EX-99.1 2 d738428dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

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  Contact: Robert Jaffe
       Investor Relations
       424-288-4098
       zqk@quiksilver.com

Quiksilver Reports Second Quarter Financial Results

Company Provides Outlook for Fiscal 2014

 

Huntington Beach, California, 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.


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Quiksilver, Inc. Reports Fiscal 2014 Second Quarter Financial Results

June 2, 2014

Page 2 of 3

 

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.


 

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Quiksilver, Inc. Reports Fiscal 2014 Second Quarter Financial Results

June 2, 2014

Page 3 of 3

 

 

 

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.

FINANCIAL TABLES FOLLOW


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 expense

     213,647        216,922        425,466        438,946   

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 loss/(gain)

     893        (2,696     3,753        390   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before (benefit)/provision for income taxes

     (54,870 )      (25,899 )      (81,778 )      (53,421 ) 

(Benefit)/provision for income taxes

     (1,173     6,828        (5,503     10,005   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from continuing operations

     (53,697 )      (32,727 )      (76,275 )      (63,426 ) 

(Loss)/income from discontinued operations, net of tax

     (7,113     509        30,400        584   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (60,810 )      (32,218 )      (45,875 )      (62,842 ) 

Less: net loss/(income) attributable to non-controlling interest

     7,737        (177     8,201        (682
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Quiksilver, Inc.

   $ (53,073   $ (32,395   $ (37,674   $ (63,524
  

 

 

   

 

 

   

 

 

   

 

 

 

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 operations

   $ (45,960   $ (32,904   $ (68,074   $ (64,108

(Loss)/income from discontinued operations, net of tax

     (7,113     509        30,400        584   
  

 

 

   

 

 

   

 

 

   

 

 

 

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 $56,047 and $0, respectively)

   $ 119,585      $ 47,893   

Trade accounts receivable (net of allowance of $62,783 and $57,134, respectively)

     351,744        371,293   

Other receivables

     29,604        29,835   

Inventories

     320,589        355,077   

Deferred income taxes – short-term

     9,696        25,696   

Prepaid expenses and other current assets

     30,966        32,637   

Current assets held for sale

     —          18,188   
  

 

 

   

 

 

 

Total Current Assets

     862,184        880,619   

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 – long-term

     —          114,391   

Non-current assets held for sale

     —          1,552   
  

 

 

   

 

 

 

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 long-term debt

     49,873        44,834   

Income taxes payable

     1,577        451   

Liabilities related to assets held for sale

     —          2,965   
  

 

 

   

 

 

 

Total Current Liabilities

     301,031        333,335   

Long-term debt, net of current portion

     846,949        769,108   

Other long-term liabilities

     34,649        34,780   

Deferred income taxes – long-term

     22,046        —     

Non-current liabilities related to assets held for sale

     —          178   
  

 

 

   

 

 

 

Total Liabilities

     1,204,675        1,137,401   

Equity

    

Common stock

     1,738        1,705   

Additional paid-in capital

     582,612        560,303   

Treasury stock

     (6,778     (6,778

Accumulated deficit

     (313,560     (106,845

Accumulated other comprehensive income

     65,177        77,799   
  

 

 

   

 

 

 

Total Quiksilver, Inc. Stockholders’ Equity

     329,189        526,184   

Non-controlling interest

     4,047        19,652   
  

 

 

   

 

 

 

Total Equity

     333,236        545,836   
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 1,537,911      $ 1,683,237   
  

 

 

   

 

 

 


QUIKSILVER, INC. AND SUBSIDIARIES

GAAP TO PRO-FORMA LOSS FROM CONTINUING OPERATIONS RECONCILIATION (UNAUDITED)

 

     Second quarter ended
April 30,
    First half ended
April 30,
 
     2014     2013     2014     2013  

In thousands, except per share amounts

        

Net loss from continuing operations attributable to Quiksilver, Inc.

   $ (45,960   $ (32,904   $ (68,074   $ (64,108

Restructuring and other special charges, net of tax of $1,003, $221, $1,043 and $625, respectively

     8,448        7,049        13,757        9,650   

Non-cash asset impairments, net of tax of $56, $136, $56 and $692, respectively

     12,446        5,196        13,329        7,808   
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro-forma loss from continuing operations attributable to Quiksilver, Inc.

     (25,066     (20,659     (40,988     (46,650

Pro-forma loss per share from continuing operations attributable to Quiksilver, Inc. (basic and diluted)

   $ (0.15   $ (0.12   $ (0.24   $ (0.28

Weighted average common shares outstanding (basic and diluted)

     170,475        166,815        170,105        166,282   


QUIKSILVER, INC. AND SUBSIDIARIES

ADJUSTED EBITDA & PRO-FORMA ADJUSTED EBITDA RECONCILIATION (UNAUDITED)

 

     Second quarter ended
April 30,
    First half ended
April 30,
 
     2014     2013     2014     2013  

In thousands

        

Loss from continuing operations attributable to Quiksilver, Inc.

   $ (45,960   $ (32,904   $ (68,074   $ (64,108

(Benefit)/provision for income taxes

     (1,173     6,828        (5,503     10,005   

Interest expense

     19,240        15,342        38,695        30,850   

Depreciation and amortization

     14,703        12,734        25,614        24,885   

Non-cash stock-based compensation expense

     6,525        3,887        11,588        11,223   

Non-cash asset impairments, net

     12,502        5,332        13,385        8,500   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     5,837        11,219        15,705        21,355   

Restructuring and other special charges

     6,382        6,833        12,830        9,838   
  

 

 

   

 

 

   

 

 

   

 

 

 

Pro-forma Adjusted EBITDA

     12,219        18,052        28,535        31,193   

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 (decrease)/increase

     -16     -5     3        -9

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.