--Company Provides Outlook for Fiscal
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 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 First half ended April
30, 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 First half ended April 30, 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.
Quiksilver, Inc.Robert JaffeInvestor
Relations424-288-4098zqk@quiksilver.com