Condensed Consolidation Financial Information

In July 2013, the Company issued $225 million aggregate principal amount of its 2020 Notes. These notes were issued in a private offering that was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). They were offered within the United States only to qualified institutional buyers in accordance with Rule 144A under the Securities Act, and outside of the United States only to non-U.S. investors in accordance with Regulation S under the Securities Act. In November 2013, these notes were exchanged for publicly registered notes with identical terms. Obligations under the Company’s 2020 Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by certain of its existing 100% owned domestic subsidiaries.

The Company presents 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 months ended January 31, 2015 and 2014, the financial position as of January 31, 2015 and October 31, 2014, and cash flows for the three months ended January 31, 2015 and 2014, of Quiksilver, Inc., QS Wholesale, Inc., the 100% owned guarantor subsidiaries, the 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.

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Operations

Three Months Ended January 31, 2015



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	116		$	71,536		$	68,535		$	229,897		$	(29,230	)	$	340,854
Cost of goods sold	—			44,052			45,091			109,077			(26,810		)	171,410
Gross profit	116			27,484			23,444			120,820			(2,420		)	169,444
Selling, general and administrative expense	2,475			28,778			29,705			111,496			(1,950		)	170,504
Asset impairments	—			—			—			255			—			255
Operating (loss)/income	(2,359		)	(1,294		)	(6,261		)	9,069			(470		)	(1,315		)
Interest expense, net	11,645			747			(2		)	6,012			—			18,402
Foreign currency (gain)/loss	(158		)	(618		)	402			1,031			—			657
Equity in earnings	(3,106		)	(324		)	—			—			3,430			—
(Loss)/income before provision/(benefit) for income taxes	(10,740		)	(1,099		)	(6,661		)	2,026			(3,900		)	(20,374		)
Provision/(benefit) for income taxes	30			146			303			(2,563		)	—			(2,084		)
(Loss)/income from continuing operations	(10,770		)	(1,245		)	(6,964		)	4,589			(3,900		)	(18,290		)
(Loss)/income from discontinued operations	—			—			(2		)	6,734			—			6,732
Net (loss)/income	(10,770		)	(1,245		)	(6,966		)	11,323			(3,900		)	(11,558		)
Net loss attributable to non-controlling interest	—			—			—			788			—			788
Net (loss)/income attributable to Quiksilver, Inc.	(10,770		)	(1,245		)	(6,966		)	12,111			(3,900		)	(10,770		)
Other comprehensive loss	(18,619		)	—			—			(18,619		)	18,619			(18,619		)
Comprehensive (loss)/income attributable to Quiksilver, Inc.	$	(29,389	)	$	(1,245	)	$	(6,966	)	$	(6,508	)	$	14,719		$	(29,389	)

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Operations

Three Months Ended January 31, 2014



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	116		$	85,536		$	98,741		$	269,770		$	(59,253	)	$	394,910
Cost of goods sold	—			51,264			68,202			119,784			(44,980		)	194,270
Gross profit	116			34,272			30,539			149,986			(14,273		)	200,640
Selling, general and administrative expense	9,025			55,966			22,668			121,057			(4,932		)	203,784
Asset impairments	—			—			222			661			—			883
Operating (loss)/income	(8,909		)	(21,694		)	7,649			28,268			(9,341		)	(4,027		)
Interest expense, net	11,600			1,010			—			6,810			—			19,420
Foreign currency loss/(gain)	36			(10		)	(224		)	3,026			—			2,828
Equity in earnings	(35,932		)	74			—			—			35,858			—
Income/(loss) before (benefit)/provision for income taxes	15,387			(22,768		)	7,873			18,432			(45,199		)	(26,275		)
(Benefit)/provision for income taxes	—			(6,169		)	(3,945		)	5,729			—			(4,385		)
Income/(loss) from continuing operations	15,387			(16,599		)	11,818			12,703			(45,199		)	(21,890		)
Income from discontinued operations	—			23,922			13,531			164			—			37,617
Net income	15,387			7,323			25,349			12,867			(45,199		)	15,727
Net income attributable to non-controlling interest	—			—			—			464			—			464
Net income attributable to Quiksilver, Inc.	15,387			7,323			25,349			13,331			(45,199		)	16,191
Other comprehensive loss	(14,422		)	—			—			(14,422		)	14,422			(14,422		)
Comprehensive income/(loss) attributable to Quiksilver, Inc.	$	965		$	7,323		$	25,349		$	(1,091	)	$	(30,777	)	$	1,769

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Balance Sheet

January 31, 2015



In thousands	Quiksilver, Inc.		QS Wholesale, Inc.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	157	$	17,392	$	(4,353	)	$	47,460	$	—		$	60,656
Restricted cash	—		—		—			1,745		—			1,745
Trade accounts receivable, net	—		44,120		22,138			192,694		—			258,952
Other receivables	10		2,185		1,476			47,459		(29		)	51,101
Inventories	—		33,719		75,499			218,634		(21,733		)	306,119
Deferred income taxes	—		21,554		—			4,533		(21,554		)	4,533
Prepaid expenses and other current assets	1,593		8,705		3,039			17,978		—			31,315
Intercompany balances	—		256,475		—			—		(256,475		)	—
Total current assets	1,760		384,150		97,799			530,503		(299,791		)	714,421
Restricted cash	—		—		—			3,918		—			3,918
Fixed assets, net	19,754		32,336		21,783			120,234		—			194,107
Intangible assets, net	8,533		43,655		1,109			83,868		—			137,165
Goodwill	—		61,983		11,089			6,733		—			79,805
Other assets	6,682		4,955		916			27,393		—			39,946
Deferred income taxes long-term	30,807		—		2,052			14,352		(32,859		)	14,352
Investment in subsidiaries	728,200		1,849		—			—		(730,049		)	—
Total assets	$	795,736	$	528,928	$	134,748		$	787,001	$	(1,062,699	)	$	1,183,714
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	—	$	—	$	—		$	31,093	$	—		$	31,093
Accounts payable	2,373		36,163		18,760			116,794		—			174,090
Accrued liabilities	29,258		12,435		6,157			53,741		—			101,591
Current portion of long-term debt	—		600		—			1,661		—			2,261
Income taxes payable	—		720		—			1,814		(29		)	2,505
Deferred income taxes	31,450		—		4,925			4,669		(21,554		)	19,490
Intercompany balances	203,267		—		39,528			13,680		(256,475		)	—
Total current liabilities	266,348		49,918		69,370			223,452		(278,058		)	331,030
Long-term debt	501,556		28,580		—			239,912		—			770,048
Other long-term liabilities	1,202		7,178		7,514			18,808		—			34,702
Deferred income taxes long-term	—		38,052		—			16,111		(32,859		)	21,304
Total liabilities	769,106		123,728		76,884			498,283		(310,917		)	1,157,084
Stockholders’/invested equity	26,630		405,200		57,864			288,718		(751,782		)	26,630
Total liabilities and equity	$	795,736	$	528,928	$	134,748		$	787,001	$	(1,062,699	)	$	1,183,714

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Balance Sheet

October 31, 2014



In thousands	Quiksilver, Inc.		QS Wholesale, Inc.		Guarantor Subsidiaries			Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	158	$	2,867	$	(2,701	)	$	46,340	$	—		$	46,664
Restricted cash	—		—		—			4,687		—			4,687
Trade accounts receivable, net	—		51,663		34,779			224,572		—			311,014
Other receivables	10		3,402		1,071			36,644		(280		)	40,847
Inventories	—		25,681		72,761			203,529		(17,454		)	284,517
Deferred income taxes	—		21,554		—			4,926		(21,554		)	4,926
Prepaid expenses and other current assets	1,579		6,209		2,941			17,351		—			28,080
Intercompany balances	—		258,808		—			—		(258,808		)	—
Current portion of assets held for sale	—		—		28			20,237		—			20,265
Total current assets	1,747		370,184		108,879			558,286		(298,096		)	741,000
Restricted cash	—		16,514		—			—		—			16,514
Fixed assets, net	20,381		34,408		21,259			137,720		—			213,768
Intangible assets, net	6,674		43,815		1,150			83,871		—			135,510
Goodwill	—		61,982		11,089			7,551		—			80,622
Other assets	7,097		5,160		1,255			33,574		—			47,086
Deferred income taxes long-term	30,807		—		2,052			16,088		(32,859		)	16,088
Investment in subsidiaries	722,935		1,525		—			—		(724,460		)	—
Assets held for sale, net of current portion	—		—		—			5,394		—			5,394
Total assets	$	789,641	$	533,588	$	145,684		$	842,484	$	(1,055,415	)	$	1,255,982
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	—	$	—	$	—		$	32,929	$	—		$	32,929
Accounts payable	4,582		40,942		22,008			100,775		—			168,307
Accrued liabilities	17,887		15,092		7,230			72,492		—			112,701
Current portion of long-term debt	—		600		—			1,832		—			2,432
Income taxes payable	—		—		—			1,404		(280		)	1,124
Deferred income taxes	31,450		—		4,925			4,807		(21,554		)	19,628
Intercompany balances	179,251		—		39,265			40,292		(258,808		)	—
Current portion of assets held for sale	—		—		6			13,260		—			13,266
Total current liabilities	233,170		56,634		73,434			267,791		(280,642		)	350,387
Long-term debt	501,416		22,657		—			269,156		—			793,229
Other long-term liabilities	1,179		9,800		7,420			20,943		—			39,342
Deferred income taxes long-term	—		38,052		—			11,597		(32,859		)	16,790
Total liabilities	735,765		127,143		80,854			569,487		(313,501		)	1,199,748
Stockholders’/invested equity	53,876		406,445		64,830			270,639		(741,914		)	53,876
Non-controlling interest	—		—		—			2,358		—			2,358
Total liabilities and equity	$	789,641	$	533,588	$	145,684		$	842,484	$	(1,055,415	)	$	1,255,982

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Cash Flows

Three Months Ended January 31, 2015



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss)/income	$	(10,770	)	$	(1,245	)	$	(6,966	)	$	11,323		$	(3,900	)	$	(11,558	)
Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities:
Income from discontinued operations	—			—			2			(6,734		)	—			(6,732		)
Depreciation and amortization	738			2,373			1,573			6,074			—			10,758
Stock-based compensation	1,769			—			—			—			—			1,769
Provision for doubtful accounts	—			82			206			1,310			—			1,598
Asset impairments	—			—			—			255			—			255
Equity in earnings	(3,106		)	(324		)	—			596			3,430			596
Non-cash interest expense	507			299			—			51			—			857
Deferred income taxes	—			—			—			(5,225		)	—			(5,225		)
Other adjustments to reconcile net (loss)/income	(154		)	(615		)	384			80			—			(305		)
Changes in operating assets and liabilities:
Trade accounts receivable	—			7,461			12,437			12,329			—			32,227
Inventories	—			(8,038		)	(2,267		)	(29,889		)	470			(39,724		)
Intercompany	16,346			18,607			(28,061		)	(6,892		)	—			—
Other operating assets and liabilities	8,992			(10,697		)	(2,109		)	14,483			—			10,669
Cash (used in)/provided by operating activities of continuing operations	14,322			7,903			(24,801		)	(2,239		)	—			(4,815		)
Cash used in operating activities of discontinued operations	—			—			(2		)	4,670			—			4,668
Net cash (used in)/provided by operating activities	14,322			7,903			(24,803		)	2,431			—			(147		)
Cash flows from investing activities:
Proceeds from the sale of properties and equipment	—			—			—			455			—			455
Capital expenditures	(2,000		)	(887		)	(4,318		)	(8,739		)	—			(15,944		)
Changes in restricted cash	—			16,514			—			(976		)	—			15,538
Cash used in investing activities of continuing operations	(2,000		)	15,627			(4,318		)	(9,260		)	—			49
Cash provided by investing activities of discontinued operations	—			—			—			10,713			—			10,713
Net cash (used in)/provided by investing activities	(2,000		)	15,627			(4,318		)	1,453			—			10,762
Cash flows from financing activities:
Borrowings on lines of credit	—			—			—			11,770			—			11,770
Payments on lines of credit	—			—			—			(16,575		)	—			(16,575		)
Borrowings on long-term debt	—			22,515			—			20,219			—			42,734
Payments on long-term debt	—			(16,600		)	—			(15,820		)	—			(32,420		)
Stock option exercises and employee stock purchases	372			—			—			—			—			372
Intercompany	(12,549		)	(14,920		)	27,469			—			—			—
Cash provided by financing activities of continuing operations	(12,177		)	(9,005		)	27,469			(406		)	—			5,881
Net cash provided by financing activities	(12,177		)	(9,005		)	27,469			(406		)	—			5,881
Effect of exchange rate changes on cash	(146		)	—			—			(2,358		)	—			(2,504		)
Net increase/(decrease) in cash and cash equivalents	(1		)	14,525			(1,652		)	1,120			—			13,992
Cash and cash equivalents, beginning of period	158			2,867			(2,701		)	46,340			—			46,664
Cash and cash equivalents, end of period	$	157		$	17,392		$	(4,353	)	$	47,460		$	—		$	60,656

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Cash Flows

Three Months Ended January 31, 2014



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	15,387		$	7,323		$	25,349		$	12,867		$	(45,199	)	$	15,727
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Income from discontinued operations	—			(23,922		)	(13,531		)	(164		)	—			(37,617		)
Depreciation and amortization	585			2,589			1,330			6,041			—			10,545
Stock-based compensation	5,063			—			—			—			—			5,063
Provision for doubtful accounts	—			1,088			(209		)	783			—			1,662
Asset impairments	—			—			222			661			—			883
Equity in earnings	(35,932		)	74			—			352			35,858			352
Non-cash interest expense	462			239			—			213			—			914
Deferred income taxes	—			—			—			5			—			5
Other adjustments to reconcile net income	35			(9		)	(219		)	2,992			—			2,799
Changes in operating assets and liabilities:
Trade accounts receivable	—			10,795			12,403			38,707			—			61,905
Inventories	—			(8,275		)	(2,386		)	(29,849		)	9,341			(31,169		)
Other operating assets and liabilities	12,141			(11,998		)	(16,366		)	(18,962		)	—			(35,185		)
Cash (used in)/provided by operating activities of continuing operations	(2,259		)	(22,096		)	6,593			13,646			—			(4,116		)
Cash used in by operating activities of discontinued operations	—			—			(1,861		)	(5,334		)	—			(7,195		)
Net cash (used in)/provided by operating activities	(2,259		)	(22,096		)	4,732			8,312			—			(11,311		)
Cash flows from investing activities:
Capital expenditures	(1,970		)	(2,397		)	(1,299		)	(4,892		)	—			(10,558		)
Changes in restricted cash	—			(60,214		)	—			(403		)	—			(60,617		)
Cash used in investing activities of continuing operations	(1,970		)	(62,611		)	(1,299		)	(5,295		)	—			(71,175		)
Cash provided by/(used) in investing activities of discontinued operations	—			58,060			18,991			(332		)	—			76,719
Net cash (used in)/provided by investing activities	(1,970		)	(4,551		)	17,692			(5,627		)	—			5,544
Cash flows from financing activities:
Borrowings on lines of credit	—			—			—			18,904			—			18,904
Payments on lines of credit	—			—			—			(16,591		)	—			(16,591		)
Borrowings on long-term debt	—			40,500			—			11,562			—			52,062
Payments on long-term debt	—			(18,500		)	—			(15,279		)	—			(33,779		)
Payments of debt issuance costs	(373		)	38			—			—			—			(335		)
Stock option exercises and employee stock purchases	3,138			—			—			—			—			3,138
Intercompany	1,463			8,134			(24,659		)	15,062			—			—
Cash provided by/(used in) financing activities of continuing operations	4,228			30,172			(24,659		)	13,658			—			23,399
Net cash provided by/(used in) financing activities	4,228			30,172			(24,659		)	13,658			—			23,399
Effect of exchange rate changes on cash	—			—			—			(4,924		)	—			(4,924		)
Net (decrease)/increase in cash and cash equivalents	(1		)	3,525			(2,235		)	11,419			—			12,708
Cash and cash equivalents, beginning of period	35			3,733			296			53,216			—			57,280
Cash and cash equivalents, end of period	$	34		$	7,258		$	(1,939	)	$	64,635		$	—		$	69,988