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 and six months ended April 30, 2015 and 2014, the financial position as of April 30, 2015 and October 31, 2014, and cash flows for the six months ended April 30, 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 April 30, 2015



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	118		$	83,703		$	63,086		$	209,322		$	(23,177	)	$	333,052
Cost of goods sold	—			51,307			42,793			104,876			(22,722		)	176,254
Gross profit	118			32,396			20,293			104,446			(455		)	156,798
Selling, general and administrative expense	4,662			47,400			21,083			103,446			(1,412		)	175,179
Asset impairments	—			—			466			237			—			703
Operating (loss)/income	(4,544		)	(15,004		)	(1,256		)	763			957			(19,084		)
Interest expense, net	11,660			962			(2		)	5,420			—			18,040
Foreign currency (gain)/loss	(205		)	330			28			(3,411		)	—			(3,258		)
Equity in earnings	21,565			419			—			—			(21,984		)	—
Loss before provision for income taxes	(37,564		)	(16,715		)	(1,282		)	(1,246		)	22,941			(33,866		)
Provision for income taxes	30			146			236			3,316			—			3,728
Net loss	(37,594		)	(16,861		)	(1,518		)	(4,562		)	22,941			(37,594		)
Other comprehensive loss	(4,152		)	—			—			(4,152		)	4,152			(4,152		)
Comprehensive loss	$	(41,746	)	$	(16,861	)	$	(1,518	)	$	(8,714	)	$	27,093		$	(41,746	)

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Operations

Three Months Ended April 30, 2014



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	116		$	90,937		$	79,964		$	257,018		$	(31,094	)	$	396,941
Cost of goods sold	193			55,274			62,839			122,224			(37,879		)	202,651
Gross profit	(77		)	35,663			17,125			134,794			6,785			194,290
Selling, general and administrative expense	6,378			59,138			21,227			122,808			(1,630		)	207,921
Asset impairments	—			765			3,255			563			—			4,583
Operating (loss)/income	(6,455		)	(24,240		)	(7,357		)	11,423			8,415			(18,214		)
Interest expense, net	11,618			455			—			7,149			—			19,222
Foreign currency loss	124			7			220			536			—			887
Equity in earnings	34,927			(692		)	—			—			(34,235		)	—
(Loss)/income before (benefit)/provision for income taxes	(53,124		)	(24,010		)	(7,577		)	3,738			42,650			(38,323		)
(Benefit)/provision for income taxes	—			(4,120		)	(2,933		)	6,610			—			(443		)
Loss from continuing operations	(53,124		)	(19,890		)	(4,644		)	(2,872		)	42,650			(37,880		)
Loss from discontinued operations	—			(4,165		)	(2,948		)	(15,868		)	—			(22,981		)
Net loss	(53,124		)	(24,055		)	(7,592		)	(18,740		)	42,650			(60,861		)
Net loss attributable to non-controlling interest	—			—			—			7,737			—			7,737
Net loss attributable to Quiksilver, Inc.	(53,124		)	(24,055		)	(7,592		)	(11,003		)	42,650			(53,124		)
Other comprehensive income	5,681			—			—			5,681			(5,681		)	5,681
Comprehensive loss attributable to Quiksilver, Inc.	$	(47,443	)	$	(24,055	)	$	(7,592	)	$	(5,322	)	$	36,969		$	(47,443	)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Operations

Six Months Ended April 30, 2015



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	234		$	155,239		$	131,621		$	439,219		$	(52,407	)	$	673,906
Cost of goods sold	—			95,359			87,884			213,953			(49,532		)	347,664
Gross profit	234			59,880			43,737			225,266			(2,875		)	326,242
Selling, general and administrative expense	7,137			76,178			50,788			214,942			(3,362		)	345,683
Asset impairments	—			—			466			492			—			958
Operating (loss)/income	(6,903		)	(16,298		)	(7,517		)	9,832			487			(20,399		)
Interest expense, net	23,305			1,709			(4		)	11,432			—			36,442
Foreign currency (gain)/loss	(363		)	(288		)	430			(2,380		)	—			(2,601		)
Equity in earnings	18,459			95			—			—			(18,554		)	—
(Loss)/income before provision for income taxes	(48,304		)	(17,814		)	(7,943		)	780			19,041			(54,240		)
Provision for income taxes	60			292			539			753			—			1,644
(Loss)/income from continuing operations	(48,364		)	(18,106		)	(8,482		)	27			19,041			(55,884		)
(Loss)/income from discontinued operations	—			—			(2		)	6,734			—			6,732
Net (loss)/income	(48,364		)	(18,106		)	(8,484		)	6,761			19,041			(49,152		)
Net loss attributable to non-controlling interest	—			—			—			788			—			788
Net (loss)/income attributable to Quiksilver, Inc.	(48,364		)	(18,106		)	(8,484		)	7,549			19,041			(48,364		)
Other comprehensive loss	(22,771		)	—			—			(22,771		)	22,771			(22,771		)
Comprehensive (loss) attributable to Quiksilver, Inc.	$	(71,135	)	$	(18,106	)	$	(8,484	)	$	(15,222	)	$	41,812		$	(71,135	)

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Operations

Six Months Ended April 30, 2014



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Revenues, net	$	232		$	176,473		$	178,705		$	526,788		$	(90,347	)	$	791,851
Cost of goods sold	193			106,538			131,041			242,008			(82,859		)	396,921
Gross profit	39			69,935			47,664			284,780			(7,488		)	394,930
Selling, general and administrative expense	15,403			115,104			43,895			243,865			(6,562		)	411,705
Asset impairments	—			765			3,477			1,224			—			5,466
Operating (loss)/income	(15,364		)	(45,934		)	292			39,691			(926		)	(22,241		)
Interest expense, net	23,218			1,465			—			13,959			—			38,642
Foreign currency loss/(gain)	160			(3		)	(4		)	3,562			—			3,715
Equity in earnings	(1,809		)	(618		)	—			—			2,427			—
(Loss)/income before (benefit)/provision for income taxes	(36,933		)	(46,778		)	296			22,170			(3,353		)	(64,598		)
(Benefit)/provision for income taxes	—			(10,289		)	(6,878		)	12,339			—			(4,828		)
(Loss)/income from continuing operations	(36,933		)	(36,489		)	7,174			9,831			(3,353		)	(59,770		)
Income/(loss) from discontinued operations	—			19,757			10,583			(15,704		)	—			14,636
Net (loss)/income	(36,933		)	(16,732		)	17,757			(5,873		)	(3,353		)	(45,134		)
Net loss attributable to non-controlling interest	—			—			—			8,201			—			8,201
Net (loss)/income attributable to Quiksilver, Inc.	(36,933		)	(16,732		)	17,757			2,328			(3,353		)	(36,933		)
Other comprehensive loss	(8,741		)	—			—			(8,741		)	8,741			(8,741		)
Comprehensive (loss)/income attributable to Quiksilver, Inc.	$	(45,674	)	$	(16,732	)	$	17,757		$	(6,413	)	$	5,388		$	(45,674	)

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Balance Sheet

April 30, 2015



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	157		$	11,555	$	—	$	39,758	$	(3,392	)	$	48,078
Restricted cash	—			—		—		4,449		—			4,449
Trade accounts receivable, net	—			51,993		19,581		180,373		—			251,947
Other receivables	10			1,989		1,084		39,717		—			42,800
Income taxes receivable	—			—		—		938		(444		)	494
Inventories	—			32,866		74,357		204,346		(20,321		)	291,248
Deferred income taxes	—			21,554		—		4,838		(21,554		)	4,838
Prepaid expenses and other current assets	1,639			8,340		3,402		17,044		—			30,425
Intercompany balances	—			264,452		—		132		(264,584		)	—
Total current assets	1,806			392,749		98,424		491,595		(310,295		)	674,279
Restricted cash	—			—		—		2,868		—			2,868
Fixed assets, net	19,192			31,249		21,277		117,955		—			189,673
Intangible assets, net	9,636			43,495		1,071		83,836		—			138,038
Goodwill	—			61,983		11,089		7,030		—			80,102
Other assets	6,253			4,531		662		28,004		—			39,450
Deferred income taxes long-term	30,807			—		2,052		14,182		(32,859		)	14,182
Investment in subsidiaries	706,629			1,430		—		—		(708,059		)	—
Total assets	$	774,323		$	535,437	$	134,575	$	745,470	$	(1,051,213	)	$	1,138,592
LIABILITIES AND EQUITY/(DEFICIT)
Current liabilities:
Lines of credit	$	—		$	—	$	—	$	33,037	$	—		$	33,037
Accounts payable	3,092			42,219		22,149		82,508		—			149,968
Accrued liabilities	19,014			13,637		9,387		66,800		(3,392		)	105,446
Current portion of long-term debt	—			600		—		1,648		—			2,248
Income taxes payable	—			443		1		—		(444		)	—
Deferred income taxes	31,450			—		4,925		4,346		(21,554		)	19,167
Intercompany balances	231,536			—		33,048		—		(264,584		)	—
Total current liabilities	285,092			56,899		69,510		188,339		(289,974		)	309,866
Long-term debt	501,699			46,103		—		237,680		—			785,482
Other long-term liabilities	2,165			6,044		8,719		18,819		—			35,747
Deferred income taxes long-term	—			38,052		—		16,937		(32,859		)	22,130
Total liabilities	788,956			147,098		78,229		461,775		(322,833		)	1,153,225
Stockholders’/invested equity/(deficit)	(14,633		)	388,339		56,346		283,695		(728,380		)	(14,633		)
Total liabilities and equity/(deficit)	$	774,323		$	535,437	$	134,575	$	745,470	$	(1,051,213	)	$	1,138,592

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

Six Months Ended April 30, 2015



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss)/income	$	(48,364	)	$	(18,106	)	$	(8,484	)	$	6,761		$	19,041		$	(49,152	)
Adjustments to reconcile net (loss)/income to net cash provided by/(used in) operating activities:
Income from discontinued operations	—			—			2			(6,734		)	—			(6,732		)
Depreciation and amortization	1,453			4,717			2,808			11,487			—			20,465
Stock-based compensation	2,252			—			—			—			—			2,252
Provision for doubtful accounts	—			647			314			2,409			—			3,370
Asset impairments	—			—			466			492			—			958
Equity in earnings	18,459			95			—			596			(18,554		)	596
Non-cash interest expense	1,030			632			—			98			—			1,760
Deferred income taxes	—			—			—			(4,091		)	—			(4,091		)
Other adjustments to reconcile net (loss)/income	(1,185		)	(281		)	47			(5,944		)	—			(7,363		)
Changes in operating assets and liabilities:
Trade accounts receivable	—			(977		)	14,886			24,891			—			38,800
Inventories	—			(7,185		)	(2,083		)	(10,403		)	(487		)	(20,158		)
Intercompany	67,233			1,020			(50,764		)	(17,489		)	—			—
Other operating assets and liabilities	1,176			(4,251		)	6,772			(9,424		)	(3,392		)	(9,119		)
Cash provided by/(used in) operating activities of continuing operations	42,054			(23,689		)	(36,036		)	(7,351		)	(3,392		)	(28,414		)
Cash (used in)/provided by operating activities of discontinued operations	—			—			(2		)	4,670			—			4,668
Net cash provided by/(used in) operating activities	42,054			(23,689		)	(36,038		)	(2,681		)	(3,392		)	(23,746		)
Cash flows from investing activities:
Proceeds from sale of property	—			—			—			460			—			460
Capital expenditures	(3,194		)	(1,674		)	(6,249		)	(11,857		)	—			(22,974		)
Changes in restricted cash	—			16,514			—			(2,630		)	—			13,884
Cash (used in)/provided by investing activities of continuing operations	(3,194		)	14,840			(6,249		)	(14,027		)	—			(8,630		)
Cash provided by investing activities of discontinued operations	—			—			—			10,713			—			10,713
Net cash (used in)/provided by investing activities	(3,194		)	14,840			(6,249		)	(3,314		)	—			2,083
Cash flows from financing activities:
Borrowings on lines of credit	—			—			—			40,739			—			40,739
Payments on lines of credit	—			—			—			(34,516		)	—			(34,516		)
Borrowings on long-term debt	—			43,038			—			14,663			—			57,701
Payments on long-term debt	—			(19,600		)	—			(15,316		)	—			(34,916		)
Stock option exercises and employee stock purchases	372			—			—			—			—			372
Intercompany	(39,087		)	(5,901		)	44,988			—			—			—
Cash (used in )/provided by financing activities of continuing operations	(38,715		)	17,537			44,988			5,570			—			29,380
Net cash (used in)/provided by financing activities	(38,715		)	17,537			44,988			5,570			—			29,380
Effect of exchange rate changes on cash	(146		)	—			—			(6,157		)	—			(6,303		)
Net (decrease)/increase in cash and cash equivalents	(1		)	8,688			2,701			(6,582		)	(3,392		)	1,414
Cash and cash equivalents, beginning of period	158			2,867			(2,701		)	46,340			—			46,664
Cash and cash equivalents, end of period	$	157		$	11,555		$	—		$	39,758		$	(3,392	)	$	48,078

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidating Statement of Cash Flows

Six Months Ended April 30, 2014



In thousands	Quiksilver, Inc.			QS Wholesale, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss)/income	$	(36,933	)	$	(16,732	)	$	17,757		$	(5,873	)	$	(3,353	)	$	(45,134	)
Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities:
Income from discontinued operations	—			(19,757		)	(10,583		)	15,704			—			(14,636		)
Depreciation and amortization	1,157			5,298			4,355			14,008			—			24,818
Stock-based compensation	11,588			—			—			—			—			11,588
Provision for doubtful accounts	—			12,458			158			2,624			—			15,240
Asset impairments	—			765			3,477			1,224			—			5,466
Equity in earnings	(1,809		)	(618		)	—			1,144			2,427			1,144
Non-cash interest expense	942			491			—			269			—			1,702
Deferred income taxes	—			—			—			529			—			529
Other adjustments to reconcile net income	157			(13		)	(288		)	3,857			—			3,713
Changes in operating assets and liabilities:
Trade accounts receivable	—			(7,671		)	17,124			28,460			—			37,913
Inventories	—			9,210			10,607			8,474			926			29,217
Intercompany	26,610			(3,121		)	(35,129		)	11,640			—			—
Other operating assets and liabilities	(1,824		)	(29,289		)	(22,034		)	(41,661		)	—			(94,808		)
Cash (used in)/provided by operating activities of continuing operations	(112		)	(48,979		)	(14,556		)	40,399			—			(23,248		)
Cash used in operating activities of discontinued operations	—			—			(1,861		)	(15,117		)	—			(16,978		)
Net cash (used in)/provided by operating activities	(112		)	(48,979		)	(16,417		)	25,282			—			(40,226		)
Cash flows from investing activities:
Proceeds from sale of property	—			11			505			149			—			665
Capital expenditures	(4,139		)	(5,159		)	(3,262		)	(11,127		)	—			(23,687		)
Changes in restricted cash	—			(50,214		)	—			(5,833		)	—			(56,047		)
Cash used in investing activities of continuing operations	(4,139		)	(55,362		)	(2,757		)	(16,811		)	—			(79,069		)
Cash provided by investing activities of discontinued operations	—			58,060			18,991			—			—			77,051
Net cash (used in)/provided by investing activities	(4,139		)	2,698			16,234			(16,811		)	—			(2,018		)
Cash flows from financing activities:
Borrowings on lines of credit	—			—			—			91,625			—			91,625
Payments on lines of credit	—			—			—			(67,258		)	—			(67,258		)
Borrowings on long-term debt	—			69,000			—			6,574			—			75,574
Payments on long-term debt	—			(26,500		)	—			(11,929		)	—			(38,429		)
Payments on short-term debt	—			—			—			(15,223		)	—			(15,223		)
Stock option exercises and employee stock purchases	5,150			—			—			—			—			5,150
Payments of debt issuance costs	(809		)	38			—			—			—			(771		)
Cash provided by financing activities of continuing operations	4,341			42,538			—			3,789			—			50,668
Net cash provided by financing activities	4,341			42,538			—			3,789			—			50,668
Effect of exchange rate changes on cash	—			—			—			1,430			—			1,430
Net increase/(decrease) in cash and cash equivalents	90			(3,743		)	(183		)	13,690			—			9,854
Cash and cash equivalents, beginning of period	35			3,733			296			53,216			—			57,280
Cash and cash equivalents, end of period	$	125		$	(10	)	$	113		$	66,906		$	—		$	67,134