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Quiksilver Reports Fiscal 2013 First Quarter Financial Results

Brands (constant currency):

  • Quiksilver was down 7% to $179 million;
  • Roxy decreased 7% to $115 million; and,
  • DC was up 1% to $109 million.

Distribution channels (constant currency):

  • Wholesale business was down 8% to $268 million;
  • Retail was down 1% to $129 million. First quarter same store sales in company-owned retail stores decreased 1% on a global basis; and,
  • E-commerce was up 39% to $33 million.

Emerging markets generated net revenue growth of 15%, in constant currency.

About Quiksilver:

Quiksilver, Inc. is one of the world’s leading outdoor sports lifestyle companies. Quiksilver designs, produces and distributes a diversified mix of branded apparel, footwear and accessories. The company’s apparel and footwear brands, inspired by the passion for outdoor action sports, represent a casual lifestyle for young-minded people who connect with its boardriding culture and heritage. The company’s Quiksilver, Roxy, DC, Lib Tech and Hawk brands are synonymous with the heritage and culture of surfing, skateboarding and snowboarding. The company’s products are sold in over 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. Quiksilver’s corporate headquarters are in Huntington Beach, California.

Forward-looking statements:

This press release contains forward-looking statements including but not limited to statements regarding the company’s three core long-term initiatives and other future activities. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially. Please refer to Quiksilver’s SEC filings for more information on the risk factors that could cause actual results to differ materially from expectations, and specifically the sections titled “Risk Factors” and “Forward-Looking Statements” in Quiksilver’s 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 , www.lib-tech.com and www.hawkclothing.com .

QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
 
  Three months ended
In thousands, except per share amounts January 31,

2013

 

2012

 
Revenues, net $ 431,018 $ 449,621
Cost of goods sold   211,311     221,671  
 
Gross profit 219,707 227,950
 
Selling, general and administrative expense 225,259 230,415
Asset impairments   3,168     -  
 
Operating loss (8,720 ) (2,465 )
 
Interest expense 15,507 15,045
Foreign currency loss (gain)   3,173     (1,850 )
 
Loss before provision for income taxes (27,400 ) (15,660 )
 
Provision for income taxes   3,224     5,250  
 
Net loss (30,624 ) (20,910 )
Less: net income attributable to non-controlling interest   (505 )   (1,695 )
 
Net loss attributable to Quiksilver, Inc. $ (31,129 ) $ (22,605 )
 
Net loss per share attributable to Quiksilver, Inc., basic and diluted $ (0.19 ) $ (0.14 )
 
Weighted average common shares outstanding, basic and diluted 165,767 163,363
 
QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 
In thousands   January 31, 2013   January 31, 2012
 

ASSETS

Current Assets
Cash and cash equivalents $ 68,361 $ 94,435
Trade accounts receivable (net of allowance of $46,378 and $44,126 respectively) 339,580 321,785
Other receivables 31,869 23,226
Income taxes receivable 1,010 -
Inventories 419,191 412,291
Deferred income taxes - short-term 27,612 23,844
Prepaid expenses and other current assets   37,915     33,602  
Total Current Assets 925,538 909,183
 
Fixed assets, net 239,950 235,537
Intangible assets, net 140,090 137,364
Goodwill 277,250 267,131
Other assets 45,463 58,981
Deferred income taxes - long-term   119,661     108,469  
Total Assets $ 1,747,952   $ 1,716,665  
 

LIABILITIES AND EQUITY

Current Liabilities
Lines of credit $ 11,897 $ 6,267
Accounts payable 221,696 225,439
Accrued liabilities 109,842 109,182
Current portion of long-term debt 42,358 4,444
Income taxes payable   -     14,553  
Total Current Liabilities 385,793 359,885
 
Long-term debt, net of current portion 734,191 729,234
Other long-term liabilities   37,592     36,350  
Total Liabilities 1,157,576 1,125,469
 
Equity
Common stock 1,702 1,683
Additional paid-in capital 555,905 539,387
Treasury stock (6,778 ) (6,778 )
Accumulated deficit (74,450 ) (55,170 )
Accumulated other comprehensive income   94,522     96,367  
Total Quiksilver, Inc. Stockholders' Equity 570,901 575,489
Non-controlling interest   19,475     15,707  
Total Equity   590,376     591,196  
 
Total Liabilities and Equity $ 1,747,952   $ 1,716,665  
 
QUIKSILVER, INC. AND SUBSIDIARIES
INFORMATION RELATED TO OPERATING SEGMENTS (UNAUDITED)
 
 
  Three months ended
In thousands 31-Jan

2013

 

2012

Revenues, net:
Americas $ 186,284 $ 205,408
EMEA 171,174 168,874
APAC 72,876 74,593
Corporate operations   684     746  
$ 431,018 $ 449,621
 
Gross Profit:
Americas $ 80,859 $ 87,928
EMEA 98,889 101,772
APAC 39,277 38,140
Corporate operations   682     110  
$ 219,707 $ 227,950
 
SG&A Expense:
Americas $ 88,074 $ 89,481
EMEA 83,234 86,096
APAC 37,206 37,239
Corporate operations   16,745     17,599  
$ 225,259 $ 230,415
 
Asset Impairments:
Americas $ 1,621 $ -
EMEA 1,547 -
APAC - -
Corporate operations   -     -  
$ 3,168 $ -
 
Operating Income (Loss):
Americas $ (8,836 ) $ (1,553 )
EMEA 14,108 15,676
APAC 2,071 901
Corporate operations   (16,063 )   (17,489 )
$ (8,720 ) $ (2,465 )
 
The Company's 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 RECONCILIATION (UNAUDITED)
 
 
  Three months ended
In thousands, except per share amounts January 31,

2013

 

2012

 
Net loss attributable to Quiksilver, Inc. $ (31,129 ) $ (22,605 )
Restructuring charges, net of tax of $404 and $200, respectively 2,601 2,276
Non-cash asset impairments, net of tax of $556, and $0, respectively   2,612     -  
 
Pro-forma loss $ (25,916 ) $ (20,329 )
 

Pro-forma loss per share attributable to Quiksilver, Inc., basic and diluted

$ (0.16 ) $ (0.12 )
 
Weighted average common shares outstanding, basic and diluted 165,767 163,363
 
QUIKSILVER, INC. AND SUBSIDIARIES
ADJUSTED EBITDA & PRO-FORMA ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
   
 
Three months ended
In thousands January 31,

2013

2012

 
Net loss attributable to Quiksilver, Inc. $ (31,129 ) $ (22,605 )
Provision for income taxes 3,224 5,250
Interest expense 15,507 15,045
Depreciation and amortization 12,219 12,962
Non-cash stock-based compensation expense 7,336 6,977
Non-cash asset impairments   3,168     -  
 
Adjusted EBITDA $ 10,325 $ 17,629
 
Restructuring and other special charges   3,005     2,476  
 
Pro-forma Adjusted EBITDA $ 13,330 $ 20,105
 
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, 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 and the effect of non-cash stock-based compensation expense. 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 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 non-cash asset impairments and the effect of restructuring and other special charges.
 
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 three months ended January 31, 2013 and 2012 (in thousands):
         
Historical currency (as reported)

Americas

EMEA

APAC

Corporate

Total

 
January 31, 2013 $ 186,284 $ 171,174 $ 72,876 $ 684 $ 431,018
January 31, 2012 $ 205,408 $ 168,874 $ 74,593 $ 746 $ 449,621
Percentage (decrease) increase -9% 1% -2% -4%
 
Constant currency (current year exchange rates)
 
January 31, 2013 $ 186,284 $ 171,174 $ 72,876 $ 684 $ 431,018
January 31, 2012 $ 203,629 $ 168,483 $ 73,615 $ 748 $ 446,475
Percentage (decrease) increase -9% 2% -1% -3%




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