Quiksilver Reports Fiscal 2013 Second Quarter Financial Results

  Quiksilver Reports Fiscal 2013 Second Quarter Financial Results

              Company Provides Updated Guidance for Fiscal 2013

Business Wire

HUNTINGTON BEACH, Calif. -- June 6, 2013

Quiksilver, Inc. (NYSE:ZQK) today announced operating results for the fiscal
2013 second quarter ended April 30, 2013.

“We recently announced a multi-year profit improvement plan designed to
enhance the performance of our three flagship brands, Quiksilver, Roxy and DC,
and accelerate our path to sustained profitable growth,” said Andy Mooney,
President and Chief Executive Officer of Quiksilver, Inc. “With a reorganized
management structure and our new leadership team largely in place, we have
begun working toward globalizing key functions and gaining efficiencies to
reap the benefits of our size and scale. We believe that, over time, our new
focus and structure will allow us to significantly improve profitability,
working capital efficiency and competitive positioning.

“Our second quarter performance reflects net revenue declines primarily within
our EMEA wholesale channel, along with lower gross margins across all three
flagship brands, particularly within DC,” continued Mooney. “We continued to
liquidate prior seasons’ inventory and meaningfully lowered operating
expenses.”

Please refer to the accompanying tables for a reconciliation of GAAP results
to certain non-GAAP results for the second quarter and first half ended April
30, 2013 and 2012, net revenues in historical and constant currency, and a
definition of our emerging markets.

Fiscal 2013 Second Quarter Review:
The following comparisons refer to the second quarter of fiscal 2013 versus
the second quarter of fiscal 2012.

Net revenues were $459 million compared with $492 million, and were down 5%,
or $25 million, in constant currency.

  *Americas net revenues increased 3% to $229 million from $221 million, and
    were up 4% in constant currency.
  *EMEA net revenues decreased 16% to $165 million from $196 million, and
    were down 14% in constant currency.
  *APAC net revenues decreased 14% to $64 million from $74 million, and were
    down 9% in constant currency.

Gross margin decreased to 46.0% of net revenues compared with 49.2%, primarily
driven by increased discounting and clearance of DC product, increased
discounting in Europe across the company’s three flagship brands, and
inventory write downs related to certain brands and product categories which
were discontinued in the second quarter.

SG&A decreased to $218 million compared with $224 million, primarily due to
the company’s ongoing expense reduction efforts which resulted in savings
across several expense categories.

Non-cash asset impairments were $5.3 million compared with $0.4 million.

Foreign currency gain was $2.6 million compared with $0.6 million.

Net loss attributable to Quiksilver, Inc. was $32 million, or $0.19 per share,
compared with $5 million, or $0.03 per share.

Pro-forma loss, which excludes the after-tax impact of restructuring and other
special charges and non-cash asset impairments from net loss attributable to
Quiksilver, Inc., was $20 million and $2 million, or $0.12 per share and $0.01
per share, respectively.

Pro-forma Adjusted EBITDA was $19 million compared with $41 million, with the
decline largely driven by gross margin and net revenue declines.

Fiscal 2013 Q2 Net Revenue Highlights:
Net revenues (in constant currency) by brand and channel for the second
quarter of fiscal 2013 compared with the second quarter of fiscal 2012 were as
follows.

Brands (constant currency):

  *Quiksilver decreased 10% to $182 million;
  *Roxy decreased 4% to $129 million; and,
  *DC increased 1% to $129 million.

Distribution channels (constant currency):

  *Wholesale decreased 7% to $344 million;
  *Retail decreased 5% to $91 million. Second quarter same store sales in
    company-owned retail stores decreased 4% on a global basis. Company-owned
    retail stores totaled 564 compared with 549 at the end of fiscal 2012
    second quarter; and,
  *E-commerce was up 31% to $23 million.

Emerging markets generated net revenue growth of 13% in constant currency.

Guidance for Fiscal 2013:
Based on its current outlook, the company revised its fiscal 2013 financial
guidance as follows:

  *Pro-forma adjusted EBITDA for the second half of fiscal 2013 is expected
    to be greater than the $91 million achieved during the second half of
    fiscal 2012;
  *Capital expenditures for fiscal 2013 are expected to decrease by at least
    10% from the $66 million recorded in fiscal 2012.

The foregoing guidance updates and supersedes the company’s prior guidance for
fiscal 2013.

About Quiksilver:

Quiksilver, Inc., one of the world’s leading outdoor sports lifestyle
companies, designs, produces and distributes branded apparel, footwear and
accessories. The company’s apparel and footwear brands, inspired by a 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, and DC brands have authentic roots and heritage in surf,
snow and skate. The company’s products are sold in more than 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 management’s expectations for improved
profitability, working capital efficiency, and competitive positioning as well
as management’s current expectations regarding pro-forma adjusted EBITDA and
capital expenditures for the second half of fiscal 2013, and other future
activities. These forward-looking statements are subject to risks and
uncertainties, and actual results may differ materially. Quiksilver undertakes
no obligation to update these statements, which are made only as of the date
of this press release. For the factors that could cause actual results to
differ materially from expectations, please refer to Quiksilver’s SEC filings
and specifically the sections titled “Risk Factors,” “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” 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 and www.moskova.com.

                           FINANCIAL TABLES FOLLOW

QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                                                               
                                                                   
                         Second quarter ended        First half ended
                         April 30,                   April 30,
                           2013          2012          2013          2012
In thousands, except
per share amounts
Revenues, net            $ 458,748     $ 492,213     $ 889,766     $ 941,834
Cost of goods sold        247,612     250,064     458,923     471,735 
                                                                   
Gross profit               211,136       242,149       430,843       470,099
                                                                   
Selling, general and       218,204       224,010       443,463       454,425
administrative expense
Asset impairments         5,332       415         8,500       415     
                                                                   
Operating (loss) income    (12,400 )     17,724        (21,120 )     15,259
                                                                   
Interest expense           15,289        15,585        30,796        30,630
Foreign currency (gain)   (2,618  )    (609    )    555         (2,459  )
loss
                                                                   
(Loss) income before
provision for income       (25,071 )     2,748         (52,471 )     (12,912 )
taxes
                                                                   
Provision for income      7,147       7,155       10,371      12,405  
taxes
                                                                   
Net loss                   (32,218 )     (4,407  )     (62,842 )     (25,317 )
Less: net income
attributable to           (177    )    (713    )    (682    )    (2,408  )
non-controlling
interest
                                                                   
Net loss attributable    $ (32,395 )   $ (5,120  )   $ (63,524 )   $ (27,725 )
to Quiksilver, Inc.
                                                                   
Net loss per share
attributable to          $ (0.19   )   $ (0.03   )   $ (0.38   )   $ (0.17   )
Quiksilver, Inc. (basic
and diluted):
                                                                   
Weighted average common
shares outstanding         166,815       163,953       166,282       163,655
(basic and diluted):
                                                                   

QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                                            
                                               April 30, 2013   April 30, 2012
In thousands
ASSETS
Current Assets
     Cash and cash equivalents                 $  47,893        $  79,177
     Trade accounts receivable (net of
     allowance of $57,134 and $53,593,            375,336          370,974
     respectively)
     Other receivables                            31,933           26,250
     Inventories                                  366,304          358,915
     Deferred income taxes - short-term           25,696           17,752
     Prepaid expenses and other current          33,457         31,697    
     assets
            Total Current Assets                  880,619          884,765
                                                                
Fixed assets, net                                 232,955          240,424
Intangible assets, net                            138,749          137,212
Goodwill                                          272,764          268,340
Other assets                                      43,759           54,948
Deferred income taxes - long-term                114,391        110,752   
            Total Assets                       $  1,683,237    $  1,696,441 
                                                                
LIABILITIES AND EQUITY
Current Liabilities
     Lines of credit                           $  -             $  13,517
     Accounts payable                             185,570          190,647
     Accrued liabilities                          102,480          108,770
     Current portion of long-term debt            44,834           22,840
     Income taxes payable                        451            3,068     
            Total Current Liabilities             333,335          338,842
                                                                
Long-term debt, net of current portion            769,108          732,916
Other long-term liabilities                      34,958         33,790    
            Total Liabilities                     1,137,401        1,105,548
                                                                
Equity
     Common stock                                 1,705            1,684
     Additional paid-in capital                   560,303          544,809
     Treasury stock                               (6,778    )      (6,778    )
     Accumulated deficit                          (106,845  )      (60,290   )
     Accumulated other comprehensive income      77,799         95,096    
            Total Quiksilver, Inc.                526,184          574,521
            Stockholders' Equity
     Non-controlling interest                    19,652         16,372    
            Total Equity                         545,836        590,893   
                                                                
            Total Liabilities and Equity       $  1,683,237    $  1,696,441 
                                                                             

QUIKSILVER, INC. AND SUBSIDIARIES
INFORMATION RELATED TO OPERATING SEGMENTS (UNAUDITED)
                                                              
                                                                   
                 Second quarter ended                First half ended
In thousands     April 30,                           April 30,
                    2013              2012             2013          2012
Revenues,
net:
Americas         $  228,703        $  220,975        $ 414,987     $ 426,383
EMEA                165,189           195,554          336,364       364,428
APAC                63,900            74,026           136,776       148,619
Corporate          956             1,658          1,639       2,404   
operations
                    458,748           492,213          889,766       941,834
                                                                   
Gross Profit:
Americas         $  92,696         $  97,709         $ 173,555     $ 185,637
EMEA                87,961            108,997          186,850       210,769
APAC                31,634            35,963           70,911        74,103
Corporate          (1,155   )       (520     )      (473    )    (410    )
operations
                    211,136           242,149          430,843       470,099
                                                                   
SG&A Expense:
Americas         $  84,999         $  88,407         $ 173,073     $ 177,888
EMEA                80,976            83,202           164,210       169,298
APAC                37,756            40,002           74,962        77,241
Corporate          14,473          12,399         31,218      29,998  
operations
                    218,204           224,010          443,463       454,425
                                                                   
Asset
Impairments:
Americas         $  5,322          $  415            $ 6,943       $ 415
EMEA                10                -                1,557         -
APAC                -                 -                -             -
Corporate          -               -              -           -       
operations
                    5,332             415              8,500         415
                                                                   
Operating
Income
(Loss):
Americas         $  2,375          $  8,887          $ (6,461  )   $ 7,334
EMEA                6,975             25,795           21,083        41,471
APAC                (6,122   )        (4,039   )       (4,051  )     (3,138  )
Corporate          (15,628  )       (12,919  )      (31,691 )    (30,408 )
operations
                    (12,400  )        17,724           (21,120 )     15,259
                                                                   
Definition of emerging markets:
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 NET LOSS RECONCILIATION (UNAUDITED)
                                                              
                                                                   
                         Second quarter ended        First half ended
                         April 30,                   April 30,
                           2013          2012          2013          2012
In thousands, except
per share amounts
Net loss attributable    $ (32,395 )   $ (5,120  )   $ (63,524 )   $ (27,725 )
to Quiksilver, Inc.
Restructuring charges,
net of tax of $221,        7,049         2,966         9,650         5,242
$600, $625 and $800,
respectively
Non-cash asset
impairments, net of       5,196       383         7,808       383     
tax of $136, $32, $692
and $32, respectively
                                                                   
Pro-forma net loss         (20,150 )     (1,771  )     (46,066 )     (22,100 )
                                                                   
Pro-forma loss per
share attributable to    $ (0.12   )   $ (0.01   )   $ (0.28   )   $ (0.14   )
Quiksilver, Inc.
(basic and diluted):
                                                                   
Weighted average
common shares              166,815       163,953       166,282       163,655
outstanding (basic and
diluted):
                                                                             

QUIKSILVER, INC. AND SUBSIDIARIES
ADJUSTED EBITDA & PRO-FORMA ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
                                                              
                                                                   
                          Second quarter ended       First half ended
                          April 30,                  April 30,
                            2013          2012         2013          2012
In thousands
Net loss attributable     $ (32,395 )   $ (5,120 )   $ (63,524 )   $ (27,725 )
to Quiksilver, Inc.
Provision for income        7,147         7,155        10,371        12,405
taxes
Interest expense            15,289        15,585       30,796        30,630
Depreciation and            12,808        14,163       25,027        27,125
amortization
Non-cash stock-based        3,887         5,423        11,223        12,400
compensation expense
Non-cash asset             5,332       415        8,500       415     
impairments
                                                                   
Adjusted EBITDA             12,068        37,621       22,393        55,250
                                                                   
Restructuring and other    6,833       3,566      9,838       6,042   
special charges
                                                                   
Pro-forma Adjusted          18,901        41,187       32,231        61,292
EBITDA
                                                                   

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, reserves and other charges associated with
restructuring activities, 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, the effect of non-cash stock-based compensation expense
and restructuring and other special charges. 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 reserves and charges associated with restructuring activities,
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
asset impairments and the effect of restructuring and other special charges.

QUIKSILVER, INC. AND SUBSIDIARIES
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 second
quarter ended April 30, 2013 and 2012 (in thousands):
            
                                                                   
               Americas       EMEA           APAC        Corporate Total
Historical
currency
(as
reported):
April 30,      $  228,703     $  165,189     $  63,900   $  956    $ 458,748
2013
April 30,         220,975        195,554        74,026      1,658    492,213
2012
Percentage
increase          3        %     -16      %     -14    %             -7      %
(decrease)
                                                                   
Constant
currency
(current
year
exchange
rates):
April 30,         228,703        165,189        63,900      956      458,748
2013
April 30,         219,240        192,532        69,870      1,654    483,296
2012
Percentage
increase          4        %     -14      %     -9     %             -5      %
(decrease)

Contact:

Quiksilver, Inc.
Robert Jaffe, Investor Relations
424-288-4098
zqk@quiksilver.com
 
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