Exhibit 99.1
Company Contact: | Bruce Thomas Vice President, Investor Relations Quiksilver, Inc. +1(714)889-2200 |
Quiksilver, Inc. Reports Fiscal 2011 Third Quarter Financial Results
— | Revenues of $503 million grew 14% compared to Q3 last year |
— | Company earns Pro-forma Adjusted EBITDA of $53 million |
— | Company unites with city of Long Beach to run Quiksilver Pro New York after Hurricane Irene |
Huntington Beach, California, September 1, 2011—Quiksilver, Inc. (NYSE:ZQK) today announced operating results for the third fiscal quarter ended July 31, 2011. Revenues grew 14% to $503.3 million as compared to $441.5 million in the third quarter of fiscal 2010. Consolidated gross profit of $255.1 million increased 11% compared to $230.7 million in the third quarter a year ago. The company earned Pro-forma Adjusted EBITDA of $52.7 million compared to $53.5 million earned in the third quarter of fiscal 2010. Pro-forma income from continuing operations was $10.4 million, or $0.06 per share, compared to $12.5 million, or $0.08 per share, in the third quarter of fiscal 2010. The company did not record any pro-forma adjustments for the third quarter of fiscal 2011, therefore income from continuing operations was also $10.4 million, or $0.06 per share, compared to $8.2 million, or $0.05 per share, in the third quarter a year ago. A reconciliation of GAAP results to pro-forma results is provided in the accompanying tables.
Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc., commented, “We’re pleased with our solid third quarter financial results and feel increasingly positive about our product offerings and the strength of our brands, which are resonating with consumers around the world despite global economic pressures. We’re seeing continued strong growth in emerging and developing markets while our category expansion initiatives are delivering good initial returns, consistent with our longer-term plans.”
McKnight continued, “And after working closely with city officials over the past few days, we’ve determined that the Quiksilver Pro New York surf contest should and will move forward in an appropriate manner given the impact of Hurricane Irene on the city and residents of Long Beach. We’re eager to bring the world’s best surfers as well as a great surf event to the New York area and in particular to Long Beach, which has an incredible surfing tradition and spirit.”
Net revenues in the Americas increased 11% during the third quarter of fiscal 2011 to $260.2 million from $234.6 million in the third quarter of fiscal 2010. As measured in U.S. dollars and reported in the financial statements, European net revenues increased 16% during the third quarter of fiscal 2011 to $176.4 million from $151.7 million in the third quarter a year ago. In constant currency, European segment net revenues increased 2% compared to the prior year. As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues increased 20% during the third quarter of fiscal 2011 to $65.5 million from $54.5 million in the third quarter of fiscal 2010. In constant currency, Asia/Pacific segment net revenues decreased 3% compared to the prior year. Please refer to the accompanying tables in order to better understand the impact of foreign currency exchange rates on revenue trends in the European and Asia/Pacific segments.
Quiksilver, Inc. Reports Fiscal 2011 Third Quarter Financial Results
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Q3 Brand Highlights
• | Legendary Quiksilver team rider and defending 10-time ASP World Surf Champion Kelly Slater won the US Open of Surfing in Huntington Beach, CA, as well as the ASP tour event in Tahiti, vaulting him into first place in the points standings in the race to become the 2011 World Surf Champion. |
• | Quiksilver held the grand opening of its newest Boardriders Store in Ericeira, Portugal. The modern-style facility offers a large selection of products representing each of the company’s brands and includes the country’s largest skate park. |
• | Australian Roxy surfer Sally Fitzgibbons won for the third time on the 2011 ASP Women’s World Tour in capturing the women’s title at the US Open of Surfing. Sally has finished the year ranked #2 in the world for the second time in just three years on tour. |
• | DC co-founder and World Rally Championship driver Ken Block released the fourth installment of his Gymkhana precision driving series and it rapidly became the fastest-spreading viral video on the Internet with over 7 million views in its first two weeks. The entire Gymkhana franchise has now generated over 120 million views and has fueled the sales of DC’s TeamWorks collection which includes shoes, shirts, hats and jackets inspired by Ken’s rally car livery. |
• | The Street League DC Pro Tour completed a second very successful season of skateboarding competitions this past week with the season finale carried on ESPN2. The tour attracted the world’s best skaters including Nyjah Houston, Chris Cole, Sean Malto, Ryan Sheckler, Chaz Ortiz, Shane O’Neill, Billy Marks, Paul Rodriguez and Mikey Taylor. |
• | DC held the grand opening of the DC Embassy in Barcelona, Spain. This unique industrial-inspired space includes large showroom areas designed to showcase DC’s expanding product line. The complex sits atop a 1300 square meter skate park that will serve as the headquarters for the European members of the DC skate team. |
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, snowboards 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 outdoor action sports. The company’s Quiksilver, Roxy, DC, Lib Tech and Hawk brands are synonymous with the heritage and culture of surfing, skateboarding and snowboarding.
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.
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Forward looking statements:
This press release contains forward-looking statements including but not limited to statements regarding the company’s new growth initiatives 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.
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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,
www.lib-tech.com andwww.hawkclothing.com.
atwww.quiksilver.com,www.roxy.com,www.dcshoes.com,
www.lib-tech.com andwww.hawkclothing.com.
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended July 31, | ||||||||
In thousands, except per share amounts | 2011 | 2010 | ||||||
Revenues, net | $ | 503,317 | $ | 441,475 | ||||
Cost of goods sold | 248,199 | 210,742 | ||||||
Gross profit | 255,118 | 230,733 | ||||||
Selling, general and administrative expense | 221,172 | 193,155 | ||||||
Asset impairments | — | 3,225 | ||||||
Operating income | 33,946 | 34,353 | ||||||
Interest expense | 15,663 | 20,630 | ||||||
Foreign currency (gain) loss | (1,456 | ) | 213 | |||||
Income before provision for income taxes | 19,739 | 13,510 | ||||||
Provision for income taxes | 8,996 | 5,096 | ||||||
Income from continuing operations | 10,743 | 8,414 | ||||||
Income from discontinued operations | — | 143 | ||||||
Net income | 10,743 | 8,557 | ||||||
Less: net income attributable to non-controlling interest | (306 | ) | (251 | ) | ||||
Net income attributable to Quiksilver, Inc. | $ | 10,437 | $ | 8,306 | ||||
Income per share from continuing operations attributable to Quiksilver, Inc. | $ | 0.06 | $ | 0.06 | ||||
Income per share from discontinued operations attributable to Quiksilver, Inc. | $ | — | $ | 0.00 | ||||
Net income per share attributable to Quiksilver, Inc. | $ | 0.06 | $ | 0.06 | ||||
Income per share from continuing operations attributable to Quiksilver, Inc., assuming dilution | $ | 0.06 | $ | 0.05 | ||||
Income per share from discontinued operations attributable to Quiksilver, Inc., assuming dilution | $ | — | $ | 0.00 | ||||
Net income per share attributable to Quiksilver, Inc., assuming dilution | $ | 0.06 | $ | 0.06 | ||||
Weighted average common shares outstanding | 162,822 | 129,756 | ||||||
Weighted average common shares outstanding, assuming dilution | 183,488 | 150,188 | ||||||
Amounts attributable to Quiksilver, Inc.: | ||||||||
Income from continuing operations | $ | 10,437 | $ | 8,163 | ||||
Income from discontinued operations | — | 143 | ||||||
Net income | $ | 10,437 | $ | 8,306 | ||||
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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Nine Months Ended July 31, | ||||||||
In thousands, except per share amounts | 2011 | 2010 | ||||||
Revenues, net | $ | 1,407,860 | $ | 1,342,501 | ||||
Cost of goods sold | 667,103 | 640,332 | ||||||
Gross profit | 740,757 | 702,169 | ||||||
Selling, general and administrative expense | 648,356 | 609,731 | ||||||
Asset impairments | 74,610 | 3,225 | ||||||
Operating income | 17,791 | 89,213 | ||||||
Interest expense | 59,727 | 63,542 | ||||||
Foreign currency gain | (5,886 | ) | (6,380 | ) | ||||
(Loss) income before provision for income taxes | (36,050 | ) | 32,051 | |||||
Provision for income taxes | 49,937 | 18,189 | ||||||
(Loss) income from continuing operations | (85,987 | ) | 13,862 | |||||
Income from discontinued operations | — | 821 | ||||||
Net (loss) income | (85,987 | ) | 14,683 | |||||
Less: net income attributable to non-controlling interest | (3,169 | ) | (2,307 | ) | ||||
Net (loss) income attributable to Quiksilver, Inc. | $ | (89,156 | ) | $ | 12,376 | |||
(Loss) income per share from continuing operations attributable to Quiksilver, Inc. | $ | (0.55 | ) | $ | 0.09 | |||
Income per share from discontinued operations attributable to Quiksilver, Inc. | $ | — | $ | 0.01 | ||||
Net (loss) income per share attributable to Quiksilver, Inc. | $ | (0.55 | ) | $ | 0.10 | |||
(Loss) income per share from continuing operations attributable to Quiksilver, Inc., assuming dilution | $ | (0.55 | ) | $ | 0.08 | |||
Income per share from discontinued operations attributable to Quiksilver, Inc., assuming dilution | $ | — | $ | 0.01 | ||||
Net (loss) income per share attributable to Quiksilver, Inc., assuming dilution | $ | (0.55 | ) | $ | 0.09 | |||
Weighted average common shares outstanding | 162,198 | 128,000 | ||||||
Weighted average common shares outstanding, assuming dilution | 162,198 | 143,623 | ||||||
Amounts attributable to Quiksilver, Inc.: | ||||||||
(Loss) income from continuing operations | $ | (89,156 | ) | $ | 11,555 | |||
Income from discontinued operations | — | 821 | ||||||
Net (loss) income | $ | (89,156 | ) | $ | 12,376 | |||
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CONSOLIDATED BALANCE SHEETS (Unaudited)
July 31, | July 31, | |||||||
In thousands | 2011 | 2010 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 126,210 | $ | 155,653 | ||||
Trade accounts receivable, less allowance for doubtful accounts of $54,381 (2011) and $49,292 (2010) | 385,927 | 340,921 | ||||||
Other receivables | 16,657 | 26,933 | ||||||
Income taxes receivable | 4,674 | 5,249 | ||||||
Inventories | 364,833 | 270,854 | ||||||
Deferred income taxes — short-term | 18,134 | 39,871 | ||||||
Prepaid expenses and other current assets | 31,787 | 41,968 | ||||||
Total current assets | 948,222 | 881,449 | ||||||
Fixed assets, net | 237,138 | 217,528 | ||||||
Intangible assets, net | 138,934 | 140,762 | ||||||
Goodwill | 273,549 | 318,418 | ||||||
Other assets | 56,868 | 67,568 | ||||||
Deferred income taxes — long-term | 72,855 | 53,514 | ||||||
Total assets | $ | 1,727,566 | $ | 1,679,239 | ||||
LIABILITIES & EQUITY
Current liabilities: | ||||||||
Lines of credit | $ | 8,928 | $ | 24,651 | ||||
Accounts payable | 238,866 | 208,515 | ||||||
Accrued liabilities | 134,365 | 96,628 | ||||||
Current portion of long-term debt | 4,820 | 59,089 | ||||||
Current liabilities of assets held for sale | ¯ | 799 | ||||||
Total current liabilities | 386,979 | 389,682 | ||||||
Long-term debt, net of current portion | 733,415 | 759,339 | ||||||
Other long-term liabilities | 56,056 | 43,066 | ||||||
Total liabilities | 1,176,450 | 1,192,087 | ||||||
Equity: | ||||||||
Common stock | 1,680 | 1,357 | ||||||
Additional paid-in capital | 527,122 | 379,538 | ||||||
Treasury stock | (6,778 | ) | (6,778 | ) | ||||
(Accumulated deficit) retained earnings | (100,463 | ) | 10,753 | |||||
Accumulated other comprehensive income | 117,318 | 92,620 | ||||||
Total Quiksilver, Inc. stockholders’ equity | 538,879 | 477,490 | ||||||
Non-controlling interest | 12,237 | 9,662 | ||||||
Total equity | 551,116 | 487,152 | ||||||
Total liabilities & equity | $ | 1,727,566 | $ | 1,679,239 | ||||
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Information related to operating segments is as follows (unaudited):
Three Months Ended July 31, | ||||||||
In thousands | 2011 | 2010 | ||||||
Revenues, net: | ||||||||
Americas | $ | 260,159 | $ | 234,630 | ||||
Europe | 176,438 | 151,675 | ||||||
Asia/Pacific | 65,495 | 54,504 | ||||||
Corporate operations | 1,225 | 666 | ||||||
$ | 503,317 | $ | 441,475 | |||||
Gross Profit: | ||||||||
Americas | $ | 115,065 | $ | 109,594 | ||||
Europe | 106,451 | 91,939 | ||||||
Asia/Pacific | 34,347 | 28,728 | ||||||
Corporate operations | (745 | ) | 472 | |||||
$ | 255,118 | $ | 230,733 | |||||
SG&A Expense: | ||||||||
Americas | $ | 87,984 | $ | 79,964 | ||||
Europe | 85,402 | 76,215 | ||||||
Asia/Pacific | 36,314 | 29,168 | ||||||
Corporate operations | 11,472 | 7,808 | ||||||
$ | 221,172 | $ | 193,155 | |||||
Asset Impairments: | ||||||||
Americas | $ | ¯ | $ | 1,939 | ||||
Europe | ¯ | 100 | ||||||
Asia/Pacific | ¯ | 1,186 | ||||||
Corporate operations | ¯ | ¯ | ||||||
$ | ¯ | $ | 3,225 | |||||
Operating Income (Loss): | ||||||||
Americas | $ | 27,081 | $ | 27,691 | ||||
Europe | 21,049 | 15,624 | ||||||
Asia/Pacific | (1,967 | ) | (1,626 | ) | ||||
Corporate operations | (12,217 | ) | (7,336 | ) | ||||
$ | 33,946 | $ | 34,353 | |||||
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Nine Months Ended July 31, | ||||||||
In thousands | 2011 | 2010 | ||||||
Revenues, net: | ||||||||
Americas | $ | 664,618 | $ | 621,324 | ||||
Europe | 548,578 | 538,260 | ||||||
Asia/Pacific | 190,636 | 180,201 | ||||||
Corporate operations | 4,028 | 2,716 | ||||||
$ | 1,407,860 | $ | 1,342,501 | |||||
Gross Profit: | ||||||||
Americas | $ | 308,032 | $ | 283,606 | ||||
Europe | 332,083 | 321,300 | ||||||
Asia/Pacific | 101,842 | 97,171 | ||||||
Corporate operations | (1,200 | ) | 92 | |||||
$ | 740,757 | $ | 702,169 | |||||
SG&A Expense: | ||||||||
Americas | $ | 256,117 | $ | 237,516 | ||||
Europe | 250,388 | 247,979 | ||||||
Asia/Pacific | 108,961 | 92,804 | ||||||
Corporate operations | 32,890 | 31,432 | ||||||
$ | 648,356 | $ | 609,731 | |||||
Asset Impairments: | ||||||||
Americas | $ | 465 | $ | 1,939 | ||||
Europe | ¯ | 100 | ||||||
Asia/Pacific | 74,145 | 1,186 | ||||||
Corporate operations | ¯ | ¯ | ||||||
$ | 74,610 | $ | 3,225 | |||||
Operating Income (Loss): | ||||||||
Americas | $ | 51,450 | $ | 44,151 | ||||
Europe | 81,695 | 73,221 | ||||||
Asia/Pacific | (81,264 | ) | 3,181 | |||||
Corporate operations | (34,090 | ) | (31,340 | ) | ||||
$ | 17,791 | $ | 89,213 | |||||
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GAAP TO PRO-FORMA RECONCILIATION (Unaudited)
Three Months Ended | ||||||||
July 31, | ||||||||
In thousands, except per share amounts | 2011 | 2010 | ||||||
Income from continuing operations attributable to Quiksilver, Inc. | $ | 10,437 | $ | 8,163 | ||||
Restructuring charges, net of tax of $0 (2011) and $164 (2010) | ¯ | 1,765 | ||||||
Non-cash asset impairment charges, net of tax of $0 (2011) and $616 (2010) | ¯ | 2,609 | ||||||
Pro-forma income from continuing operations | $ | 10,437 | $ | 12,537 | ||||
Pro-forma income per share from continuing operations | $ | 0.06 | $ | 0.10 | ||||
Pro-forma income per share from continuing operations, assuming dilution | $ | 0.06 | $ | 0.08 | ||||
Weighted average common shares outstanding | 162,822 | 129,756 | ||||||
Weighted average common shares outstanding, assuming dilution | 183,488 | 150,188 | ||||||
Nine Months Ended | ||||||||
July 31, | ||||||||
In thousands, except per share amounts | 2011 | 2010 | ||||||
(Loss) income from continuing operations attributable to Quiksilver, Inc. | $ | (89,156 | ) | $ | 11,555 | |||
Non-cash asset impairment charges, net of tax of $0 (2011) and $616 (2010) | 74,610 | 2,609 | ||||||
Effect of APAC tax valuation allowance | 25,980 | ¯ | ||||||
Non-cash interest charges, net of tax of $4,618 (2011) and $0 (2010) | 10,691 | ¯ | ||||||
Restructuring (credits) charges, net of tax of $0 (2011) and $271 (2010) | (2,118 | ) | 7,612 | |||||
Stock compensation expense | ¯ | 5,240 | ||||||
Gain from sale of Raisins trademarks | ¯ | (1,252 | ) | |||||
Pro-forma income from continuing operations | $ | 20,007 | $ | 25,764 | ||||
Pro-forma income per share from continuing operations | $ | 0.12 | $ | 0.20 | ||||
Pro-forma income per share from continuing operations, assuming dilution | $ | 0.11 | $ | 0.18 | ||||
Weighted average common shares outstanding | 162,198 | 128,000 | ||||||
Weighted average common shares outstanding, assuming dilution | 182,688 | 143,623 | ||||||
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ADJUSTED EBITDA and PRO-FORMA ADJUSTED EBITDA RECONCILIATION
(Unaudited)
(Unaudited)
Three Months Ended | ||||||||
July 31, | ||||||||
In thousands | 2011 | 2010 | ||||||
Income from continuing operations attributable to Quiksilver, Inc. | $ | 10,437 | $ | 8,163 | ||||
Provision for income taxes | 8,996 | 5,096 | ||||||
Interest expense | 15,663 | 20,630 | ||||||
Depreciation and amortization | 12,684 | 13,192 | ||||||
Non-cash stock-based compensation expense | 4,935 | 1,279 | ||||||
Non-cash asset impairments | ¯ | 3,225 | ||||||
Adjusted EBITDA | $ | 52,715 | $ | 51,585 | ||||
Restructuring and other special charges | ¯ | 1,929 | ||||||
Pro-forma Adjusted EBITDA | $ | 52,715 | $ | 53,514 | ||||
Nine Months Ended | ||||||||
July 31, | ||||||||
In thousands | 2011 | 2010 | ||||||
(Loss) income from continuing operations attributable to Quiksilver, Inc. | $ | (89,156 | ) | $ | 11,555 | |||
Provision for income taxes | 49,937 | 18,189 | ||||||
Interest expense | 59,727 | 63,542 | ||||||
Depreciation and amortization | 40,154 | 40,215 | ||||||
Non-cash stock-based compensation expense | 9,916 | 11,414 | ||||||
Non-cash asset impairments | 74,610 | 3,225 | ||||||
Adjusted EBITDA | $ | 145,188 | $ | 148,140 | ||||
Restructuring and other special (credits) charges | (2,118 | ) | 6,631 | |||||
Pro-forma Adjusted EBITDA | $ | 143,070 | $ | 154,771 | ||||
Definition of Adjusted EBITDA:
Adjusted EBITDA is defined as income (loss) from continuing operations attributable to Quiksilver, Inc. 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
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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.
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 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. 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 operating segment. As such, this methodology does not account for movements in individual currencies within a segment (for example, non-euro currencies within our European segment and Japanese yen within our Asia/Pacific segment). A constant currency translation methodology that accounts for movements in each individual currency could 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, 2010 and 2011 (in thousands):
Historical currency (as reported) | Americas | Europe | Asia/Pacific | Corporate | Total | |||||||||||||||
July 31, 2010 | 234,630 | 151,675 | 54,504 | 666 | 441,475 | |||||||||||||||
July 31, 2011 | 260,159 | 176,438 | 65,495 | 1,225 | 503,317 | |||||||||||||||
Percentage increase | 11 | % | 16 | % | 20 | % | 14 | % |
Constant currency (current year exchange rates) | ||||||||||||||||||||
July 31, 2010 | 234,630 | 173,647 | 67,199 | 666 | 476,142 | |||||||||||||||
July 31, 2011 | 260,159 | 176,438 | 65,495 | 1,225 | 503,317 | |||||||||||||||
Percentage increase (decrease) | 11 | % | 2 | % | (3 | %) | 6 | % |