Quiksilver, Inc. Reports First Quarter Fiscal 2012 Financial Results

  • Revenues of $450 million grew 6% compared to Q1 last year
  • Company earned pro-forma Adjusted EBITDA of $19.5 million for the quarter

HUNTINGTON BEACH, Calif.--()--Quiksilver, Inc. (NYSE:ZQK) today announced operating results for the first fiscal quarter ended January 31, 2012. Revenues grew 5% to $449.6 million as compared to $426.5 million in the first quarter of fiscal 2011 and grew 6% in constant currency. The company earned pro-forma Adjusted EBITDA of $19.5 million in the quarter compared to $28.2 million in the first quarter of fiscal 2011. The net loss was $22.6 million, or $0.14 per share, while the pro-forma loss, which excludes $1.9 million of net after-tax severance charges, was $20.7 million or $0.13 per share. 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 very pleased with our solid first quarter results. Our top line growth was driven by continued strong retail performance with positive comparable store sales in all three regions. We’ve known for some time that the first half of fiscal 2012 would present some challenges to our business given the higher sourcing costs we began to encounter in the second half of 2011. But despite these pressures, demand for our products remains strong in both established and emerging markets. We’re also making good progress on the long-term growth initiatives in which we’ve invested. In addition, we’ve identified significant opportunities for cost reductions through further globalization of our operations. All things considered, we remain well positioned to deliver both revenue growth and profit expansion in fiscal 2012, the first year of our 5-year plan to increase annual revenues by 50% to $3 billion and to double our annual EBITDA to $400 million.”

Net revenues in the Americas increased 6% during the first quarter of fiscal 2012 to $205.4 million from $193.8 million in the first quarter of fiscal 2011. In constant currency, European segment net revenues increased 4% in the first quarter of fiscal 2012 compared to the prior year. As measured in U.S. dollars and reported in the financial statements, European net revenues increased 2% to $168.9 million from $165.2 million in the first quarter of fiscal 2011. In constant currency, Asia/Pacific segment net revenues increased 8% in the first quarter of fiscal 2012 compared to the prior year. As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues increased 11% to $74.6 million as compared to $67.0 million in the first quarter of fiscal 2011. 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.

Q1 Highlights

  • The company’s revenues grew in all three of its geographic regions for the first time since Q2 of fiscal 2008.
  • First quarter same store sales in Quiksilver’s company-owned retail business grew 11% in the Americas region, 9% in Europe and 3% in the Asia Pacific region.
  • Consumers shopped Quiksilver’s on-line web sites in record numbers as the company’s first quarter E-Commerce revenues more than doubled in comparison to the first quarter of fiscal 2011.
  • Quiksilver opened its first Mountain Boardriders store in Chamonix, France. The new shop in the heart of the French Alps offers a diverse line of products representing each of the company’s brands including a complete wintersports clothing collection, snowboards and boots, accessories, eyewear, watches, and in-season casuals. The store will also carry a collection for active summer outdoor sports at this Alpine destination.
  • Four-time World Champion and Quiksilver team rider and brand ambassador Stephanie Gilmore kicked off the Women’s ASP (Association of Surfing Professionals) 2012 season in style by winning the Roxy Pro Gold Coast at Snapper Rocks in Queensland, Australia.
  • DC added two of the largest names in skateboarding to the DC Pro Skate Team in January when they signed Battle at the Berrics winner Mike Mo Capaldi and two-time Street League champion and 2011 X Games XVII gold medalist Nyjah Huston.

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, select department stores and over the internet. 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 revenue, profit and EBITDA expectations and plans, 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 January 31,
In thousands, except per share amounts

2012

 

2011

 
Revenues, net $ 449,621 $ 426,450
Cost of goods sold   221,671     202,980  
Gross profit 227,950 223,470
 
Selling, general and administrative expense   230,415     210,436  
 
Operating (loss) income (2,465 ) 13,034
 
Interest expense 15,045 28,968
Foreign currency gain   (1,850 )   (2,109 )
Loss before provision for income taxes (15,660 ) (13,825 )
 
Provision for income taxes   5,250     1,251  
 
Net loss (20,910 ) (15,076 )

Less: net income attributable to non-controlling interest

  (1,695 )   (1,192 )
Net loss attributable to Quiksilver, Inc. $ (22,605 ) $ (16,268 )
 
 

Net loss per share attributable to Quiksilver, Inc.

$

(0.14

)

$

(0.10

)

 

Net loss per share attributable to Quiksilver, Inc., assuming dilution

 

$ (0.14 ) $ (0.10 )
 
 
Weighted average common shares outstanding   163,363     161,614  
 

Weighted average common shares outstanding, assuming dilution

 

  163,363     161,614  
 
 

CONSOLIDATED BALANCE SHEETS (Unaudited)

 
In thousands   January 31,   January 31,

2012

2011

ASSETS
Current assets:
Cash and cash equivalents $ 94,435 $ 177,192

Trade accounts receivable, less allowance for doubtful accounts of $44,126 (2012) and $44,558 (2011)

321,785

287,458

Other receivables 23,226 35,404
Inventories 412,291 309,561
Deferred income taxes – short-term 23,844 40,110
Prepaid expenses and other current assets   33,602     27,550  
Total current assets 909,183 877,275
 
Fixed assets, net 235,537 217,929
Intangibles, net 137,364 139,958
Goodwill 267,131 330,266
Other assets 58,981 50,479
Deferred income taxes – long-term   108,469     81,510  
Total assets $ 1,716,665   $ 1,697,417  
 

LIABILITIES & EQUITY

Current liabilities:
Lines of credit $ 6,267 $ 15,540
Accounts payable 225,439 211,148
Accrued liabilities 109,182 109,172
Current portion of long-term debt 4,444 5,594
Income taxes payable   14,553     719  
Total current liabilities 359,885 342,173
 
Long-term debt 729,234 697,043
Other long-term liabilities   36,350     56,524  
Total liabilities 1,125,469 1,095,740
 
Equity:
Common stock 1,683 1,675
Additional paid-in capital 539,387 518,347
Treasury stock (6,778 ) (6,778 )
Accumulated deficit (55,170 ) (27,575 )
Accumulated other comprehensive income   96,367     105,747  
Total Quiksilver, Inc. stockholders’ equity 575,489 591,416
Non-controlling interest   15,707     10,261  
Total equity   591,196     601,677  
Total liabilities & equity $ 1,716,665   $ 1,697,417  
 

Information related to operating segments is as follows (unaudited):

 
  Three Months Ended January 31,
In thousands

2012

 

2011

 
Revenues, net:
Americas $ 205,408 $ 193,790
Europe 168,874 165,199
Asia/Pacific 74,593 67,001
Corporate operations   746     460  
$ 449,621   $ 426,450  
 
Gross Profit:
Americas $ 87,928 $ 89,466
Europe 101,772 97,300
Asia/Pacific 38,140 36,633
Corporate operations   110     71  
$ 227,950   $ 223,470  
 
SG&A Expense:
Americas $ 89,481 $ 82,994
Europe 86,096 80,417
Asia/Pacific 37,239 34,830
Corporate operations   17,599     12,195  
$ 230,415   $ 210,436  
 
Operating (Loss) Income:
Americas $ (1,553 ) $ 6,472
Europe 15,676 16,883
Asia/Pacific 901 1,803
Corporate operations   (17,489 )   (12,124 )
$ (2,465 ) $ 13,034  
 
 

GAAP TO PRO-FORMA RECONCILIATION (Unaudited)

 
  Three Months Ended
January 31,
In thousands, except per share amounts 2012   2011
 
Net loss attributable to Quiksilver, Inc. $ (22,605 ) $ (16,268 )
Restructuring charges (credits), net of tax of $0 (2012) and $0 (2011) 1,873 (2,118 )

Non-cash interest charges, net of tax of $0 (2012) and $4,618 (2011)

      10,691  
Pro-forma loss $ (20,732 ) $ (7,695 )
 
Pro-forma loss per share $ (0.13 ) $ (0.05 )

Pro-forma loss per share, assuming dilution

$ (0.13 ) $ (0.05 )
 
 
Weighted average common shares outstanding   163,363     161,614  
 
Weighted average common shares outstanding, assuming dilution   163,363     161,614  
 
 
ADJUSTED EBITDA and PRO-FORMA ADJUSTED EBITDA RECONCILIATION
(Unaudited)
 
  Three Months Ended
January 31,
Amounts in thousands 2012   2011
 
Net loss attributable to Quiksilver, Inc. $ (22,605 ) $ (16,268 )
Provision for income taxes 5,250 1,251
Interest expense 15,045 28,968
Depreciation and amortization 12,962 14,000
Non-cash stock-based compensation expense   6,977     2,410  
Adjusted EBITDA $ 17,629 $ 30,361
Restructuring charges (credits)   1,873     (2,118 )
Pro-forma Adjusted EBITDA $ 19,502   $ 28,243  
 

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 January 31, 2011 and 2012 (in thousands):

 
Historical currency (as reported)   Americas   Europe   Asia/Pacific   Corporate   Total
 
January 31, 2011 $ 193,790 $ 165,199 $ 67,001 $ 460 $ 426,450
January 31, 2012 205,408 168,874 74,593 746 449,621
Percentage increase 6 % 2 % 11 % 5 %
 

Constant currency (current year

exchange rates)

 
January 31, 2011 193,790 162,689 68,889 460 425,828
January 31, 2012 205,408 168,874 74,593 746 449,621
Percentage increase 6 % 4 % 8 % 6 %
 

Contacts

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

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Contacts

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