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Quiksilver, Inc. Reports Second Quarter Fiscal 2012 Financial Results

  Quiksilver, Inc. Reports Second Quarter Fiscal 2012 Financial Results

  *Revenues of $492 million up 5% in constant currency compared to Q2 last
    year
  *Company earned pro-forma Adjusted EBITDA of $39.4 million for the quarter

Business Wire

HUNTINGTON BEACH, Calif. -- June 07, 2012

Quiksilver, Inc. (NYSE:ZQK) today announced operating results for the second
fiscal quarter ended April 30, 2012. Revenues grew 3% to $492.2 million
compared to $478.1 million in the second quarter of fiscal 2011 and grew 5% in
constant currency. The net loss was $5.1 million, or $0.03 per share, compared
to a net loss of $83.3 million, or $0.51 per share, in the second quarter of
fiscal 2011. The net loss a year ago included a $74.1 million non-cash
goodwill impairment charge related to the company’s business in Australia and
Japan. The pro-forma loss in the second quarter of fiscal 2012, which excludes
$2.1 million of net after-tax asset impairments and restructuring charges, was
$3.0 million, or $0.02 per share, compared to pro-forma income of $17.3
million, or $0.09 per share, in the second quarter of fiscal 2011, which
excluded the $74.1 million non-cash goodwill impairment charge mentioned
above. The decline in pro-forma income was primarily driven by gross margin
contraction. 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, “I’m proud of the Quiksilver team’s
performance in the second quarter amid inconsistent economic conditions around
the world. We continue to see examples of solid growth in our emerging markets
while some established markets, particularly in Europe, have been impacted by
regional economic uncertainty. Especially against this backdrop, we’re pleased
to see that the improvements we’ve made to our retail presence continue to
drive positive comparable store sales in all three regions. We’re also pleased
to be turning the page on a challenging first half of the year that included a
number of known headwinds that particularly affected our gross margins. We
expect the second half of fiscal 2012 will compare favorably to last year as
we anniversary higher input costs that we began to see in Q3 of 2011 and as we
begin to deliver goods for our highly anticipated back-to-school season,
particularly for DC. We also expect to reduce inventory levels in the second
half as we anticipate a productive fall season and largely conclude the
clearance activities we identified a quarter ago.”

Net revenues in the Americas increased 5% during the second quarter of fiscal
2012 to$221.0 million from $210.7 million in the second quarter of fiscal
2011. European net revenues decreased 6% during the second quarter of fiscal
2012 to $195.6 million from $206.9 million in the second quarter of fiscal
2011, and increased modestly in constant currency terms. Asia/Pacific net
revenues increased 27% during the second quarter of fiscal 2012 to $74.0
million from $58.1 million in the second quarter of fiscal 2011, and were up
24% in constant currency. The Asia/Pacific revenue growth was significantly
driven by improved performance in Japan where revenues in the second quarter
of fiscal 2011 were substantially impacted by the earthquake and related
tsunamis in the region. Please refer to the accompanying tables to better
understand the impact of foreign currency exchange rates on revenue trends in
the European and Asia/Pacific segments.

Gross margin in the second quarter was 49.2% of net revenues compared to 54.8%
of net revenues in the second quarter of fiscal 2011. The gross margin
contraction was principally driven by higher levels of clearance business, the
timing of certain royalties, higher input costs, and the impact of foreign
currency exchange rates. The company earned pro-forma Adjusted EBITDA of $39.4
million in the quarter compared to $62.1 million in the second quarter of
fiscal 2011, with the decline largely driven by the contraction in gross
margin mentioned above.

Q2 Highlights

  *Revenues for each of the company’s three major brands – Quiksilver, Roxy
    and DC – grew in the second quarter compared to the same quarter a year
    ago.
  *Second quarter same store sales in company-owned retail stores grew 6% on
    a global basis and were positive in each region.
  *Revenues in the company’s Americas and Asia/Pacific regions grew in all
    three channels of distribution including wholesale, company-owned retail
    and E-Commerce.
  *Quiksilver’s strong online sales momentum continued as the company’s
    second quarter E-Commerce revenues again demonstrated solid growth
    compared to the same quarter a year ago.
  *Continuing the company’s investment in emerging markets, on May 1^st
    Quiksilver expanded its majority ownership in its Brazilian entity to 80%.
    The company’s business in Brazil continues to demonstrate strong growth
    and solid profitability while generating annual revenues of greater than
    $50 million.
  *DC continues to build its strong online following with nearly 9 million
    Facebook fans who collectively generated over 182 million impressions on
    the DC brand Facebook page during Q2. In addition, DC’s official YouTube
    film channel generated nearly 14 million views in the quarter.
  *With two events remaining in the 2012 Association of Surfing Professionals
    season, Quiksilver team rider and brand ambassador Stephanie Gilmore, a
    four-time World Champion, and Roxy team rider Sally Fitzgibbons, world
    title runner-up the past two years, are locked in a tight battle for the
    women’s world surfing title after both have won two events during the
    current campaign. The next event on this year’s schedule is the Roxy Pro
    France in July.
  *The Street League Skateboarding DC Pro Tour kicked off its 2012 season at
    the Sprint Center in Kansas City. 17-year-old phenom Nyjah Huston, the
    newest addition to the DC skate team, won the event in a dramatic duel
    with Bastien Salabanzi, the tour’s first European qualifier. The next stop
    on the DC Pro Tour is at the Citizens Business Bank Arena in Ontario,
    California, June 15-16.

About Quiksilver:

Quiksilver, Inc. (NYSE:ZQK) 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 over the
internet. 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 anticipated second half
performance, inventory levels 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., 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 April 30,
In thousands, except per share amounts            2012           2011
                                                                   
Revenues, net                                     $  492,213       $ 478,093
Cost of goods sold                                  250,064       215,924 
Gross profit                                         242,149         262,169
                                                                   
Selling, general and administrative expense          224,010         216,748
Asset impairments                                   415           74,610  
                                                                   
Operating income (loss)                              17,724          (29,189 )
                                                                   
Interest expense                                     15,585          15,096
Foreign currency gain                               (609    )      (2,321  )
Income (loss) before provision for income            2,748           (41,964 )
taxes
                                                                   
Provision for income taxes                          7,155         39,690  
                                                                   
Net loss                                             (4,407  )       (81,654 )
Less: net income attributable to                    (713    )      (1,671  )
non-controlling interest
Net loss attributable to Quiksilver, Inc.         $  (5,120  )     $ (83,325 )
                                                                   
                                                                   
Net loss per share attributable to
                                                  $  (0.03   )     $ (0.51   )
Quiksilver, Inc.
                                                                   
Net loss per share attributable to
                                                  $  (0.03   )     $ (0.51   )
Quiksilver, Inc., assuming dilution
                                                                   
Weighted average common shares outstanding          163,953       162,268 
Weighted average common shares outstanding,
                                                    163,953       162,268 
assuming dilution
                                                                             

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                                                
                                                   Six Months Ended April 30,
In thousands, except per share amounts             2012          2011
                                                                   
Revenues, net                                      $ 941,834       $ 904,543
Cost of goods sold                                  471,735       418,904 
Gross profit                                         470,099         485,639
                                                                   
Selling, general and administrative expense          454,425         427,184
Asset impairments                                   415           74,610  
                                                                   
Operating income (loss)                              15,259          (16,155 )
                                                                   
Interest expense                                     30,630          44,064
Foreign currency gain                               (2,459  )      (4,430  )
Loss before provision for income taxes               (12,912 )       (55,789 )
                                                                   
Provision for income taxes                          12,405        40,941  
                                                                   
Net loss                                             (25,317 )       (96,730 )
Less: net income attributable to                    (2,408  )      (2,863  )
non-controlling interest
Net loss attributable to Quiksilver, Inc.          $ (27,725 )     $ (99,593 )
                                                                   
Net loss per share attributable to
                                                   $ (0.17   )     $ (0.62   )
Quiksilver, Inc.
                                                                   
Net loss per share attributable to
                                                   $ (0.17   )     $ (0.62   )
Quiksilver, Inc., assuming dilution
                                                                   
Weighted average common shares outstanding          163,655       161,879 
Weighted average common shares outstanding,         163,655       161,879 
assuming dilution
                                                                             

CONSOLIDATED BALANCE SHEETS (Unaudited)
                                                           
In thousands                                    April 30,       April 30,
                                                2012            2011
ASSETS
Current assets:
Cash and cash equivalents                       $ 79,177        $ 138,592
Trade accounts receivable, less allowance
for doubtful accounts of $41,995 (2012)         370,974         341,781
and $51,772 (2011)
Other receivables                               26,250          27,347
Income taxes receivable                         ―               111
Inventories                                     358,915         289,538
Deferred income taxes – short-term              17,752          24,426
Prepaid expenses and other current assets       31,697          31,270
Total current assets                            884,765         853,065
                                                                
Fixed assets, net                               240,424         234,645
Intangibles, net                                137,212         139,614
Goodwill                                        268,340         277,608
Other assets                                    54,948          52,658
Deferred income taxes – long-term               110,752         80,291
Total assets                                    $ 1,696,441     $ 1,637,881
                                                                
LIABILITIES & EQUITY
                                                                
Current liabilities:
Lines of credit                                 $ 13,517        $ 4,792
Accounts payable                                190,647         178,559
Accrued liabilities                             108,770         128,748
Current portion of long-term debt               22,840          5,824
Income taxes payable                            3,068           ―
Total current liabilities                       338,842         317,923
                                                                
Long-term debt                                  732,916         722,271
Other long-term liabilities                     33,790          63,171
Total liabilities                               1,105,548       1,103,365
                                                                
Equity:
Common stock                                    1,684           1,677
Additional paid-in capital                      544,809         521,148
Treasury stock                                  (6,778)         (6,778)
Accumulated deficit                             (60,290)        (110,900)
Accumulated other comprehensive income          95,096          117,438
Total Quiksilver, Inc. stockholders’ equity     574,521         522,585
Non-controlling interest                        16,372          11,931
Total equity                                    590,893         534,516
Total liabilities & equity                      $ 1,696,441     $ 1,637,881
                                                                

Information related to operating segments is as follows (unaudited):
                            
                                Three Months Ended April 30,
In thousands                    2012                2011
                                                      
Revenues, net:
Americas                        $   220,975           $  210,669
Europe                              195,554              206,941
Asia/Pacific                        74,026               58,140
Corporate operations               1,658              2,343    
                                $   492,213          $  478,093  
                                                      
Gross Profit:
Americas                        $   97,709            $  103,501
Europe                              108,997              128,332
Asia/Pacific                        35,963               30,862
Corporate operations               (520     )          (526     )
                                $   242,149          $  262,169  
                                                      
SG&A Expense:
Americas                        $   88,407            $  85,139
Europe                              83,202               84,569
Asia/Pacific                        40,002               37,817
Corporate operations               12,399             9,223    
                                $   224,010          $  216,748  
                                                      
Asset Impairments:
Americas                        $   415               $  465
Europe                              ―                    ―
Asia/Pacific                        ―                    74,145
Corporate operations               ―                  ―        
                                $   415              $  74,610   
                                                      
Operating Income (Loss):
Americas                        $   8,887             $  17,897
Europe                              25,795               43,763
Asia/Pacific                        (4,039   )           (81,100  )
Corporate operations               (12,919  )          (9,749   )
                                $   17,724           $  (29,189  )
                                                                  
                                                                  
                                Six Months Ended April 30,
In thousands                    2012                  2011
                                                      
Revenues, net:
Americas                        $   426,383           $  404,459
Europe                              364,428              372,140
Asia/Pacific                        148,619              125,141
Corporate operations               2,404              2,803    
                                $   941,834          $  904,543  
                                                      
Gross Profit:
Americas                        $   185,637           $  192,967
Europe                              210,769              225,632
Asia/Pacific                        74,103               67,495
Corporate operations               (410     )          (455     )
                                $   470,099          $  485,639  
                                                      
SG&A Expense:
Americas                        $   177,888           $  168,133
Europe                              169,298              164,986
Asia/Pacific                        77,241               72,647
Corporate operations               29,998             21,418   
                                $   454,425          $  427,184  
                                                      
Asset Impairments:
Americas                        $   415               $  465
Europe                              ―                    ―
Asia/Pacific                        ―                    74,145
Corporate operations               ―                  ―        
                                $   415              $  74,610   
                                                      
Operating Income (Loss):
Americas                        $   7,334             $  24,369
Europe                              41,471               60,646
Asia/Pacific                        (3,138   )           (79,297  )
Corporate operations               (30,408  )          (21,873  )
                                $   15,259           $  (16,155  )
                                                                  

GAAP TO PRO-FORMA RECONCILIATION

(Unaudited)
                                            
                                               Three Months Ended

                                               April 30,
In thousands, except per share amounts         2012            2011
                                                                             
Net loss attributable to Quiksilver, Inc.      $ (5,120  )         $ (83,325 )
Non-cash asset impairment charges, net of        383                 74,610
tax of $32 (2012) and $0 (2011)
Restructuring charges, net of tax of $0          1,746             ―
(2012) and $0 (2011)
Effect of APAC tax valuation allowance         ―                   25,980  
Pro-forma (loss) income                        $ (2,991  )         $ 17,265  
                                                                             
Pro-forma (loss) income per share              $ (0.02   )         $ 0.11    
                                                                             
Pro-forma (loss) income per share,             $ (0.02   )         $ 0.09    
assuming dilution
                                                                             
Weighted average common shares outstanding      163,953           162,268 
Weighted average common shares                  163,953           182,037 
outstanding, assuming dilution
                                                                             
                                               Six Months Ended

                                               April 30,
In thousands, except per share amounts         2012                2011
                                                                             
Net loss attributable to Quiksilver, Inc.      $ (27,725 )         $ (99,593 )
Non-cash asset impairment charges, net of        383                 74,610
tax of $32 (2012) and $0 (2011)
Restructuring charges (credits), net of
tax of $0                                        3,619               (2,118  )

(2012) and $0 (2011)
Effect of APAC tax valuation allowance         ―                     25,980
Non-cash interest charges, net of tax of
$0                                             ―                   10,691  

(2012) and $4,618 (2011)
Pro-forma (loss) income                        $ (23,723 )         $ 9,570   
                                                                             
Pro-forma (loss) income per share              $ (0.14   )         $ 0.06    
                                                                             
Pro-forma (loss) income per share,             $ (0.14   )         $ 0.05    
assuming dilution
                                                                             
Weighted average common shares outstanding      163,655           161,879 
Weighted average common shares
outstanding,                                    163,655           182,289 

assuming dilution
                                                                             

ADJUSTED EBITDA and PRO-FORMA ADJUSTED EBITDA RECONCILIATION

(Unaudited)
                                           
                                              Three Months Ended

                                              April 30,
Amounts in thousands                          2012          2011
                                                                        
Net loss attributable to Quiksilver, Inc.     $ (5,120  )     $ (83,325 )
Provision for income taxes                      7,155           39,690
Interest expense                                15,585          15,096
Depreciation and amortization                   14,163          13,470
Non-cash stock-based compensation expense       5,423           2,571
Non-cash asset impairments                     415           74,610  
Adjusted EBITDA                               $ 37,621        $ 62,112
Restructuring charges                          1,746        ―         
Pro-forma Adjusted EBITDA                     $ 39,367       $ 62,112  
                                                                        
                                              Six Months Ended

                                              April 30,
Amounts in thousands                          2012            2011
                                                                        
Net loss attributable to Quiksilver, Inc.     $ (27,725 )     $ (99,593 )
Provision for income taxes                      12,405          40,941
Interest expense                                30,630          44,064
Depreciation and amortization                   27,125          27,470
Non-cash stock-based compensation expense       12,400          4,981
Non-cash asset impairments                     415           74,610  
Adjusted EBITDA                               $ 55,250        $ 92,473
Restructuring charges (credits)                3,619         (2,118  )
Pro-forma Adjusted EBITDA                     $ 58,869       $ 90,355  
                                                                        

Definition of Adjusted EBITDA:

Adjusted EBITDA is defined as net income (loss) 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 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
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 April 30, 2011 and 2012 (in thousands):

Historical
currency     Americas   Europe    Asia/Pacific   Corporate   Total
(as
reported)
                                                                       
April 30,      210,669      206,941     58,140           2,343         478,093
2011
April 30,      220,975      195,554     74,026           1,658         492,213
2012
Percentage
increase       5%           (6%)        27%                            3%
(decrease)
                                                                       
Constant
currency
(current
year
exchange
rates)
                                                                       
April 30,      210,669      194,729     59,788           2,343         467,529
2011
April 30,      220,975      195,544     74,026           1,658         492,213
2012
Percentage     5%           0%          24%                            5%
increase

Contact:

Quiksilver, Inc.
Bruce Thomas
Vice President, Investor Relations
+1 (714) 889-2200