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Quiksilver Takes Actions To Advance Profit Improvement Plan

Quiksilver, Inc. (NYSE: ZQK) announced completion of several initiatives under its Profit Improvement Plan. These initiatives include:

  • sale of its snowboard subsidiary, Mervin Manufacturing for $58 million;
  • purchase of all remaining minority interests in its joint ventures in Mexico and Brazil;
  • establishment of a €60 million European credit facility;
  • plans to divest certain other non-core businesses.

“These transactions represent additional milestones in executing our multi-year profit improvement plan,” said Andy Mooney, President and Chief Executive Officer of Quiksilver, Inc. “We used a portion of the Mervin proceeds to invest in our high-growth subsidiaries in Mexico and Brazil, and we now own 100 percent of our operations in both countries. The remaining proceeds from the Mervin sale, combined with the new European credit facility, enhance our financial flexibility and add greater stability to our liquidity.

“Divesting Mervin and the other non-core businesses will allow management to focus on expanding our three core brands – Quiksilver, Roxy, and DC Shoes – along with driving additional operational efficiencies.”

Last month, the company completed the sale of its snowboard subsidiary, Mervin Manufacturing, Inc. Mervin is a leading designer and manufacturer of snowboarding products, with brands that include Gnu and Lib Tech.

On October 31, 2013, the company entered into a €60 million European credit facility with Eurofactor. The credit facility, which does not contain any financial covenants, has an initial term of three years.

Quiksilver also announced today its intention to pursue the divestiture and exit of other non-core businesses, including Surfdome Shop, Ltd. (Surfdome), Hawk Designs, Inc. (Hawk), its Moskova brand, and its business under license with Maui and Sons. As a result, the company plans to classify Mervin, Surfdome and Hawk as assets held for sale and discontinued operations at October 31, 2013.

Below are the preliminary and unaudited aggregate results for these discontinued operations. The company will report final fiscal 2013 fourth quarter and full year financial results, including these units as discontinued operations, on December 12, 2013.

         
        Fiscal 2013
($ in millions)       Q1       Q2       Q3       Q4       Full Year
Net revenues       $ 18.8       $ 11.4       $ 20.6       $ 32.3       $ 83.2
Gross profit       $ 9.9       $ 5.7       $ 11.2       $ 16.2       $ 43.0
SG&A       $ 8.9       $ 6.3       $ 7.7       $ 10.1       $ 33.0
PF Adj EBITDA       $ 1.0       $ 0.4       $ 3.7       $ 6.5       $ 11.7
                             

The foregoing financial information regarding discontinued operations reflects preliminary estimates as of the date of this press release and represents the most current information reasonably available to management. Actual results for these discontinued operations may differ materially from the preliminary results due to the completion of our financial closing procedures, final adjustments and other developments that may arise between the date of this press release and the time that financial results for the three months and fiscal year ended October 31, 2013 are finalized.

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