--Company Makes Progress on Profit Improvement
Plan Initiatives;
Continues to Reduce Operating Costs--
Quiksilver, Inc. (NYSE:ZQK) today announced financial results
for the fiscal 2013 fourth quarter and full year ended October 31,
2013.
“We made solid progress on key elements of our Profit
Improvement Plan over the last few months,” said Andy Mooney,
President and Chief Executive Officer of Quiksilver, Inc. “During
the fourth quarter, we continued right-sizing our global
operations, closing underperforming retail stores, trimming our
global athlete roster, divesting non-core operations and making
important headway in establishing global controls in the supply
chain management processes. In November, we acquired full ownership
of our high-growth operations in Brazil and Mexico and entered into
our first substantial licensing agreement.
“I am pleased that our cost reduction efforts generated an
increase of $3 million and $7 million in pro forma adjusted EBITDA
for the fourth quarter and second half of fiscal 2013,
respectively, versus the comparable prior year periods,” continued
Mooney. “While net revenues were lower due to the expected decrease
in DC brand sales, we generated higher gross margin and drove down
selling, general and administrative expenses.”
As previously announced, the company sold its snowboard
business, Mervin Manufacturing, and intends to pursue the
divestiture of other non-core businesses. As a result, Quiksilver
has reclassified the current and prior year operating results of
Mervin and the other non-core businesses as discontinued
operations. 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 income/(loss),
pro-forma income/(loss) per share attributable to Quiksilver, Inc.,
adjusted EBITDA and pro-forma adjusted EBITDA, for the fourth
quarter and full year ended October 31, 2013 and 2012, net revenues
in historical and constant currency, and a definition of our
emerging markets.
Fiscal 2013 Fourth Quarter Review:
The following comparisons refer to results of continuing
operations for the fourth quarter of fiscal 2013 versus the fourth
quarter of fiscal 2012.
Net revenues were $476 million compared with $529
million, and were down 9%, or $47 million, in constant
currency.
- Americas net revenues decreased
15% to $223 million from $263 million, and were down 14% in
constant currency.
- EMEA net revenues decreased 6%
to $168 million from $179 million, and were down 9% in constant
currency.
- APAC net revenues decreased 4%
to $83 million from $86 million, but were up 9% in constant
currency.
Gross margin increased to 47.0% of net revenues compared
with 45.6%, due to gross margin improvement in the EMEA region,
partially offset by a modest decline to gross margin in the APAC
region.
SG&A expense decreased $7 million to $220 million
from $227 million, primarily due to reduced expenses related to
employee compensation, marketing expenses and administrative
costs.
Pro-forma Adjusted EBITDA from continuing operations
increased to $35 million from $32 million.
Provision for income taxes was $157 million, which
included a $157 million charge related to recording valuation
allowances against certain deferred tax assets in the company’s
EMEA segment, versus benefit for income taxes of $10 million.
Net loss from continuing operations attributable to
Quiksilver, Inc. was $175 million, or $1.04 per share, versus
net loss from continuing operations attributable to Quiksilver,
Inc. of $0.4 million, or $0.00 per diluted share.
Pro-forma loss from continuing operations, which excludes
a non-cash tax valuation allowance and the after-tax impact of
restructuring and other special charges, non-cash asset
impairments, gain on store sale and non-cash interest charges, was
$7 million, or $0.04 per share, versus pro-forma income from
continuing operations of $8 million, or $0.05 per diluted
share.
Fiscal 2013 Q4 Net Revenue Highlights:
Net revenues from continuing operations (in constant currency)
by brand and channel for the fourth quarter of fiscal 2013 compared
with the fourth quarter of fiscal 2012 were as follows.
- Brands (constant currency):
- Quiksilver was flat at $190
million;
- Roxy was flat at $137 million;
and,
- DC decreased $47 million, or 25%, to
$139 million.
- Distribution channels (constant
currency):
- Wholesale revenues decreased 12% to
$353 million;
- Retail revenues increased slightly to
$107 million. Same-store sales in company-owned retail stores were
flat. Company-owned retail stores totaled 631 at the end of fiscal
2013 compared with 605 at the end of fiscal 2012; and,
- E-commerce revenues grew 22% to $16
million.
Emerging markets generated net revenue growth of 32% in constant
currency.
Fiscal 2013 Full Year Review:
The following comparisons refer to results of continuing
operations for the full year of fiscal 2013 versus the full year of
fiscal 2012.
Net revenues were $1.81 billion compared with $1.94
billion, and were down 6%, or $110 million, in constant
currency.
- Americas net revenues decreased
7% to $893 million from $961 million, and were down 6% in constant
currency.
- EMEA net revenues decreased 6%
to $632 million from $672 million, and were down 7% in constant
currency.
- APAC net revenues decreased 8%
to $282 million from $306 million, and were flat in constant
currency.
Gross margin decreased slightly to 48.2% of net revenues
compared with 48.5%, with gross margin declines on DC brand sales
in the Americas wholesale channel, largely offset by gross margin
improvement in the EMEA wholesale channel.
SG&A expense decreased $31 million to $858 million
from $888 million, primarily due to reduced expenses related to
employee compensation, marketing expenses and administrative
costs.
Pro-forma Adjusted EBITDA from continuing operations was
$118 million compared with $141 million.
Provision for income taxes was $166 million, which
included a $157 million charge related to recording valuation
allowances against certain deferred tax assets in the company’s
EMEA segment, compared with $4 million.
Net loss from continuing operations attributable to
Quiksilver, Inc. was $239 million, or $1.43 per share, compared
with $18 million, or $0.11 per share.
Pro-forma loss from continuing operations, which excludes
a non-cash tax valuation allowance and the after-tax impact of
restructuring and other special charges, non-cash asset
impairments, gain on store sale and non-cash interest charges, was
$38 million, or $0.23 per share, versus pro-forma income from
continuing operations of $0.1 million, or $0.00 per diluted
share.
Fiscal 2013 Net Revenue Highlights:
Net revenues from continuing operations (in constant currency)
by brand and channel for the full year of fiscal 2013 compared with
the full year of fiscal 2012 were as follows.
- Brands (constant currency):
- Quiksilver decreased 7% to $721
million;
- Roxy decreased 2% to $511 million;
and,
- DC decreased 8% to $542 million.
- Distribution channels (constant
currency):
- Wholesale revenues decreased 8% to
$1.29 billion;
- Retail revenues decreased 1% to $447
million. Same-store sales in company-owned retail stores were flat;
and,
- E-commerce revenues grew 25% to $69
million.
Emerging markets generated net revenue growth of 21% in constant
currency.
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. 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 divestiture of
non-core businesses and management’s expectations for improved
sales, efficiency and profitability in the future. 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 and
www.dcshoes.com.
QUIKSILVER, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended Twelve months ended
In thousands, except per share amounts
October 31, October 31, 2013
2012 2013
2012 Revenues, net $
475,913 $ 529,230 $ 1,810,570
$ 1,941,849 Cost of goods sold 252,241
287,997 938,139 1,000,530
Gross profit 223,672 241,233
872,431 941,319 Selling, general and
administrative expense 220,404 227,361 857,557 888,250 Asset
impairments 1,675 6,678 12,327
7,234
Operating income
1,593 7,194 2,547 45,835
Interest expense 20,000 15,354 71,049 60,885 Foreign currency
loss/(gain) 319 3,067 4,689
(1,709 )
Loss before provision/(benefit)
for income taxes (18,726 ) (11,227
) (73,191 ) (13,341 )
Provision/(benefit) for income taxes 157,496
(9,738 ) 166,220 3,904
Loss
from continuing operations (176,222 )
(1,489 ) (239,411 ) (17,245
) Income from discontinued operations, net of tax
3,647 4,736 6,201 7,263
Net (loss)/income (172,575 )
3,247 (233,210 ) (9,982 ) Less:
net loss/(income) attributable to non-controlling interest
1,463 1,112 645 (774 )
Net (loss)/income attributable to Quiksilver, Inc.
$ (171,112 ) $ 4,359
$ (232,565 ) $ (10,756 )
Loss per share from continuing operations attributable to
Quiksilver, Inc.: Basic $ (1.04 )
$ (0.00 ) $ (1.43 )
$ (0.11 ) Diluted $ (1.04
) $ (0.00 ) $ (1.43
) $ (0.11 ) Income per share
from discontinued operations attributable to Quiksilver, Inc.:
Basic $ 0.02 $ 0.03 $
0.04 $ 0.04 Diluted $
0.02 $ 0.03 $ 0.04 $
0.04 Weighted average common shares
outstanding: Basic 168,796 165,227
167,255 164,245 Diluted 168,796
165,227 167,255 164,245 Amounts
attributable to Quiksilver, Inc.: Loss from continuing
operations $ (174,759 ) $
(377 ) $ (238,766 ) $
(18,019 ) Income from discontinued operations, net
of tax 3,647 4,736
6,201 7,263 Net
(loss)/income $ (171,112 ) $
4,359 $ (232,565 ) $
(10,756 ) QUIKSILVER, INC. AND
SUBSIDIARIES INFORMATION RELATED TO OPERATING SEGMENTS
(UNAUDITED) Three months ended
Twelve months ended In thousands
October 31,
October 31, 2013
2012 2013
2012 Revenues, net: Americas $ 223,204 $
263,228 $ 893,333 $ 960,719 EMEA 168,317 179,032 631,546 671,991
APAC 83,025 86,357 282,070 305,518 Corporate operations
1,367 613 3,621 3,621
475,913 529,230 1,810,570
1,941,849 Gross Profit: Americas $ 91,882 $
108,167 $ 370,288 $ 408,361 EMEA 91,222 89,652 358,175 376,929 APAC
40,856 43,296 143,874 156,328 Corporate operations (288 )
118 94 (299 )
223,672
241,233 872,431 941,319 SG&A
Expense: Americas $ 73,752 $ 88,008 $ 319,736 $ 349,350 EMEA
88,261 82,480 324,346 322,715 APAC 37,624 42,229 146,389 157,145
Corporate operations 20,767 14,644
67,086 59,040
220,404
227,361 857,557 888,250 Asset
Impairments: Americas $ 1,182 $ 4,711 $ 9,211 $ 5,267 EMEA 381
560 3,004 560 APAC 112 1,407 112 1,407 Corporate operations
- - - -
1,675 6,678 12,327 7,234
Operating Income/(Loss): Americas $ 16,948 $ 15,448 $ 41,341
$ 53,744 EMEA 2,580 6,612 30,825 53,654 APAC 3,120 (340 ) (2,627 )
(2,224 ) Corporate operations (21,055 ) (14,526 )
(66,992 ) (59,339 )
1,593 7,194
2,547 45,835
Definition of Emerging
Markets:
The company's references to emerging markets in this press
release refer to net revenues from continuing operations generated
in Brazil, Mexico, Korea, China, Indonesia, Taiwan and Russia,
collectively.
QUIKSILVER, INC. AND SUBSIDIARIES GAAP TO
PRO-FORMA RECONCILIATION (UNAUDITED)
Three months ended Twelve months ended In
thousands, except per share amounts
October 31, October
31, 2013 2012
2013 2012
Net loss from continuing operations attributable to Quiksilver,
Inc. $ (174,759 ) $ (377
) $ (238,766 ) $ (18,019
)
Restructuring and other special charges,
net of tax of $3,486, $1,586, $6,517 and $2,719, respectively
9,032 6,223 29,449 15,415
Non-cash asset impairments, net of tax of
$388, $233, $1,129 and $265, respectively
1,287 6,445 11,198 6,969 Gain on store sale, net of tax of $(1,819)
(2012) - (4,245 ) - (4,245 ) Non-cash interest charges, net of tax
of $0 for all periods - - 3,179 - Non-cash tax valuation allowance
157,123 - 157,123
-
Pro-forma (loss)/income from continuing
operations (7,317 ) 8,046 (37,817
) 120 Pro-forma (loss)/income per share
from continuing operations Basic $ (0.04
) $ 0.05 $ (0.23 )
$ 0.00 Diluted $ (0.04 )
$ 0.05 $ (0.23 ) $
0.00 Weighted average common shares
outstanding: Basic 168,796 165,227
167,255 164,245 Diluted 168,796
178,348 167,255 178,907
QUIKSILVER, INC. AND SUBSIDIARIES ADJUSTED EBITDA &
PRO-FORMA ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
Three months ended Twelve months ended
In thousands
October 31, October 31,
2013 2012
2013 2012
Net loss from continuing
operations
attributable to Quiksilver,
Inc.
$ (174,759 ) $ (377 )
$ (238,766 ) $ (18,019 )
Provision/(benefit) for income taxes 157,496 (9,738 ) 166,220 3,904
Interest expense 20,000 15,354 71,049 60,885 Depreciation and
amortization 12,977 13,494 49,958 52,418 Non-cash stock-based
compensation expense 5,361 5,280 21,556 22,552 Non-cash asset
impairments 1,675 6,678 12,327
7,234
Adjusted EBITDA
22,750 30,691 82,344 128,974
Restructuring and other special charges 12,518
1,745 35,649 12,070
Pro-forma Adjusted EBITDA 35,268 32,436
117,993 141,044
Definition of Adjusted EBITDA and
Pro-forma Adjusted EBITDA:
Adjusted EBITDA is defined as net income (loss) from continuing
operations attributable to Quiksilver, Inc. before (i) interest
expense, (ii) provision/(benefit) 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.
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 net
revenues from continuing operations by segment in both historical
currency and constant currency for the three months ended October
31, 2013 and 2012 (in thousands):
Americas EMEA
APAC
Corporate Total
Historical currency (as reported): October 31, 2013 $
223,204 $ 168,317 $ 83,025 $ 1,367 $ 475,913 October 31, 2012
263,228 179,032 86,357 613 529,230 Percentage decrease -15 % -6 %
-4 % -10 %
Constant currency (current year exchange
rates): October 31, 2013 223,204 168,317 83,025 1,367 475,913
October 31, 2012 260,083 185,496 76,255 634 522,468 Percentage
(decrease)/increase -14 % -9 % 9 % -9 % The following table
presents net revenues from continuing operations by segment in both
historical currency and constant currency for the fiscal years
ended October 31, 2013 and 2012 (in thousands):
Americas EMEA
APAC Corporate
Total Historical currency (as
reported): October 31, 2013 $ 893,333 $ 631,546 $ 282,070 $
3,621 $ 1,810,570 October 31, 2012 960,719 671,991 305,518 3,621
1,941,849 Percentage decrease -7 % -6 % -8 % -7 %
Constant currency (current year exchange rates): October 31,
2013 893,333 631,546 282,070 3,621 1,810,570 October 31, 2012
953,500 680,763 282,735 3,657 1,920,655 Percentage decrease -6 % -7
% 0 % -6 %
QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED SELECTED BALANCE SHEET INFORMATION (UNAUDITED)
In thousands
October 31, 2013
October 31, 2012 Cash and cash
equivalents $ 57,280 $ 41,823 Trade accounts receivable, net
411,638 410,774 Inventories 337,715 326,877 Lines of credit and
long-term debt 831,300 757,969
QUIKSILVER, INC.
AND SUBSIDIARIES DISCONTINUED OPERATIONS ADJUSTED
EBITDA & PRO-FORMA ADJUSTED EBITDA RECONCILIATION
(UNAUDITED) Fiscal 2013 In thousands
Q1 Q2
Q3 Q4
Full Year
Net income from discontinued operations
attributable to Quiksilver, Inc.
$ 439 $ 79 $ 2,036
$ 3,647 $ 6,201 Provision for income
taxes 275 49 1,274 2,282 3,880 Interest expense/(income) 6 (45 )
(19 ) 34 (24 ) Depreciation and amortization 276 345
416 507 1,544
Adjusted and Pro-forma Adjusted EBITDA
from discontinued operations
996 428 3,707 6,470 11,601
Quiksilver, Inc.Robert Jaffe, 424-288-4098Investor
Relationszqk@quiksilver.com