Exhibit 99.1
Company Contact: | Bruce Thomas Vice President, Investor Relations Quiksilver, Inc. +1 (714) 889-4425 |
Quiksilver, Inc. Reports Fiscal 2009 Third Quarter Financial Results
—Income from Continuing Operations of $0.03 per share
—European Refinancing Expected to Close as Planned by the End of September
Huntington Beach, California, September 3, 2009—Quiksilver, Inc. (NYSE:ZQK) today announced operating results for the third quarter ended July 31, 2009. Consolidated net revenues from continuing operations for the third quarter of fiscal 2009 decreased to $501.4 million, from $564.9 million in the third quarter of fiscal 2008. Adjusting for changes in foreign currency as compared to the U.S. dollar, this represented a decline of 5% in constant currency. Consolidated pro-forma income from continuing operations for the third quarter of fiscal 2009 was $3.7 million, or $0.03 per share, compared to $33.1 million, or $0.25 per share, for the third quarter of fiscal 2008. The pro-forma income from continuing operations for the three months ended July 31, 2009 excludes severance and facility related restructuring charges of $7.3 million net of tax and an offsetting tax adjustment of comparable amount. Including these items, income from continuing operations was $3.4 million or $0.03 per share. A reconciliation of GAAP results to pro-forma results is included in the accompanying tables. Net revenues and income from continuing operations for all periods exclude the results of our Rossignol wintersports business, which was sold in the first quarter of fiscal 2009 and is reported as discontinued operations.
Net revenues in the Americas segment decreased 6% during the third quarter of fiscal 2009 to $256.8 million from $271.9 million in the third quarter of fiscal 2008. In constant currency, European segment net revenues decreased 8% compared to the prior year. As reported in the financial statements, European segment net revenues decreased 19% during the third quarter of fiscal 2009 to $189.0 million from $232.0 million in the third quarter of fiscal 2008. In constant currency, Asia/Pacific segment net revenues increased 12% compared to the prior year. As reported in the financial statements, Asia/Pacific segment net revenues decreased 8% to $55.1 million in the third quarter of fiscal 2009 from $59.6 million in the third quarter of fiscal 2008. Please refer to the accompanying tables in order to better understand the impact of foreign currency on revenue trends in our Europe and Asia/Pacific segments.
Consolidated inventories decreased 7% to $334.2 million at July 31, 2009 from $358.6 million at July 31, 2008. Consolidated trade accounts receivable decreased 14% to $424.2 million at July 31, 2009 from $491.4 million at July 31, 2008.
Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc., commented, “The fiscal third quarter was a very important period for our company as we delivered on the financial expectations we set a quarter ago and secured our global refinancing plan. In doing so, we have returned our focus to the continuing development of our core businesses. The retail environment remains very challenging and we will continue to adapt our cost structure to this trend as we go forward.”
Addressing its outlook for continuing operations, the Company stated that based on current trends, fourth quarter revenues are expected to be down in the mid-teens on a percentage basis compared to the same quarter a year ago and that it expects to incur a loss per share on a diluted basis in the mid-single-digit range. The company indicated that longer term visibility into revenues and earnings remains limited due to global economic conditions.
The Company also provided an update on the commitment it had reached to consolidate its European debt obligations, including previously uncommitted lines of credit, into a new committed
Quiksilver, Inc. 2009 Third Quarter Results
September 3, 2009
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4-year facility. The new financing with the Company’s European banking partners remains on track with the time table expressed by Quiksilver at the time the transaction was first announced and is expected to close before the end of September. Quiksilver previously announced that two separate transactions had closed and funded at the end of July. In the first transaction, Rhône, an international private equity firm with offices in New York, London and Paris, funded a 5-year senior secured term loan of approximately $150 million. In the second transaction, Bank of America and GE Capital, as joint lead arrangers, funded a new 3-year $200 million asset-based credit facility for Quiksilver’s Americas business.
With its new funding in place, the Company had approximately $147 million of availability under its credit lines and approximately $117 million of unrestricted cash at the end of the third quarter.
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 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 different outdoor sports. The Company’s Quiksilver, Roxy, DC and Hawk brands are synonymous with the heritage and culture of surfing, skateboarding and snowboarding, and its beach and water oriented swimwear brands include Raisins, Radio Fiji and Leilani.
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 and select department stores. 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 guidance, diluted earnings per share guidance, refinancing expectations 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 onForm 10-K and Quarterly Reports onForm 10-Q.
* * * * *
NOTE: For further information about Quiksilver, Inc., you are invited to take a look at our world atwww.quiksilver.com,
www.roxy.com,www.dcshoes.com,http:///www.hawkclothing.com.
www.roxy.com,www.dcshoes.com,http:///www.hawkclothing.com.
Quiksilver, Inc. 2009 Third Quarter Results
September 3, 2009
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended July 31, | ||||||||
In thousands, except per share amounts | 2009 | 2008 | ||||||
Revenues, net | $ | 501,394 | $ | 564,876 | ||||
Cost of goods sold | 267,030 | 280,047 | ||||||
Gross profit | 234,364 | 284,829 | ||||||
Selling, general and administrative expense | 211,771 | 232,094 | ||||||
Operating income | 22,593 | 52,735 | ||||||
Interest expense | 15,347 | 11,801 | ||||||
Foreign currency loss (gain) | 3,473 | (1,231 | ) | |||||
Minority interest and other (income) expense | (36 | ) | 415 | |||||
Income before provision for income taxes | 3,809 | 41,750 | ||||||
Provision for income taxes | 396 | 8,677 | ||||||
Income from continuing operations | $ | 3,413 | $ | 33,073 | ||||
Loss from discontinued operations, net of tax | (2,067 | ) | (30,219 | ) | ||||
Net income | $ | 1,346 | $ | 2,854 | ||||
Income per share from continuing operations | $ | 0.03 | $ | 0.26 | ||||
Loss per share from discontinued operations | $ | (0.02 | ) | $ | (0.24 | ) | ||
Net income per share | $ | 0.01 | $ | 0.02 | ||||
Income per share from continuing operations, assuming dilution | $ | 0.03 | $ | 0.25 | ||||
Loss per share from discontinued operations, assuming dilution | $ | (0.02 | ) | $ | (0.23 | ) | ||
Net income per share, assuming dilution | $ | 0.01 | $ | 0.02 | ||||
Weighted average common shares outstanding | 127,467 | 126,220 | ||||||
Weighted average common shares outstanding, assuming dilution | 128,238 | 130,021 | ||||||
Quiksilver, Inc. 2009 Third Quarter Results
September 3, 2009
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended July 31, | ||||||||
In thousands, except per share amounts | 2009 | 2008 | ||||||
Revenues, net | $ | 1,438,845 | $ | 1,657,737 | ||||
Cost of goods sold | 764,200 | 829,042 | ||||||
Gross profit | 674,645 | 828,695 | ||||||
Selling, general and administrative expense | 621,178 | 684,304 | ||||||
Asset impairment | — | 350 | ||||||
Operating income | 53,467 | 144,041 | ||||||
Interest expense | 43,053 | 35,845 | ||||||
Foreign currency loss (gain) | 6,829 | (463 | ) | |||||
Minority interest and other expense | 584 | 18 | ||||||
Income before provision for income taxes | 3,001 | 108,641 | ||||||
Provision for income taxes | 60,505 | 29,273 | ||||||
(Loss) income from continuing operations | $ | (57,504 | ) | $ | 79,368 | |||
Loss from discontinued operations | (132,763 | ) | (304,678 | ) | ||||
Net loss | $ | (190,267 | ) | $ | (225,310 | ) | ||
(Loss) income per share from continuing operations | $ | (0.45 | ) | $ | 0.63 | |||
Loss per share from discontinued operations | $ | (1.04 | ) | $ | (2.43 | ) | ||
Net loss per share | $ | (1.49 | ) | $ | (1.80 | ) | ||
(Loss) income per share from continuing operations, assuming dilution | $ | (0.45 | ) | $ | 0.61 | |||
Loss per share from discontinued operations, assuming dilution | $ | (1.04 | ) | $ | (2.35 | ) | ||
Net loss per share, assuming dilution | $ | (1.49 | ) | $ | (1.74 | ) | ||
Weighted average common shares outstanding | 127,286 | 125,511 | ||||||
Weighted average common shares outstanding, assuming dilution | 127,286 | 129,765 | ||||||
Quiksilver, Inc. 2009 Third Quarter Results
September 3, 2009
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CONSOLIDATED BALANCE SHEETS (Unaudited)
July 31, | July 31, | |||||||
In thousands | 2009 | 2008 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 116,830 | $ | 99,491 | ||||
Restricted cash | 50,054 | — | ||||||
Trade accounts receivable, less allowance for doubtful accounts of $43,386 (2009) and $27,458 (2008) | 424,191 | 491,369 | ||||||
Other receivables | 19,459 | 18,893 | ||||||
Inventories | 334,233 | 358,646 | ||||||
Deferred income taxes — short term | 101,807 | 100,777 | ||||||
Prepaid expenses and other current assets | 39,874 | 29,221 | ||||||
Current assets held for sale | 2,282 | 358,832 | ||||||
Total current assets | 1,088,730 | 1,457,229 | ||||||
Fixed assets, net | 237,069 | 258,920 | ||||||
Intangibles, net | 142,954 | 146,862 | ||||||
Goodwill | 321,451 | 417,486 | ||||||
Other assets | 62,271 | 44,892 | ||||||
Deferred income taxes — long term | 23,659 | 14,007 | ||||||
Total assets | $ | 1,876,134 | $ | 2,339,396 | ||||
LIABILITIES & STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Lines of credit | $ | 221,024 | $ | 274,685 | ||||
Accounts payable | 219,536 | 251,623 | ||||||
Accrued liabilities | 107,025 | 129,803 | ||||||
Current portion of long-term debt | 82,363 | 35,584 | ||||||
Income taxes payable | 28,313 | 13,447 | ||||||
Liabilities related to assets held for sale | 579 | 144,882 | ||||||
Total current liabilities | 658,840 | 850,024 | ||||||
Long-term debt | 733,622 | 744,127 | ||||||
Other long-term liabilities | 43,069 | 37,164 | ||||||
Non-current liabilities of assets held for sale | — | 7,736 | ||||||
Total liabilities | 1,435,531 | 1,639,051 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock | — | — | ||||||
Common stock | 1,312 | 1,306 | ||||||
Additional paid-in capital | 366,852 | 331,269 | ||||||
Treasury stock | (6,778 | ) | (6,778 | ) | ||||
Retained earnings | 152 | 191,374 | ||||||
Accumulated other comprehensive income | 79,065 | 183,174 | ||||||
Total stockholders’ equity | 440,603 | 700,345 | ||||||
Total liabilities & stockholders’ equity | $ | 1,876,134 | $ | 2,339,396 | ||||
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September 3, 2009
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Information related to operating segments is as follows (unaudited):
Three Months Ended July 31, | ||||||||
In thousands | 2009 | 2008 | ||||||
Revenues, net: | ||||||||
Americas | $ | 256,778 | $ | 271,941 | ||||
Europe | 189,027 | 231,987 | ||||||
Asia/Pacific | 55,090 | 59,634 | ||||||
Corporate operations | 499 | 1,314 | ||||||
$ | 501,394 | $ | 564,876 | |||||
Gross Profit: | ||||||||
Americas | $ | 96,735 | $ | 112,552 | ||||
Europe | 108,720 | 138,439 | ||||||
Asia/Pacific | 29,603 | 33,094 | ||||||
Corporate operations | (694 | ) | 744 | |||||
$ | 234,364 | $ | 284,829 | |||||
SG&A Expense: | ||||||||
Americas | $ | 92,273 | $ | 89,361 | ||||
Europe | 83,732 | 97,502 | ||||||
Asia/Pacific | 27,271 | 28,580 | ||||||
Corporate operations | 8,495 | 16,651 | ||||||
$ | 211,771 | $ | 232,094 | |||||
Operating Income (Loss): | ||||||||
Americas | $ | 4,462 | $ | 23,191 | ||||
Europe | 24,988 | 40,937 | ||||||
Asia/Pacific | 2,332 | 4,514 | ||||||
Corporate operations | (9,189 | ) | (15,907 | ) | ||||
$ | 22,593 | $ | 52,735 | |||||
Quiksilver, Inc. 2009 Third Quarter Results
September 3, 2009
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Nine Months Ended July 31, | ||||||||
In thousands | 2009 | 2008 | ||||||
Revenues, net: | ||||||||
Americas | $ | 690,181 | $ | 754,491 | ||||
Europe | 581,223 | 716,770 | ||||||
Asia/Pacific | 164,979 | 182,494 | ||||||
Corporate operations | 2,462 | 3,982 | ||||||
$ | 1,438,845 | $ | 1,657,737 | |||||
Gross Profit: | ||||||||
Americas | $ | 257,296 | $ | 320,087 | ||||
Europe | 328,933 | 409,866 | ||||||
Asia/Pacific | 89,142 | 96,519 | ||||||
Corporate operations | (726 | ) | 2,223 | |||||
$ | 674,645 | $ | 828,695 | |||||
SG&A Expense: | ||||||||
Americas | $ | 273,300 | $ | 273,668 | ||||
Europe | 241,557 | 283,639 | ||||||
Asia/Pacific | 80,504 | 88,661 | ||||||
Corporate operations | 25,817 | 38,336 | ||||||
$ | 621,178 | $ | 684,304 | |||||
Asset Impairment: | ||||||||
Americas | $ | — | $ | 350 | ||||
Europe | — | — | ||||||
Asia/Pacific | — | — | ||||||
Corporate operations | — | — | ||||||
$ | — | $ | 350 | |||||
Operating (Loss) Income: | ||||||||
Americas | $ | (16,004 | ) | $ | 46,069 | |||
Europe | 87,376 | 126,227 | ||||||
Asia/Pacific | 8,638 | 7,858 | ||||||
Corporate operations | (26,543 | ) | (36,113 | ) | ||||
$ | 53,467 | $ | 144,041 | |||||
Quiksilver, Inc. 2009 Third Quarter Results
September 3, 2009
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September 3, 2009
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GAAP TO PRO-FORMA RECONCILIATION (UNAUDITED)
Three Months Ended | ||||
July 31, 2009 | ||||
Income from continuing operations | $ | 3,413 | ||
Restructuring charges, net of tax | 7,333 | |||
Tax adjustment | (7,003 | ) | ||
Pro-forma income from continuing operations | $ | 3,743 | ||
Pro-forma income per share from continuing operations | $ | 0.03 | ||
Pro-forma income per share from continuing operations, assuming dilution | $ | 0.03 | ||
Weighted average common shares outstanding | 127,467 | |||
Weighted average common shares outstanding, assuming dilution | 128,238 | |||
Nine Months Ended | ||||
July 31, 2009 | ||||
Loss from continuing operations | $ | (57,504 | ) | |
Restructuring charges, net of tax | 15,105 | |||
First quarter effect of U.S. tax valuation allowance | 50,778 | |||
Tax adjustment | (7,003 | ) | ||
Pro-forma income from continuing operations | $ | 1,376 | ||
Pro-forma income per share from continuing operations | $ | 0.01 | ||
Pro-forma income per share from continuing operations, assuming dilution | $ | 0.01 | ||
Weighted average common shares outstanding | 127,286 | |||
Weighted average common shares outstanding, assuming dilution | 128,008 | |||
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September 3, 2009
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September 3, 2009
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ADJUSTED EBITDA and PRO-FORMA ADJUSTED EBITDA RECONCILIATION
Three Months Ended | ||||||||
July 31, | ||||||||
2009 | 2008 | |||||||
Income from continuing operations | $ | 3,413 | $ | 33,073 | ||||
Provision for income taxes | 396 | 8,677 | ||||||
Interest expense | 15,347 | 11,801 | ||||||
Depreciation and amortization | 13,650 | 14,842 | ||||||
Non-cash stock-based compensation expense | 3,047 | 3,320 | ||||||
Non-cash asset impairments | — | — | ||||||
Adjusted EBITDA | $ | 35,853 | $ | 71,713 | ||||
Restructuring charges | 8,190 | — | ||||||
Pro-forma Adjusted EBITDA | $ | 44,043 | $ | 71,713 | ||||
Nine Months Ended | ||||||||
July 31, | ||||||||
2009 | 2008 | |||||||
(Loss) income from continuing operations | $ | (57,504 | ) | $ | 79,368 | |||
Provision for income taxes | 60,505 | 29,273 | ||||||
Interest expense | 43,053 | 35,845 | ||||||
Depreciation and amortization | 40,388 | 42,935 | ||||||
Non-cash stock-based compensation expense | 7,419 | 9,871 | ||||||
Non-cash asset impairments | — | 350 | ||||||
Adjusted EBITDA | $ | 93,861 | $ | 197,642 | ||||
Restructuring charges | 16,521 | — | ||||||
Pro-forma Adjusted EBITDA | $ | 110,382 | $ | 197,642 | ||||
Definition of Adjusted EBITDA:
Adjusted EBITDA is defined as income from continuing operations 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 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.
Quiksilver, Inc. 2009 Third Quarter Results
September 3, 2009
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September 3, 2009
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SUPPLEMENTAL EXCHANGE RATE INFORMATION
(UNAUDITED)
(UNAUDITED)
In order to better understand growth rates in our foreign operating segments, we make reference to constant currency. Constant currency improves visibility into actual growth rates as it adjusts for the effect of changing foreign currency exchange rates from period to period. For income statement items, constant currency is calculated by taking the average foreign currency exchange rate 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 reporting segment. A constant currency translation based upon each individual currency would 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 July 31, 2008 and 2009:
Americas | Europe | Asia/Pacific | Corporate | Total | ||||||||||||||||
Historical currency (as reported) | ||||||||||||||||||||
July 31, 2008 | $ | 271,941 | $ | 231,987 | $ | 59,634 | $ | 1,314 | $ | 564,876 | ||||||||||
July 31, 2009 | 256,778 | 189,027 | 55,090 | 499 | 501,394 | |||||||||||||||
Percentage decrease | (6 | %) | (19 | %) | (8 | %) | (11 | %) | ||||||||||||
Constant currency (current year exchange rates) | ||||||||||||||||||||
July 31, 2008 | 271,941 | 206,250 | 49,249 | 1,314 | 528,754 | |||||||||||||||
July 31, 2009 | 256,778 | 189,027 | 55,090 | 499 | 501,394 | |||||||||||||||
Percentage (decrease) increase | (6 | %) | (8 | %) | 12 | % | (5 | %) |