Quiksilver Reports Second Quarter Financial Results

  Quiksilver Reports Second Quarter Financial Results

                 --Company Provides Outlook for Fiscal 2014--

Business Wire

HUNTINGTON BEACH, Calif. -- June 2, 2014

Quiksilver, Inc. (NYSE:ZQK) today announced financial results for the fiscal
2014 second quarter ended April 30, 2014.

“We made progress on our Profit Improvement Plan,” said Andy Mooney, President
and Chief Executive Officer of Quiksilver, Inc. “During the second quarter, we
again reduced our expense structure, increased sales in our direct to consumer
channels and emerging markets, and drove improvements in gross margins. These
improvements were offset by decreased net revenues in our wholesale channel,
especially in the developed markets in North America and Europe. Consequently,
pro-forma adjusted EBITDA decreased versus the prior year.”

All of the results presented below represent the Company’s continuing
operations.

Please refer to the accompanying tables for a reconciliation of GAAP results
from continuing operations to certain non-GAAP results from continuing
operations, including pro-forma loss from continuing operations, pro-forma
loss from continuing operations per share, adjusted EBITDA and pro-forma
adjusted EBITDA, for all periods presented, net revenues in historical and
constant currency, and a definition of the Company’s emerging markets.

Second Quarter Review:

The following comparisons refer to results of continuing operations for the
second quarter of fiscal 2014 versus the second quarter of fiscal 2013.

Net revenues were $408 million compared with $456 million, and were down 9%,
or $42 million, in constant currency.

  *Americas net revenues decreased 18% to $186 million from $226 million, and
    were down 16% in constant currency.
  *EMEA net revenues decreased 2% to $162 million from $165 million, and were
    down 5% in constant currency.
  *APAC net revenues decreased 6% to $60 million from $64 million, but were
    up 3% in constant currency.

Gross margin increased to 48.7% from 45.9%. The 280 basis point improvement in
gross margin reflects the sales growth in our direct to consumer channels,
reduced clearance activity in the wholesale channel of certain regions and
benefits of licensing activities.

SG&A expense decreased $3 million to $214 million from $217 million, primarily
due to reduced selling expenses associated with the decline in net revenues,
reduced employee compensation expenses and event spending, partially offset by
an increase in bad debt expense.

Asset impairments increased to $20 million from $5 million due to a $15
million write-down of Surfdome goodwill and intangible assets in connection
with the reclassification of Surfdome from discontinued operations to
continuing operations.

Pro-forma Adjusted EBITDA decreased to $12 million from $18 million.

Net loss from continuing operations attributable to Quiksilver, Inc. was $46
million, or $0.27 per share, compared with $33 million, or $0.20 per share.

Pro-forma loss from continuing operations, which excludes the after-tax impact
of restructuring and other special charges and non-cash asset impairments,
increased to $25 million, or $0.15 per share, compared with $21 million, or
$0.12 per share.

Q2 Net Revenue Highlights:

Net revenues from continuing operations by brand and channel for the second
quarter of fiscal 2014 compared with the second quarter of fiscal 2013 were as
follows.

Brands (constant currency):

  *Quiksilver decreased $13 million, or 7%, to $167 million.
  *Roxy decreased $7 million, or 6%, to $121 million.
  *DC decreased $24 million, or 19%, to $103 million.

Distribution channels (constant currency):

  *Wholesale revenues decreased 15% to $286 million.
  *Retail revenues were flat at $90 million. Same-store sales in
    company-owned retail stores increased 1%. Company-owned retail stores
    totaled 658 at the end of the fiscal 2014 second quarter compared with 630
    at the end of the fiscal 2013 second quarter.
  *E-commerce revenues grew 23% to $30 million.

Emerging markets generated net revenue growth of 28% in constant currency.

Outlook:

The Company anticipates that the general sales trends of recent quarters
compared to the same prior year period will continue into the second half of
fiscal 2014 with continued net revenue declines in the North America and
Europe wholesale channels being partially offset by net revenue growth in
emerging markets and e-commerce. The Company also anticipates some continued
year-over-year gross margin improvements in the second half of fiscal 2014,
and that pro-forma adjusted EBITDA for fiscal 2014 will be below the $118
million achieved in fiscal 2013.

The Company said that it has revised the timing for achieving its Profit
Improvement Plan adjusted EBITDA target to the end of fiscal 2017.

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 100 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. The Company’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 future
revenues, gross margins, pro-forma adjusted EBITDA, and the timing of
achieving objectives of the company’s profit improvement plan. These
forward-looking statements are subject to risks and uncertainties, and actual
results may differ materially. The Company 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 the Company’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 the Company’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 and www.dcshoes.com.

                                                                   
QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                                                                                
                          Second quarter ended                First half ended
                          April 30,                           April 30,
                          2014              2013              2014              2013
In thousands,
except per share
amounts
Revenues, net             $ 408,215         $ 455,563         $ 819,383         $ 880,604
Cost of goods sold         209,344         246,562         412,403         455,339 
                                                                                
Gross profit                198,871           209,001           406,980           425,265
                                                                                
Selling, general
and administrative          213,647           216,922           425,466           438,946
expense
Asset impairments          19,961          5,332           20,844          8,500   
                                                                                
Operating loss              (34,737 )         (13,253 )         (39,330 )         (22,181 )
                                                                                
Interest expense            19,240            15,342            38,695            30,850
Foreign currency           893             (2,696  )        3,753           390     
loss/(gain)
                                                                                
Loss before
(benefit)/provision         (54,870 )         (25,899 )         (81,778 )         (53,421 )
for income taxes
                                                                                
(Benefit)/provision        (1,173  )        6,828           (5,503  )        10,005  
for income taxes
                                                                                
Loss from
continuing                  (53,697 )         (32,727 )         (76,275 )         (63,426 )
operations
(Loss)/income from
discontinued               (7,113  )        509             30,400          584     
operations, net of
tax
                                                                                
Net loss                    (60,810 )         (32,218 )         (45,875 )         (62,842 )
Less: net
loss/(income)
attributable to            7,737           (177    )        8,201           (682    )
non-controlling
interest
                                                                                
Net loss
attributable to           $ (53,073 )       $ (32,395 )       $ (37,674 )       $ (63,524 )
Quiksilver, Inc.
                                                                                
Loss per share from
continuing
operations
attributable to
Quiksilver, Inc.:
Basic                     $ (0.27   )       $ (0.20   )       $ (0.40   )       $ (0.39   )
Diluted                   $ (0.27   )       $ (0.20   )       $ (0.40   )       $ (0.39   )
                                                                                
(Loss)/income per
share from
discontinued
operations
attributable to
Quiksilver, Inc.:
Basic                     $ (0.04   )       $ 0.00            $ 0.18            $ 0.00
Diluted                   $ (0.04   )       $ 0.00            $ 0.18            $ 0.00
                                                                                
Weighted average
common shares
outstanding:
Basic                       170,475           166,815           170,105           166,282
Diluted                     170,475           166,815           170,105           166,282
                                                                                
Amounts
attributable to
Quiksilver, Inc.:
Loss from
continuing                $ (45,960 )       $ (32,904 )       $ (68,074 )       $ (64,108 )
operations
(Loss)/income from
discontinued               (7,113  )        509             30,400          584     
operations, net of
tax
Net loss                  $ (53,073 )       $ (32,395 )       $ (37,674 )       $ (63,524 )
                                                                                
                                                                                

                                                  
QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                                                                
                                 April 30, 2014                 April 30, 2013
In thousands
ASSETS
Current Assets
  Cash and cash
  equivalents (includes
  restricted cash of             $  119,585                     $  47,893
  $56,047 and $0,
  respectively)
  Trade accounts
  receivable (net of                351,744                        371,293
  allowance of $62,783 and
  $57,134, respectively)
  Other receivables                 29,604                         29,835
  Inventories                       320,589                        355,077
  Deferred income taxes -           9,696                          25,696
  short-term
  Prepaid expenses and              30,966                         32,637
  other current assets
  Current assets held for          -                            18,188    
  sale
       Total Current                862,184                        880,619
       Assets
                                                                
Fixed assets, net                   224,276                        232,335
Intangible assets, net              135,510                        137,817
Goodwill                            265,565                        272,764
Other assets                        50,376                         43,759
Deferred income taxes -             -                              114,391
long-term
Non-current assets held            -                            1,552     
for sale
       Total Assets              $  1,537,911                  $  1,683,237 
                                                                
LIABILITIES AND EQUITY
Current Liabilities
  Accounts payable               $  138,125                     $  184,684
  Accrued liabilities               111,456                        100,401
  Current portion of                49,873                         44,834
  long-term debt
  Income taxes payable              1,577                          451
  Liabilities related to           -                            2,965     
  assets held for sale
       Total Current                301,031                        333,335
       Liabilities
                                                                
Long-term debt, net of              846,949                        769,108
current portion
Other long-term                     34,649                         34,780
liabilities
Deferred income taxes -             22,046                         -
long-term
Non-current liabilities
related to assets held for         -                            178       
sale
       Total Liabilities            1,204,675                      1,137,401
                                                                
Equity
  Common stock                      1,738                          1,705
  Additional paid-in                582,612                        560,303
  capital
  Treasury stock                    (6,778    )                    (6,778    )
  Accumulated deficit               (313,560  )                    (106,845  )
  Accumulated other                65,177                       77,799    
  comprehensive income
       Total Quiksilver,
       Inc. Stockholders'           329,189                        526,184
       Equity
  Non-controlling interest         4,047                        19,652    
       Total Equity                333,236                      545,836   
                                                                
       Total Liabilities         $  1,537,911                  $  1,683,237 
       and Equity
                                                                
                                                                

                                                             
QUIKSILVER, INC. AND SUBSIDIARIES
GAAP TO PRO-FORMA LOSS FROM CONTINUING OPERATIONS RECONCILIATION (UNAUDITED)
                                                                          
                    Second quarter ended                First half ended
                    April 30,                           April 30,
                    2014              2013              2014              2013
In thousands,
except per
share amounts
Net loss from
continuing
operations
attributable        $ (45,960 )       $ (32,904 )       $ (68,074 )       $ (64,108 )
to
Quiksilver,
Inc.
Restructuring
and other
special
charges, net
of tax of             8,448             7,049             13,757            9,650
$1,003, $221,
$1,043 and
$625,
respectively
Non-cash
asset
impairments,
net of tax of        12,446          5,196           13,329          7,808   
$56, $136,
$56 and $692,
respectively
                                                                          
Pro-forma
loss from
continuing
operations            (25,066 )         (20,659 )         (40,988 )         (46,650 )
attributable
to
Quiksilver,
Inc.
                                                                          
Pro-forma
loss per
share from
continuing
operations          $ (0.15   )       $ (0.12   )       $ (0.24   )       $ (0.28   )
attributable
to
Quiksilver,
Inc. (basic
and diluted)
                                                                          
Weighted
average
common shares         170,475           166,815           170,105           166,282
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,
                          2014              2013              2014              2013
In thousands
Loss from
continuing
operations                $ (45,960 )       $ (32,904 )       $ (68,074 )       $ (64,108 )
attributable to
Quiksilver, Inc.
(Benefit)/provision         (1,173  )         6,828             (5,503  )         10,005
for income taxes
Interest expense            19,240            15,342            38,695            30,850
Depreciation and            14,703            12,734            25,614            24,885
amortization
Non-cash
stock-based                 6,525             3,887             11,588            11,223
compensation
expense
Non-cash asset             12,502          5,332           13,385          8,500   
impairments, net
                                                                                
Adjusted EBITDA             5,837             11,219            15,705            21,355
                                                                                
Restructuring and
other special              6,382           6,833           12,830          9,838   
charges
                                                                                
Pro-forma Adjusted          12,219            18,052            28,535            31,193
EBITDA
                                                                                

Definition of Adjusted EBITDA and Pro-forma Adjusted EBITDA:



Adjusted EBITDA is defined as loss from continuing operations 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, net of
non-controlling interest. For the quarter ended April 30, 2014, non-cash asset
impairments reflect Quiksilver, Inc.'s 51% share of the Surfdome impairment
charge. Pro-forma Adjusted EBITDA is defined as Adjusted EBITDA excluding
restructuring and other special charges. Such charges include, but are not
limited to, a) gains and losses on early lease terminations; severance and
other termination costs for employees or independent agents; contractual or
other termination costs paid to sever business relationships with sponsored
athletes, vendors, customers, and other business partners; write-offs of
inventory and other assets devalued as a direct result of restructuring
activities; and other expenses associated with planning and implementing
profit improvement plan activities; and b) other significant, non-recurring
and unusual items. 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, the impact of
implementing restructuring activities, and other significant, non-recurring
and unusual items. 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 restructuring and other
special charges, as these items 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, 2014 and 2013 (in
thousands):
                                                                                               
                          Americas          EMEA              APAC             Corporate       Total
                                                                                               
Historical currency
(as reported):
April 30, 2014            $ 186,427         $ 161,977         $ 59,721         $   90          $ 408,215
April 30, 2013              226,302           164,725           63,581             955           455,563
Percentage decrease         -18     %         -2      %         -6     %                         -10     %
                                                                                               
Constant currency
(current year
exchange rates):
April 30, 2014              186,427           161,977           59,721             90            408,215
April 30, 2013              221,552           170,001           57,887             976           450,416
Percentage                  -16     %         -5      %         3      %                         -9      %
(decrease)/increase
                                                                                               
                                                                                               
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.


Contact:

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