Quiksilver, Inc. (NYSE:ZQK) (the Company) today announced
financial results for the fiscal 2014 first quarter ended January
31, 2014.
“We continued to execute our Profit Improvement Plan over the
last few months,” said Andy Mooney, President and Chief Executive
Officer of Quiksilver, Inc. “During the first quarter, we further
reduced our expense structure and made progress on optimizing our
supply chain and laying the foundation for stabilizing and
expanding revenues.
“Pro-forma adjusted EBITDA improved versus the prior year
quarter, continuing the progress made in the final two quarters of
last year,” added Mooney. “The key drivers for the improvement were
reduced selling, general and administrative expenses, along with
higher Roxy brand sales and increased revenues in our
direct-to-consumer channels and emerging markets. We were able to
report this improvement despite decreased net revenues, which were
driven by lower sales in our wholesale channel, especially in the
developed markets in North America and Europe.”
As previously announced, the Company sold its Mervin
Manufacturing and Hawk businesses, and is pursuing the divestiture
of its Surfdome business. As a result, the Company has reclassified
the current and prior year operating results of these 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 loss from
continuing operations, pro-forma loss from continuing operations
per share, adjusted EBITDA and pro-forma adjusted EBITDA, for the
first quarter ended January 31, 2014 and 2013, net revenues in
historical and constant currency, and a definition of the Company’s
emerging markets.
Fiscal 2014 First Quarter Review:
The following comparisons refer to results of continuing
operations for the first quarter of fiscal 2014 versus the first
quarter of fiscal 2013.
Net revenues were $393 million compared with $412
million, and were down 2%, or $9 million, in constant currency.
- Americas net revenues decreased
5% to $173 million from $183 million, and were down 3% in constant
currency.
- EMEA net revenues decreased 4%
to $149 million from $156 million, and were down 6% in constant
currency.
- APAC net revenues decreased 4%
to $70 million from $73 million, but were up 11% in constant
currency.
Gross margin was consistent with the first quarter of
last year at 50.9%. Modest improvements in gross margins in the
Americas and EMEA segments were offset by increased promotional
activity in the APAC segment.
SG&A expense decreased $12 million to $204 million
from $216 million, primarily due to reduced employee compensation
expenses, including incentive compensation, and reduced athlete and
event spending.
Pro-forma Adjusted EBITDA increased to $16 million from
$12 million.
Net loss from continuing operations attributable to
Quiksilver, Inc. improved to $22 million, or $0.13 per share,
from $32 million, or $0.19 per share, primarily attributable to
income tax benefits of $10 million recognized in continuing
operations related to the sale of the Mervin and Hawk businesses,
which are not expected to be recurring.
Pro-forma loss from continuing operations, which excludes
the after-tax impact of restructuring and other special charges and
non-cash asset impairments, was $16 million, or $0.10 per share,
compared with $26 million, or $0.16 per share, also largely as a
result of the income tax benefits recognized in continuing
operations related to the sale of the Mervin and Hawk
businesses.
Fiscal 2014 Q1 Net Revenue Highlights:
Net revenues from continuing operations (in constant currency)
by brand and channel for the first quarter of fiscal 2014 compared
with the first quarter of fiscal 2013 were as follows.
Brands (constant currency):
- Quiksilver decreased $11 million, or
6%, to $163 million.
- Roxy increased $6 million, or 5%, to
$117 million.
- DC decreased $4 million, or 4%, to $102
million.
Distribution channels (constant
currency):
- Wholesale revenues decreased 7% to $239
million.
- Retail revenues increased 4% to $131
million. Same-store sales in company-owned retail stores increased
2%. Company-owned retail stores totaled 645 at the end of the
fiscal 2014 first quarter compared with 615 at the end of the
fiscal 2013 first quarter.
- E-commerce revenues grew 16% to $23
million.
Emerging markets generated net revenue growth of 32% 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. 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 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. 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)
Three months ended In thousands, except per share
amounts
January 31, 2014
2013 Revenues, net $
392,612 $ 412,189 Cost of goods sold
192,776 202,416
Gross profit
199,836 209,773 Selling, general and
administrative expense 203,784 216,339 Asset impairments 883
3,168
Operating loss
(4,831 ) (9,734 ) Interest
expense 19,420 15,501 Foreign currency loss 2,828
3,065
Loss before (benefit)/provision for
income taxes (27,079 ) (28,300 )
(Benefit)/provision for income taxes (4,385 )
2,949
Loss from continuing operations
(22,694 ) (31,249 ) Income from
discontinued operations, net of tax (includes net gain on sale of
$38,103 and $0, respectively) 37,617 625
Net income/(loss) 14,923 (30,624
) Less: net loss/(income) attributable to non-controlling
interest 464 (505 )
Net
income/(loss) attributable to Quiksilver, Inc. $
15,387 $ (31,129 )
Loss per share from continuing operations attributable to
Quiksilver, Inc.: Basic $ (0.13 )
$ (0.19 ) Diluted $ (0.13
) $ (0.19 ) Income per share
from discontinued operations attributable to Quiksilver, Inc.:
Basic $ 0.22 $ 0.00
Diluted $ 0.22 $ 0.00
Weighted average common shares outstanding: Basic
169,747 165,767 Diluted 169,747
165,767 Amounts attributable to Quiksilver,
Inc.: Loss from continuing operations $
(22,333 ) $ (31,568 ) Income
from discontinued operations, net of tax 37,720
439 Net income/(loss) $
15,387 $ (31,129 )
QUIKSILVER, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS (UNAUDITED) In thousands
January 31, 2014 January 31,
2013
ASSETS
Current Assets Cash and cash equivalents (includes restricted cash
of $60,617 and $0, respectively) $ 130,605 $ 68,361 Trade accounts
receivable (net of allowance of $61,534 and $58,126, respectively)
338,723 330,826 Other receivables 27,278 30,153 Income taxes
receivable - 1,010 Inventories 360,146 402,403 Deferred income
taxes - short-term 9,563 27,651 Prepaid expenses and other current
assets 29,243 36,764 Current portion of assets held for sale
13,676 28,370
Total Current Assets
909,234 925,538 Fixed assets, net 224,914
237,020 Intangible assets, net 134,665 135,891 Goodwill 258,238
261,567 Other assets 50,389 45,069 Deferred income taxes -
long-term - 121,147 Assets held for sale, net of current portion
23,715 21,720
Total Assets
$ 1,601,155 $ 1,747,952
LIABILITIES AND
EQUITY
Current Liabilities Lines of credit $ - $ 11,897 Accounts payable
168,005 215,609 Accrued liabilities 119,757 104,735 Current portion
of long-term debt 43,424 42,358 Income taxes payable 1,913 -
Current portion of assets held for sale 9,075
11,194
Total Current Liabilities 342,174
385,793 Long-term debt, net of current portion
821,224 734,191 Other long-term liabilities 34,503 37,435 Deferred
income taxes - long-term 21,590 - Assets held for sale, net of
current portion 1,577 157
Total
Liabilities 1,221,068 1,157,576 Equity
Common stock 1,733 1,702 Additional paid-in capital 574,081 555,905
Treasury stock (6,778 ) (6,778 ) Accumulated deficit (260,499 )
(74,450 ) Accumulated other comprehensive income 59,496
94,522
Total Quiksilver, Inc. Stockholders'
Equity 368,033 570,901 Non-controlling interest
12,054 19,475
Total Equity
380,087 590,376
Total Liabilities and Equity $ 1,601,155
$ 1,747,952 QUIKSILVER, INC.
AND SUBSIDIARIES INFORMATION RELATED TO OPERATING SEGMENTS
(UNAUDITED) Three months ended In
thousands
January 31, 2014
2013 Revenues, net: Americas $ 173,165 $
182,636 EMEA 149,397 156,174 APAC 69,875 72,695 Corporate
operations 175 684
$
392,612 $ 412,189 Gross Profit:
Americas $ 75,110 $ 78,121 EMEA 87,849 91,734 APAC 36,808 39,236
Corporate operations 69 682
$
199,836 $ 209,773 SG&A
Expense: Americas $ 83,692 $ 85,187 EMEA 76,712 77,215 APAC
32,615 37,192 Corporate operations 10,765
16,745
$ 203,784 $ 216,339
Asset Impairments: Americas $ 222 $ 1,621 EMEA 661
1,547 APAC - - Corporate operations - -
$ 883 $ 3,168 Operating
Income (Loss): Americas $ (8,804 ) $ (8,687 ) EMEA 10,476
12,972 APAC 4,193 2,044 Corporate operations (10,696 )
(16,063 )
$ (4,831 ) $
(9,734 )
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 RECONCILIATION (UNAUDITED) Three
months ended January 31, In thousands, except per share
amounts
2014 2013
Net loss from continuing operations attributable to Quiksilver,
Inc. $ (22,333 ) $ (31,568
) Restructuring and other special charges, net of tax of $40
and $404, respectively 5,309 2,601 Non-cash asset impairments, net
of tax of $0 and $556, respectively 883 2,612
Pro-forma loss from continuing operations
(16,141 ) (26,355 ) Pro-forma
loss per share from continuing operations, basic and diluted
$ (0.10 ) $ (0.16 )
Weighted average common shares outstanding, basic and
diluted 169,747 165,767 QUIKSILVER,
INC. AND SUBSIDIARIES ADJUSTED EBITDA & PRO-FORMA
ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
Three months ended January 31, In thousands
2014 2013 Net
loss from continuing operations
attributable to Quiksilver,
Inc.
$ (22,333 ) $ (31,568 )
(Benefit)/provision for income taxes (4,385 ) 2,949 Interest
expense 19,420 15,501 Depreciation and amortization 10,545 11,943
Non-cash stock-based compensation expense 5,063 7,336 Non-cash
asset impairments 883 3,168
Adjusted EBITDA $ 9,193 $ 9,329
Restructuring and other special charges 6,448
3,005
Pro-forma Adjusted EBITDA
$ 15,641 $ 12,334
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) (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 incurred 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
help us 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 non-cash 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 non-cash 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
revenues by segment in both historical currency and constant
currency for the three months ended January 31, 2014 and 2013 (in
thousands):
Americas
EMEA APAC
Corporate Total
Historical currency (as reported) January 31, 2014 $ 173,165
$ 149,397 $ 69,875 $ 175 $ 392,612 January 31, 2013 $ 182,636 $
156,174 $ 72,695 $ 684 $ 412,189 Percentage change -5% -4% -4% -5%
Constant currency (current year exchange rates)
January 31, 2014 $ 173,165 $ 149,397 $ 69,875 $ 175 $ 392,612
January 31, 2013 $ 179,387 $ 159,014 $ 62,893 $ 698 $ 401,992
Percentage change -3% -6% 11% -2%
Quiksilver, Inc.Investor RelationsRobert Jaffe,
424-288-4098zqk@quiksilver.com