $ | 173,555 | $ | 185,637 | ||||||||
EMEA |
87,961 | 108,997 | 186,850 | 210,769 | ||||||||||||
APAC |
31,634 | 35,963 | 70,911 | 74,103 | ||||||||||||
Corporate operations |
(1,155 | ) | (520 | ) | (473 | ) | (410 | ) | ||||||||
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|
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211,136 | 242,149 | 430,843 | 470,099 | |||||||||||||
SG&A Expense: |
||||||||||||||||
Americas |
$ | 84,999 | $ | 88,407 | $ | 173,073 | $ | 177,888 | ||||||||
EMEA |
80,976 | 83,202 | 164,210 | 169,298 | ||||||||||||
APAC |
37,756 | 40,002 | 74,962 | 77,241 | ||||||||||||
Corporate operations |
14,473 | 12,399 | 31,218 | 29,998 | ||||||||||||
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218,204 | 224,010 | 443,463 | 454,425 | |||||||||||||
Asset Impairments: |
||||||||||||||||
Americas |
$ | 5,322 | $ | 415 | $ | 6,943 | $ | 415 | ||||||||
EMEA |
10 | | 1,557 | | ||||||||||||
APAC |
| | | | ||||||||||||
Corporate operations |
| | | | ||||||||||||
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5,332 | 415 | 8,500 | 415 | |||||||||||||
Operating Income (Loss): |
||||||||||||||||
Americas |
$ | 2,375 | $ | 8,887 | $ | (6,461 | ) | $ | 7,334 | |||||||
EMEA |
6,975 | 25,795 | 21,083 | 41,471 | ||||||||||||
APAC |
(6,122 | ) | (4,039 | ) | (4,051 | ) | (3,138 | ) | ||||||||
Corporate operations |
(15,628 | ) | (12,919 | ) | (31,691 | ) | (30,408 | ) | ||||||||
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(12,400 | ) | 17,724 | (21,120 | ) | 15,259 |
Definition of emerging markets:
The Companys references to emerging markets in this press release refer to net revenues generated in Brazil, Mexico, Korea, China, Indonesia, Taiwan and Russia, collectively.
QUIKSILVER, INC. AND SUBSIDIARIES
GAAP TO PRO-FORMA NET LOSS RECONCILIATION (UNAUDITED)
Second quarter ended April 30, |
First half ended April 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
In thousands, except per share amounts | ||||||||||||||||
Net loss attributable to Quiksilver, Inc. |
$ | (32,395 | ) | $ | (5,120 | ) | $ | (63,524 | ) | $ | (27,725 | ) | ||||
Restructuring charges, net of tax of $221, $600, $625 and $800, respectively |
7,049 | 2,966 | 9,650 | 5,242 | ||||||||||||
Non-cash asset impairments, net of tax of $136, $32, $692 and $32, respectively |
5,196 | 383 | 7,808 | 383 | ||||||||||||
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Pro-forma net loss |
(20,150 | ) | (1,771 | ) | (46,066 | ) | (22,100 | ) | ||||||||
Pro-forma loss per share attributable to Quiksilver, Inc. (basic and diluted): |
$ | (0.12 | ) | $ | (0.01 | ) | $ | (0.28 | ) | $ | (0.14 | ) | ||||
Weighted average common shares outstanding (basic and diluted): |
166,815 | 163,953 | 166,282 | 163,655 |
QUIKSILVER, INC. AND SUBSIDIARIES
ADJUSTED EBITDA & PRO-FORMA ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
Second quarter ended April 30, |
First half ended April 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
In thousands | ||||||||||||||||
Net loss attributable to Quiksilver, Inc. |
$ | (32,395 | ) | $ | (5,120 | ) | $ | (63,524 | ) | $ | (27,725 | ) | ||||
Provision for income taxes |
7,147 | 7,155 | 10,371 | 12,405 | ||||||||||||
Interest expense |
15,289 | 15,585 | 30,796 | 30,630 | ||||||||||||
Depreciation and amortization |
12,808 | 14,163 | 25,027 | 27,125 | ||||||||||||
Non-cash stock-based compensation expense |
3,887 | 5,423 | 11,223 | 12,400 | ||||||||||||
Non-cash asset impairments |
5,332 | 415 | 8,500 | 415 | ||||||||||||
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Adjusted EBITDA |
12,068 | 37,621 | 22,393 | 55,250 | ||||||||||||
Restructuring and other special charges |
6,833 | 3,566 | 9,838 | 6,042 | ||||||||||||
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Pro-forma Adjusted EBITDA |
18,901 | 41,187 | 32,231 | 61,292 |
Definition of Adjusted EBITDA and Pro-forma Adjusted EBITDA:
Adjusted EBITDA is defined as net income (loss) attributable to Quiksilver, Inc. before (i) interest expense, (ii) (benefit) provision for income taxes, (iii) depreciation and amortization, (iv) non-cash stock-based compensation expense and (v) non-cash asset impairments. Pro-forma Adjusted EBITDA is defined as Adjusted EBITDA excluding restructuring and other special charges (including, but not limited to, reserves and other charges associated with restructuring activities, non-operating charges for gains and losses on lease exit activities, as well as severance and other employee termination costs as a result of downsizing and reorganization). Adjusted EBITDA and Pro-forma Adjusted EBITDA are not defined under generally accepted accounting principles (GAAP), and may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA and Pro-forma Adjusted EBITDA, along with other GAAP measures, as measures of profitability because Adjusted EBITDA and Pro-forma Adjusted EBITDA 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, the effect of non-cash stock-based compensation expense and restructuring and other special charges. 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 the 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 Adjusted EBITDA for the same reason that we remove depreciation and amortization as it is part of the non-cash impact of our asset base. We also remove from Pro-forma Adjusted EBITDA the impact of certain reserves and charges associated with restructuring activities, non-operating charges for gains and losses on lease exit activities, as well as severance and other employee termination costs as these costs are not typically part of normal, day-to-day operations. Adjusted EBITDA and Pro-forma Adjusted EBITDA have limitations as profitability measures in that they do 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, the effect of asset impairments and the effect of restructuring and other special charges.
QUIKSILVER, INC. AND SUBSIDIARIES
SUPPLEMENTAL EXCHANGE RATE INFORMATION
(Unaudited)
In order to better understand growth rates in our 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. The following table presents revenues by segment in both historical currency and constant currency for the second quarter ended April 30, 2013 and 2012 (in thousands):
Americas | EMEA | APAC | Corporate | Total | ||||||||||||||||
Historical currency (as reported): |
||||||||||||||||||||
April 30, 2013 |
$ | 228,703 | $ | 165,189 | $ | 63,900 | $ | 956 | $ | 458,748 | ||||||||||
April 30, 2012 |
220,975 | 195,554 | 74,026 | 1,658 | 492,213 | |||||||||||||||
Percentage increase (decrease) |
3 | % | -16 | % | -14 | % | -7 | % | ||||||||||||
Constant currency (current year exchange rates): |
||||||||||||||||||||
April 30, 2013 |
228,703 | 165,189 | 63,900 | 956 | 458,748 | |||||||||||||||
April 30, 2012 |
219,240 | 192,532 | 69,870 | 1,654 | 483,296 | |||||||||||||||
Percentage increase (decrease) |
4 | % | -14 | % | -9 | % | -5 | % |