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 2, 2014
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 2, 2014, Quiksilver, Inc. issued a press release announcing its financial results for the three and six months ended April 30, 2014. 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 from continuing operations, pro forma loss per share from continuing operations, 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 2, 2014, 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 2, 2014 | 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 2, 2014, issued by Quiksilver, Inc. |
4
Exhibit 99.1
Contact: | Robert Jaffe |
Investor Relations |
424-288-4098 |
zqk@quiksilver.com |
Quiksilver Reports Second Quarter Financial Results
Company Provides Outlook for Fiscal 2014
Huntington Beach, California, June 2, 2014Quiksilver, Inc. (NYSE:ZQK) today announced financial results for the fiscal 2014 second quarter ended April 30, 2014.
We made progress on our Profit Improvement Plan, said Andy Mooney, President and Chief Executive Officer of Quiksilver, Inc. During the second quarter, we again reduced our expense structure, increased sales in our direct to consumer channels and emerging markets, and drove improvements in gross margins. These improvements were offset by decreased net revenues in our wholesale channel, especially in the developed markets in North America and Europe. Consequently, pro-forma adjusted EBITDA decreased versus the prior year.
All of the results presented below represent the Companys continuing operations.
Please refer to the accompanying tables for a reconciliation of GAAP results from continuing operations to certain non-GAAP results from continuing operations, including pro-forma loss from continuing operations, pro-forma loss from continuing operations per share, adjusted EBITDA and pro-forma adjusted EBITDA, for all periods presented, net revenues in historical and constant currency, and a definition of the Companys emerging markets.
Second Quarter Review:
The following comparisons refer to results of continuing operations for the second quarter of fiscal 2014 versus the second quarter of fiscal 2013.
Net revenues were $408 million compared with $456 million, and were down 9%, or $42 million, in constant currency.
¡ | Americas net revenues decreased 18% to $186 million from $226 million, and were down 16% in constant currency. |
¡ | EMEA net revenues decreased 2% to $162 million from $165 million, and were down 5% in constant currency. |
¡ | APAC net revenues decreased 6% to $60 million from $64 million, but were up 3% in constant currency. |
Gross margin increased to 48.7% from 45.9%. The 280 basis point improvement in gross margin reflects the sales growth in our direct to consumer channels, reduced clearance activity in the wholesale channel of certain regions and benefits of licensing activities.
SG&A expense decreased $3 million to $214 million from $217 million, primarily due to reduced selling expenses associated with the decline in net revenues, reduced employee compensation expenses and event spending, partially offset by an increase in bad debt expense.
Quiksilver, Inc. Reports Fiscal 2014 Second Quarter Financial Results
June 2, 2014
Page 2 of 3
Asset impairments increased to $20 million from $5 million due to a $15 million write-down of Surfdome goodwill and intangible assets in connection with the reclassification of Surfdome from discontinued operations to continuing operations.
Pro-forma Adjusted EBITDA decreased to $12 million from $18 million.
Net loss from continuing operations attributable to Quiksilver, Inc. was $46 million, or $0.27 per share, compared with $33 million, or $0.20 per share.
Pro-forma loss from continuing operations, which excludes the after-tax impact of restructuring and other special charges and non-cash asset impairments, increased to $25 million, or $0.15 per share, compared with $21 million, or $0.12 per share.
Q2 Net Revenue Highlights:
Net revenues from continuing operations by brand and channel for the second quarter of fiscal 2014 compared with the second quarter of fiscal 2013 were as follows.
Brands (constant currency):
¡ | Quiksilver decreased $13 million, or 7%, to $167 million. |
¡ | Roxy decreased $7 million, or 6%, to $121 million. |
¡ | DC decreased $24 million, or 19%, to $103 million. |
Distribution channels (constant currency):
¡ | Wholesale revenues decreased 15% to $286 million. |
¡ | Retail revenues were flat at $90 million. Same-store sales in company-owned retail stores increased 1%. Company-owned retail stores totaled 658 at the end of the fiscal 2014 second quarter compared with 630 at the end of the fiscal 2013 second quarter. |
¡ | E-commerce revenues grew 23% to $30 million. |
Emerging markets generated net revenue growth of 28% in constant currency.
Outlook:
The Company anticipates that the general sales trends of recent quarters compared to the same prior year period will continue into the second half of fiscal 2014 with continued net revenue declines in the North America and Europe wholesale channels being partially offset by net revenue growth in emerging markets and e-commerce. The Company also anticipates some continued year-over-year gross margin improvements in the second half of fiscal 2014, and that pro-forma adjusted EBITDA for fiscal 2014 will be below the $118 million achieved in fiscal 2013.
The Company said that it has revised the timing for achieving its Profit Improvement Plan adjusted EBITDA target to the end of fiscal 2017.
Quiksilver, Inc. Reports Fiscal 2014 Second Quarter Financial Results
June 2, 2014
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 100 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. The Companys 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 future revenues, gross margins, pro-forma adjusted EBITDA, and the timing of achieving objectives of the companys profit improvement plan. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. The Company 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 the Companys 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 the Companys 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 and www.dcshoes.com.
FINANCIAL TABLES FOLLOW
QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Second quarter ended | First half ended | |||||||||||||||
April 30, | April 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
In thousands, except per share amounts |
||||||||||||||||
Revenues, net |
$ | 408,215 | $ | 455,563 | $ | 819,383 | $ | 880,604 | ||||||||
Cost of goods sold |
209,344 | 246,562 | 412,403 | 455,339 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
198,871 | 209,001 | 406,980 | 425,265 | ||||||||||||
Selling, general and administrative expense |
213,647 | 216,922 | 425,466 | 438,946 | ||||||||||||
Asset impairments |
19,961 | 5,332 | 20,844 | 8,500 | ||||||||||||
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|
|
|
|
|
|
|
|||||||||
Operating loss |
(34,737 | ) | (13,253 | ) | (39,330 | ) | (22,181 | ) | ||||||||
Interest expense |
19,240 | 15,342 | 38,695 | 30,850 | ||||||||||||
Foreign currency loss/(gain) |
893 | (2,696 | ) | 3,753 | 390 | |||||||||||
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|
|||||||||
Loss before (benefit)/provision for income taxes |
(54,870 | ) | (25,899 | ) | (81,778 | ) | (53,421 | ) | ||||||||
(Benefit)/provision for income taxes |
(1,173 | ) | 6,828 | (5,503 | ) | 10,005 | ||||||||||
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|
|
|
|
|
|||||||||
Loss from continuing operations |
(53,697 | ) | (32,727 | ) | (76,275 | ) | (63,426 | ) | ||||||||
(Loss)/income from discontinued operations, net of tax |
(7,113 | ) | 509 | 30,400 | 584 | |||||||||||
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|
|
|
|
|
|
|
|||||||||
Net loss |
(60,810 | ) | (32,218 | ) | (45,875 | ) | (62,842 | ) | ||||||||
Less: net loss/(income) attributable to non-controlling interest |
7,737 | (177 | ) | 8,201 | (682 | ) | ||||||||||
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|
|
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|
|||||||||
Net loss attributable to Quiksilver, Inc. |
$ | (53,073 | ) | $ | (32,395 | ) | $ | (37,674 | ) | $ | (63,524 | ) | ||||
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Loss per share from continuing operations attributable to Quiksilver, Inc.: |
||||||||||||||||
Basic |
$ | (0.27 | ) | $ | (0.20 | ) | $ | (0.40 | ) | $ | (0.39 | ) | ||||
Diluted |
$ | (0.27 | ) | $ | (0.20 | ) | $ | (0.40 | ) | $ | (0.39 | ) | ||||
(Loss)/income per share from discontinued operations attributable to Quiksilver, Inc.: |
||||||||||||||||
Basic |
$ | (0.04 | ) | $ | 0.00 | $ | 0.18 | $ | 0.00 | |||||||
Diluted |
$ | (0.04 | ) | $ | 0.00 | $ | 0.18 | $ | 0.00 | |||||||
Weighted average common shares outstanding: |
||||||||||||||||
Basic |
170,475 | 166,815 | 170,105 | 166,282 | ||||||||||||
Diluted |
170,475 | 166,815 | 170,105 | 166,282 | ||||||||||||
Amounts attributable to Quiksilver, Inc.: |
||||||||||||||||
Loss from continuing operations |
$ | (45,960 | ) | $ | (32,904 | ) | $ | (68,074 | ) | $ | (64,108 | ) | ||||
(Loss)/income from discontinued operations, net of tax |
(7,113 | ) | 509 | 30,400 | 584 | |||||||||||
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|
|||||||||
Net loss |
$ | (53,073 | ) | $ | (32,395 | ) | $ | (37,674 | ) | $ | (63,524 | ) | ||||
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QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
April 30, 2014 |
April 30, 2013 |
|||||||
In thousands |
||||||||
ASSETS |
||||||||
Current Assets |
||||||||
Cash and cash equivalents (includes restricted cash of $56,047 and $0, respectively) |
$ | 119,585 | $ | 47,893 | ||||
Trade accounts receivable (net of allowance of $62,783 and $57,134, respectively) |
351,744 | 371,293 | ||||||
Other receivables |
29,604 | 29,835 | ||||||
Inventories |
320,589 | 355,077 | ||||||
Deferred income taxes short-term |
9,696 | 25,696 | ||||||
Prepaid expenses and other current assets |
30,966 | 32,637 | ||||||
Current assets held for sale |
| 18,188 | ||||||
|
|
|
|
|||||
Total Current Assets |
862,184 | 880,619 | ||||||
Fixed assets, net |
224,276 | 232,335 | ||||||
Intangible assets, net |
135,510 | 137,817 | ||||||
Goodwill |
265,565 | 272,764 | ||||||
Other assets |
50,376 | 43,759 | ||||||
Deferred income taxes long-term |
| 114,391 | ||||||
Non-current assets held for sale |
| 1,552 | ||||||
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|
|
|
|||||
Total Assets |
$ | 1,537,911 | $ | 1,683,237 | ||||
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|||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities |
||||||||
Accounts payable |
$ | 138,125 | $ | 184,684 | ||||
Accrued liabilities |
111,456 | 100,401 | ||||||
Current portion of long-term debt |
49,873 | 44,834 | ||||||
Income taxes payable |
1,577 | 451 | ||||||
Liabilities related to assets held for sale |
| 2,965 | ||||||
|
|
|
|
|||||
Total Current Liabilities |
301,031 | 333,335 | ||||||
Long-term debt, net of current portion |
846,949 | 769,108 | ||||||
Other long-term liabilities |
34,649 | 34,780 | ||||||
Deferred income taxes long-term |
22,046 | | ||||||
Non-current liabilities related to assets held for sale |
| 178 | ||||||
|
|
|
|
|||||
Total Liabilities |
1,204,675 | 1,137,401 | ||||||
Equity |
||||||||
Common stock |
1,738 | 1,705 | ||||||
Additional paid-in capital |
582,612 | 560,303 | ||||||
Treasury stock |
(6,778 | ) | (6,778 | ) | ||||
Accumulated deficit |
(313,560 | ) | (106,845 | ) | ||||
Accumulated other comprehensive income |
65,177 | 77,799 | ||||||
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|||||
Total Quiksilver, Inc. Stockholders Equity |
329,189 | 526,184 | ||||||
Non-controlling interest |
4,047 | 19,652 | ||||||
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|
|
|||||
Total Equity |
333,236 | 545,836 | ||||||
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|
|||||
Total Liabilities and Equity |
$ | 1,537,911 | $ | 1,683,237 | ||||
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QUIKSILVER, INC. AND SUBSIDIARIES
GAAP TO PRO-FORMA LOSS FROM CONTINUING OPERATIONS RECONCILIATION (UNAUDITED)
Second quarter ended April 30, |
First half ended April 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
In thousands, except per share amounts |
||||||||||||||||
Net loss from continuing operations attributable to Quiksilver, Inc. |
$ | (45,960 | ) | $ | (32,904 | ) | $ | (68,074 | ) | $ | (64,108 | ) | ||||
Restructuring and other special charges, net of tax of $1,003, $221, $1,043 and $625, respectively |
8,448 | 7,049 | 13,757 | 9,650 | ||||||||||||
Non-cash asset impairments, net of tax of $56, $136, $56 and $692, respectively |
12,446 | 5,196 | 13,329 | 7,808 | ||||||||||||
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Pro-forma loss from continuing operations attributable to Quiksilver, Inc. |
(25,066 | ) | (20,659 | ) | (40,988 | ) | (46,650 | ) | ||||||||
Pro-forma loss per share from continuing operations attributable to Quiksilver, Inc. (basic and diluted) |
$ | (0.15 | ) | $ | (0.12 | ) | $ | (0.24 | ) | $ | (0.28 | ) | ||||
Weighted average common shares outstanding (basic and diluted) |
170,475 | 166,815 | 170,105 | 166,282 |
QUIKSILVER, INC. AND SUBSIDIARIES
ADJUSTED EBITDA & PRO-FORMA ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
Second quarter ended April 30, |
First half ended April 30, |
|||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
In thousands |
||||||||||||||||
Loss from continuing operations attributable to Quiksilver, Inc. |
$ | (45,960 | ) | $ | (32,904 | ) | $ | (68,074 | ) | $ | (64,108 | ) | ||||
(Benefit)/provision for income taxes |
(1,173 | ) | 6,828 | (5,503 | ) | 10,005 | ||||||||||
Interest expense |
19,240 | 15,342 | 38,695 | 30,850 | ||||||||||||
Depreciation and amortization |
14,703 | 12,734 | 25,614 | 24,885 | ||||||||||||
Non-cash stock-based compensation expense |
6,525 | 3,887 | 11,588 | 11,223 | ||||||||||||
Non-cash asset impairments, net |
12,502 | 5,332 | 13,385 | 8,500 | ||||||||||||
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Adjusted EBITDA |
5,837 | 11,219 | 15,705 | 21,355 | ||||||||||||
Restructuring and other special charges |
6,382 | 6,833 | 12,830 | 9,838 | ||||||||||||
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Pro-forma Adjusted EBITDA |
12,219 | 18,052 | 28,535 | 31,193 |
Definition of Adjusted EBITDA and Pro-forma Adjusted EBITDA:
Adjusted EBITDA is defined as loss from continuing operations 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, net of non-controlling interest. For the quarter ended April 30, 2014, non-cash asset impairments reflect Quiksilver, Inc.s 51% share of the Surfdome impairment charge. Pro-forma Adjusted EBITDA is defined as Adjusted EBITDA excluding restructuring and other special charges. Such charges include, but are not limited to, a) gains and losses on early lease terminations; severance and other termination costs for employees or independent agents; contractual or other termination costs paid to sever business relationships with sponsored athletes, vendors, customers, and other business partners; write-offs of inventory and other assets devalued as a direct result of restructuring activities; and other expenses associated with planning and implementing profit improvement plan activities; and b) other significant, non-recurring and unusual items. 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, the impact of implementing restructuring activities, and other significant, non-recurring and unusual items. 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 restructuring and other special charges, as these items 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, 2014 and 2013 (in thousands):
Americas | EMEA | APAC | Corporate | Total | ||||||||||||||||
Historical currency (as reported): |
||||||||||||||||||||
April 30, 2014 |
$ | 186,427 | $ | 161,977 | $ | 59,721 | $ | 90 | $ | 408,215 | ||||||||||
April 30, 2013 |
226,302 | 164,725 | 63,581 | 955 | 455,563 | |||||||||||||||
Percentage decrease |
-18 | % | -2 | % | -6 | % | -10 | % | ||||||||||||
Constant currency (current year exchange rates): |
||||||||||||||||||||
April 30, 2014 |
186,427 | 161,977 | 59,721 | 90 | 408,215 | |||||||||||||||
April 30, 2013 |
221,552 | 170,001 | 57,887 | 976 | 450,416 | |||||||||||||||
Percentage (decrease)/increase |
-16 | % | -5 | % | 3 | % | -9 | % |
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.