Quiksilver, Inc. (NYSE:ZQK) today announced operating results for the third fiscal quarter ended July 31, 2011. Revenues grew 14% to $503.3 million as compared to $441.5 million in the third quarter of fiscal 2010. Consolidated gross profit of $255.1 million increased 11% compared to $230.7 million in the third quarter a year ago. The company earned Pro-forma Adjusted EBITDA of $52.7 million compared to $53.5 million earned in the third quarter of fiscal 2010. Pro-forma income from continuing operations was $10.4 million, or $0.06 per share, compared to $12.5 million, or $0.08 per share, in the third quarter of fiscal 2010. The company did not record any pro-forma adjustments for the third quarter of fiscal 2011, therefore income from continuing operations was also $10.4 million, or $0.06 per share, compared to $8.2 million, or $0.05 per share, in the third quarter a year ago. A reconciliation of GAAP results to pro-forma results is provided in the accompanying tables.

Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc., commented, “We’re pleased with our solid third quarter financial results and feel increasingly positive about our product offerings and the strength of our brands, which are resonating with consumers around the world despite global economic pressures. We’re seeing continued strong growth in emerging and developing markets while our category expansion initiatives are delivering good initial returns, consistent with our longer-term plans.”

McKnight continued, “And after working closely with city officials over the past few days, we’ve determined that the Quiksilver Pro New York surf contest should and will move forward in an appropriate manner given the impact of Hurricane Irene on the city and residents of Long Beach. We’re eager to bring the world’s best surfers as well as a great surf event to the New York area and in particular to Long Beach, which has an incredible surfing tradition and spirit.”

Net revenues in the Americas increased 11% during the third quarter of fiscal 2011 to $260.2 million from $234.6 million in the third quarter of fiscal 2010. As measured in U.S. dollars and reported in the financial statements, European net revenues increased 16% during the third quarter of fiscal 2011 to $176.4 million from $151.7 million in the third quarter a year ago. In constant currency, European segment net revenues increased 2% compared to the prior year. As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues increased 20% during the third quarter of fiscal 2011 to $65.5 million from $54.5 million in the third quarter of fiscal 2010. In constant currency, Asia/Pacific segment net revenues decreased 3% compared to the prior year. Please refer to the accompanying tables in order to better understand the impact of foreign currency exchange rates on revenue trends in the European and Asia/Pacific segments.

Q3 Brand Highlights
  • Legendary Quiksilver team rider and defending 10-time ASP World Surf Champion Kelly Slater won the US Open of Surfing in Huntington Beach, CA, as well as the ASP tour event in Tahiti, vaulting him into first place in the points standings in the race to become the 2011 World Surf Champion.
  • Quiksilver held the grand opening of its newest Boardriders Store in Ericeira, Portugal. The modern-style facility offers a large selection of products representing each of the company’s brands and includes the country’s largest skate park.
  • Australian Roxy surfer Sally Fitzgibbons won for the third time on the 2011 ASP Women’s World Tour in capturing the women’s title at the US Open of Surfing. Sally has finished the year ranked #2 in the world for the second time in just three years on tour.
  • DC co-founder and World Rally Championship driver Ken Block released the fourth installment of his Gymkhana precision driving series and it rapidly became the fastest-spreading viral video on the Internet with over 7 million views in its first two weeks. The entire Gymkhana franchise has now generated over 120 million views and has fueled the sales of DC’s TeamWorks collection which includes shoes, shirts, hats and jackets inspired by Ken’s rally car livery.
  • The Street League DC Pro Tour completed a second very successful season of skateboarding competitions this past week with the season finale carried on ESPN2. The tour attracted the world’s best skaters including Nyjah Houston, Chris Cole, Sean Malto, Ryan Sheckler, Chaz Ortiz, Shane O’Neill, Billy Marks, Paul Rodriguez and Mikey Taylor.
  • DC held the grand opening of the DC Embassy in Barcelona, Spain. This unique industrial-inspired space includes large showroom areas designed to showcase DC’s expanding product line. The complex sits atop a 1300 square meter skate park that will serve as the headquarters for the European members of the DC skate team.

About Quiksilver:

Quiksilver, Inc. (NYSE:ZQK) is the world’s leading outdoor sports lifestyle company, which designs, produces and distributes a diversified mix of branded apparel, footwear, accessories, snowboards and related products. The company’s apparel and footwear brands represent a casual lifestyle for young-minded people that connect with its boardriding culture and heritage.

The reputation of Quiksilver’s brands is based on outdoor action sports. 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 and select department stores. Quiksilver’s corporate and Americas’ headquarters are in Huntington Beach, California, while its European headquarters are in St. Jean de Luz, France, and its Asia/Pacific headquarters are in Torquay, Australia.

Forward looking statements:

This press release contains forward-looking statements including but not limited to statements regarding the company’s new growth 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, 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., you are invited to take a look at our world at www.quiksilver.com , www.roxy.com , www.dcshoes.com , www.lib-tech.com and www.hawkclothing.com .
 

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
Three Months Ended July 31,
In thousands, except per share amounts

2011
 

2010
 
Revenues, net $ 503,317 $ 441,475
Cost of goods sold   248,199     210,742  
Gross profit 255,118 230,733
 
Selling, general and administrative expense 221,172 193,155
Asset impairments     3,225  
 
Operating income 33,946 34,353
 
Interest expense 15,663 20,630
Foreign currency (gain) loss   (1,456 )   213  
Income before provision for income taxes 19,739 13,510
 
Provision for income taxes   8,996     5,096  
 
Income from continuing operations 10,743 8,414
Income from discontinued operations     143  
Net income 10,743 8,557
Less: net income attributable to non-controlling interest   (306 )   (251 )
Net income attributable to Quiksilver, Inc. $ 10,437   $ 8,306  
 
 

Income per share from continuing operations attributable to Quiksilver, Inc.
$

0.06
  $ 0.06  

Income per share from discontinued operations attributable to Quiksilver, Inc.
$

--
  $ 0.00  

Net income per share attributable to Quiksilver, Inc.
$ 0.06   $ 0.06  
 

Income per share from continuing operations attributable to Quiksilver, Inc., assuming dilution
$ 0.06   $ 0.05  

Income per share from discontinued operations attributable to Quiksilver, Inc., assuming dilution
$ --   $ 0.00  

Net income per share attributable to Quiksilver, Inc., assuming dilution
$ 0.06   $ 0.06  
 
Weighted average common shares outstanding   162,822     129,756  
 

Weighted average common shares outstanding, assuming dilution
  183,488     150,188  
 
Amounts attributable to Quiksilver, Inc.:
 
Income from continuing operations $ 10,437 $ 8,163
Income from discontinued operations     143  
Net income $ 10,437   $ 8,306  
 

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
 
Nine Months Ended July 31,
In thousands, except per share amounts

2011
 

2010
 
Revenues, net $ 1,407,860 $ 1,342,501
Cost of goods sold   667,103     640,332  
Gross profit 740,757 702,169
 
Selling, general and administrative expense 648,356 609,731
Asset impairments   74,610     3,225  
 
Operating income 17,791 89,213
 
Interest expense 59,727 63,542
Foreign currency gain   (5,886 )   (6,380 )
(Loss) income before provision for income taxes (36,050 ) 32,051
 
Provision for income taxes   49,937     18,189  
 
(Loss) income from continuing operations (85,987 ) 13,862
Income from discontinued operations

  821  
Net (loss) income (85,987 ) 14,683
Less: net income attributable to non-controlling interest   (3,169 )   (2,307 )
Net (loss) income attributable to Quiksilver, Inc. $ (89,156 ) $ 12,376  
 
(Loss) income per share from continuing operations attributable to Quiksilver, Inc. $ (0.55 ) $ 0.09  

Income per share from discontinued operations attributable to Quiksilver, Inc.

$

--
  $ 0.01  
Net (loss) income per share attributable to Quiksilver, Inc. $ (0.55 ) $ 0.10  
 
(Loss) income per share from continuing operations attributable to Quiksilver, Inc., assuming dilution $ (0.55 ) $ 0.08  

Income per share from discontinued operations attributable to Quiksilver, Inc., assuming dilution
$ --   $ 0.01  

Net (loss) income per share attributable to Quiksilver, Inc., assuming dilution
$ (0.55 ) $ 0.09  
 
Weighted average common shares outstanding   162,198     128,000  
 

Weighted average common shares outstanding, assuming dilution
 

162,198
   

143,623
 
 
Amounts attributable to Quiksilver, Inc.:
 
(Loss) income from continuing operations $ (89,156 ) $ 11,555
Income from discontinued operations   821  
Net (loss) income $ (89,156 ) $ 12,376  
 

CONSOLIDATED BALANCE SHEETS (Unaudited)
   

In thousands

July 31, 2011

July 31, 2010
ASSETS
Current assets:
Cash and cash equivalents $ 126,210 $ 155,653
Trade accounts receivable, less allowancefor doubtful accounts of $54,381 (2011)and $49,292 (2010) 385,927 340,921
Other receivables 16,657 26,933
Income taxes receivable 4,674 5,249
Inventories 364,833 270,854
Deferred income taxes – short-term 18,134 39,871
Prepaid expenses and other current assets   31,787     41,968  
Total current assets 948,222 881,449
 
Fixed assets, net 237,138 217,528
Intangible assets, net 138,934 140,762
Goodwill 273,549 318,418
Other assets 56,868 67,568
Deferred income taxes – long-term   72,855     53,514  
Total assets $ 1,727,566   $ 1,679,239  
 

LIABILITIES & EQUITY
 
Current liabilities:
Lines of credit $ 8,928 $ 24,651
Accounts payable 238,866 208,515
Accrued liabilities 134,365 96,628
Current portion of long-term debt 4,820 59,089
Current liabilities of assets held for sale     799  
Total current liabilities 386,979 389,682
 
Long-term debt, net of current portion 733,415 759,339
Other long-term liabilities   56,056     43,066  
Total liabilities 1,176,450 1,192,087
 
Equity:
Common stock 1,680 1,357
Additional paid-in capital 527,122 379,538
Treasury stock (6,778 ) (6,778 )
(Accumulated deficit) retained earnings (100,463 ) 10,753
Accumulated other comprehensive income   117,318     92,620  
Total Quiksilver, Inc. stockholders’ equity 538,879 477,490
Non-controlling interest   12,237     9,662  
Total equity   551,116     487,152  
Total liabilities & equity $ 1,727,566   $ 1,679,239  
 

Information related to operating segments is as follows (unaudited):
 
Three Months Ended July 31,
In thousands

2011
 

2010
 
Revenues, net:
Americas $ 260,159 $ 234,630
Europe 176,438 151,675
Asia/Pacific 65,495 54,504
Corporate operations   1,225     666  
$ 503,317   $ 441,475  
 
Gross Profit:
Americas $ 115,065 $ 109,594
Europe 106,451 91,939
Asia/Pacific 34,347 28,728
Corporate operations   (745 )   472  
$ 255,118   $ 230,733  
 
SG&A Expense:
Americas $ 87,984 $ 79,964
Europe 85,402 76,215
Asia/Pacific 36,314 29,168
Corporate operations   11,472     7,808  
$ 221,172   $ 193,155  
 

Asset Impairments:
Americas

$

$ 1,939
Europe

100
Asia/Pacific

1,186
Corporate operations  

   

 

$

  $ 3,225  
 
Operating Income (Loss):
Americas $ 27,081 $ 27,691
Europe 21,049 15,624
Asia/Pacific (1,967 ) (1,626 )
Corporate operations   (12,217 )   (7,336 )
$ 33,946   $ 34,353  
 
Nine Months Ended July 31,  
In thousands

2011
 

2010
 
Revenues, net:
Americas $ 664,618 $ 621,324
Europe 548,578 538,260
Asia/Pacific 190,636 180,201
Corporate operations   4,028     2,716  
$ 1,407,860   $ 1,342,501  
 
Gross Profit:
Americas $ 308,032 $ 283,606
Europe 332,083 321,300
Asia/Pacific 101,842 97,171
Corporate operations   (1,200 )   92  
$ 740,757   $ 702,169  
 
SG&A Expense:
Americas $ 256,117 $ 237,516
Europe 250,388 247,979
Asia/Pacific 108,961 92,804
Corporate operations   32,890     31,432  
$ 648,356   $ 609,731  
 
Asset Impairments:
Americas $ 465 $ 1,939
Europe 100
Asia/Pacific 74,145 1,186
Corporate operations    
$ 74,610   $ 3,225  
 
Operating Income (Loss):
Americas $ 51,450 $ 44,151
Europe 81,695 73,221
Asia/Pacific (81,264 ) 3,181
Corporate operations   (34,090 )   (31,340 )
$ 17,791   $ 89,213  
 

GAAP TO PRO-FORMA RECONCILIATION (Unaudited)
 
Three Months Ended

July 31,
 
In thousands, except per share amounts

2011
 

2010
 
Income from continuing operations attributable to Quiksilver, Inc. $ 10,437 $ 8,163
Restructuring charges, net of tax of $0 (2011) and $164 (2010) 1,765
Non-cash asset impairment charges, net of tax of

$0 (2011) and $616 (2010)
    2,609  
Pro-forma income from continuing operations $ 10,437   $ 12,537  
 
Pro-forma income per share from continuing operations $ 0.06   $ 0.10  

Pro-forma income per share from continuing operations,

assuming dilution
$ 0.06   $ 0.08  
 
Weighted average common shares outstanding   162,822     129,756  
 
Weighted average common shares outstanding, assuming dilution   183,488     150,188  
 
Nine Months Ended

July 31,
 
In thousands, except per share amounts

2011

2010
 
(Loss) income from continuing operations attributable to

Quiksilver, Inc.
$ (89,156 ) $ 11,555
Non-cash asset impairment charges, net of tax of $0

(2011) and $616 (2010)
74,610 2,609
Effect of APAC tax valuation allowance 25,980
Non-cash interest charges, net of tax of $4,618 (2011)

and $0 (2010)
10,691
Restructuring (credits) charges, net of tax of $0 (2011)

and $271 (2010)
(2,118 ) 7,612
Stock compensation expense 5,240
Gain from sale of Raisins trademarks     (1,252 )
Pro-forma income from continuing operations $ 20,007   $ 25,764  
 
Pro-forma income per share from continuing operations $ 0.12   $ 0.20  

Pro-forma income per share from continuing operations,

assuming dilution
$ 0.11   $ 0.18  
 
Weighted average common shares outstanding   162,198     128,000  
 
Weighted average common shares outstanding, assuming dilution   182,688     143,623  
 

ADJUSTED EBITDA and PRO-FORMA ADJUSTED EBITDA RECONCILIATION

(Unaudited)
 
Three Months Ended

July 31,
In thousands

2011
 

2010
 
Income from continuing operations attributable to Quiksilver, Inc. $ 10,437 $ 8,163
Provision for income taxes 8,996 5,096
Interest expense 15,663 20,630
Depreciation and amortization 12,684 13,192
Non-cash stock-based compensation expense 4,935 1,279
Non-cash asset impairments     3,225
Adjusted EBITDA $ 52,715 $ 51,585
Restructuring and other special charges     1,929
Pro-forma Adjusted EBITDA $ 52,715   $ 53,514
 
Nine Months Ended

July 31,
In thousands

2011

2010
 
(Loss) income from continuing operations attributable to Quiksilver, Inc. $ (89,156 ) $ 11,555
Provision for income taxes 49,937 18,189
Interest expense 59,727 63,542
Depreciation and amortization 40,154 40,215
Non-cash stock-based compensation expense 9,916 11,414
Non-cash asset impairments   74,610     3,225
Adjusted EBITDA $ 145,188 $ 148,140
Restructuring and other special (credits) charges   (2,118 )   6,631
Pro-forma Adjusted EBITDA $ 143,070   $ 154,771
 

Definition of Adjusted EBITDA:

Adjusted EBITDA is defined as income (loss) from continuing operations attributable to Quiksilver, Inc. before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) non-cash stock-based compensation expense and (v) asset impairments. Adjusted EBITDA is not defined under generally accepted accounting principles (“GAAP”), and it may not be comparable to similarly titled measures reported by other companies. We use Adjusted EBITDA, along with other GAAP measures, as a measure of profitability because Adjusted EBITDA helps us to 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 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 impact of our asset base. Adjusted EBITDA has limitations as a profitability measure in that it does 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 and the effect of asset impairments.

SUPPLEMENTAL EXCHANGE RATE INFORMATION (Unaudited)

In order to better understand growth rates in our foreign 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. Our European segment is translated into constant currency using euros and our Asia/Pacific segment is translated into constant currency using Australian dollars as these are the primary functional currencies of each operating segment. As such, this methodology does not account for movements in individual currencies within a segment (for example, non-euro currencies within our European segment and Japanese yen within our Asia/Pacific segment). A constant currency translation methodology that accounts for movements in each individual currency could yield a different result compared to using only euros and Australian dollars. The following table presents revenues by segment in both historical currency and constant currency for the three months ended July 31, 2010 and 2011 (in thousands):
         
Historical currency (as reported) Americas Europe Asia/Pacific Corporate Total
 
July 31, 2010 234,630 151,675 54,504 666 441,475
July 31, 2011 260,159 176,438 65,495 1,225 503,317
Percentage increase 11% 16% 20% 14%
 

Constant currency (current year exchange rates)
 
July 31, 2010 234,630 173,647 67,199 666 476,142
July 31, 2011 260,159 176,438 65,495 1,225 503,317
Percentage increase (decrease) 11% 2% (3%) 6%

Copyright Business Wire 2010

If you liked this article you might like

How Buying Lululemon Could Fix VF's Gender Imbalance

How Buying Lululemon Could Fix VF's Gender Imbalance

Quiksilver Sinks into Bankruptcy, Plans Reoganization

Quiksilver Sinks into Bankruptcy, Plans Reoganization

Quiksilver (ZQK) Stock Dives in Pre-Market Trading on Bankruptcy Filing

Quiksilver (ZQK) Stock Dives in Pre-Market Trading on Bankruptcy Filing

What to Expect When Quiksilver (ZQK) Reports Earnings Tomorrow

What to Expect When Quiksilver (ZQK) Reports Earnings Tomorrow

Quiksilver (ZQK) Flagged As Strong On High Volume

Quiksilver (ZQK) Flagged As Strong On High Volume