EX-99.01
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following pro forma consolidated financial information is based on the historical financial statements of Quiksilver, Inc. and its subsidiaries (the “Company”), including certain pro forma adjustments, and has been prepared to illustrate the pro forma effect of the disposition of the Cleveland Golf business and Rossignol group. The Company has previously reported operating results of the Cleveland Golf business as discontinued operations in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2007 and in the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended January 31, 2008, April 30, 2008 and July 31, 2008. The Company also has previously reported operating results of the Rossignol group as discontinued operations in the Company’s Quarterly Reports on Form 10-Q for the fiscal quarters ended April 30, 2008 and July 31, 2008.
In the fourth fiscal quarter of 2007, Quiksilver reported the operating results of the Cleveland Golf business as discontinued operations and restated the fiscal 2007, 2006, and 2005 operating results to show the effect on the consolidated financial statements as part of the Form 10-K disclosure requirements. The Company subsequently sold the Cleveland Golf business in the first fiscal quarter of 2008, thus the reported historical financial statements herein assume that the disposition of the Cleveland Golf business occurred prior to those periods.
The unaudited pro forma consolidated statements of operations for the nine months ended July 31, 2008 and for the fiscal years ended October 31, 2007, 2006 and 2005 assume that the disposition of the Rossignol group occurred prior to those periods. The statements of operations do not include any gain or loss on the sale or costs associated with the sale of the business. The unaudited pro forma consolidated balance sheet as of July 31, 2008 is presented as if the disposition of the Rossignol group had occurred as of that date.
The unaudited pro forma consolidated financial information has been prepared based upon available information and management estimates; actual amounts may differ from these estimated amounts. The unaudited pro forma consolidated financial statements are not necessarily indicative of the financial position or results of operations that might have occurred had the disposition occurred as of the dates stated above. The pro forma adjustments are described in the notes to the pro forma financial statements.
The unaudited pro forma consolidated financial information should be read in conjunction with the audited financial statements and notes and related Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2007 and unaudited interim financial statements and the related MD&A included in the July 31, 2008 Form 10-Q.
QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JULY 31, 2008
(In thousands, except per Common Share amounts)
FOR THE NINE MONTHS ENDED JULY 31, 2008
(In thousands, except per Common Share amounts)
As Reported | Unaudited | Unaudited | ||||||||||
Unaudited Net | Pro Forma | Pro Forma | ||||||||||
of Rossignol and | Adjustments | Statement of | ||||||||||
Cleveland Golf | Rossignol | Operations | ||||||||||
Revenues, net | $ | 1,657,737 | $ | ¾ | $ | 1,657,737 | ||||||
Cost of goods sold | 829,042 | ¾ | 829,042 | |||||||||
Gross profit | 828,695 | ¾ | 828,695 | |||||||||
Selling, general and administrative expense | 684,304 | ¾ | 684,304 | |||||||||
Asset impairments | 350 | ¾ | 350 | |||||||||
Operating income | 144,041 | ¾ | 144,041 | |||||||||
Interest expense | 35,845 | ¾ | 35,845 | |||||||||
Foreign currency gain | (463 | ) | ¾ | (463 | ) | |||||||
Minority interest and other expense | 18 | ¾ | 18 | |||||||||
Income before provision for income taxes | 108,641 | ¾ | 108,641 | |||||||||
Provision for income taxes | 29,273 | ¾ | 29,273 | |||||||||
Net income from continuing operations | $ | 79,368 | $ | ¾ | $ | 79,368 | ||||||
Income per share from continuing operations | $ | 0.63 | $ | ¾ | $ | 0.63 | ||||||
Income per share from continuing operations, assuming dilution | $ | 0.61 | $ | ¾ | $ | 0.61 | ||||||
Weighted average common shares outstanding | 125,511 | ¾ | 125,511 | |||||||||
Weighted average common shares outstanding, assuming dilution | 129,765 | ¾ | 129,765 | |||||||||
QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2007
(In thousands, except per Common Share amounts)
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2007
(In thousands, except per Common Share amounts)
Unaudited | Unaudited | |||||||||||
Pro Forma | Pro Forma | |||||||||||
As Reported Net of | Adjustments | Statement of | ||||||||||
Cleveland Golf | Rossignol | Operations | ||||||||||
Revenues, net | $ | 2,426,035 | $ | (378,963 | ) | a | $ | 2,047,072 | ||||
Cost of goods sold | 1,303,794 | (241,767 | ) | a | 1,062,027 | |||||||
Gross profit | 1,122,241 | (137,196 | ) | 985,045 | ||||||||
Selling, general and administrative expense | 971,411 | (189,148 | ) | a | 782,263 | |||||||
Asset impairments | 166,352 | (166,352 | ) | a | ¾ | |||||||
Operating income | (15,522 | ) | 218,304 | 202,782 | ||||||||
Interest expense | 57,023 | (10,452 | ) | a | 46,571 | |||||||
Foreign currency loss | 1,777 | 3,080 | a | 4,857 | ||||||||
Minority interest and other expense | 121 | ¾ | 121 | |||||||||
Income before provision for income taxes | (74,443 | ) | 225,676 | 151,233 | ||||||||
Provision for income taxes | 24,205 | 10,301 | a | 34,506 | ||||||||
Net income from continuing operations | $ | (98,648 | ) | $ | 215,375 | $ | 116,727 | |||||
(Loss) income per share from continuing operations | $ | (0.80 | ) | $ | 1.74 | a | $ | 0.94 | ||||
(Loss) income per share from continuing operations, assuming dilution | $ | (0.80 | ) | $ | 1.70 | a | $ | 0.90 | ||||
Weighted average common shares outstanding | 123,770 | ¾ | 123,770 | |||||||||
Weighted average common shares outstanding, assuming dilution | 123,770 | 5,936 | b | 129,706 | ||||||||
QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2006
(In thousands, except per Common Share amounts)
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2006
(In thousands, except per Common Share amounts)
Unaudited | Unaudited | |||||||||||
Pro Forma | Pro Forma | |||||||||||
As Reported Net of | Adjustments | Statement of | ||||||||||
Cleveland Golf | Rossignol | Operations | ||||||||||
Revenues, net | $ | 2,200,234 | $ | (478,084 | ) | a | $ | 1,722,150 | ||||
Cost of goods sold | 1,193,938 | (284,381 | ) | a | 909,557 | |||||||
Gross profit | 1,006,296 | (193,703 | ) | 812,593 | ||||||||
Selling, general and administrative expense | 827,025 | (178,318 | ) | a | 648,707 | |||||||
Operating income | 179,271 | (15,385 | ) | 163,886 | ||||||||
Interest expense | 47,444 | (6,127 | ) | a | 41,317 | |||||||
Foreign currency loss (gain) | 8 | (299 | ) | a | (291 | ) | ||||||
Minority interest and other expense | 303 | ¾ | 303 | |||||||||
Income before provision for income taxes | 131,516 | (8,959 | ) | 122,557 | ||||||||
Provision for income taxes | 37,413 | (4,232 | ) | a | 33,181 | |||||||
Net income from continuing operations | $ | 94,103 | $ | (4,727 | ) | $ | 89,376 | |||||
Income per share from continuing operations | $ | 0.77 | $ | (0.04 | ) | a | $ | 0.73 | ||||
Income per share from continuing operations, assuming dilution | $ | 0.74 | $ | (0.04 | ) | a | $ | 0.70 | ||||
Weighted average common shares outstanding | 122,074 | ¾ | 122,074 | |||||||||
Weighted average common shares outstanding, assuming dilution | 127,744 | ¾ | 127,744 | |||||||||
QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005
(In thousands, except per Common Share amounts)
FOR THE FISCAL YEAR ENDED OCTOBER 31, 2005
(In thousands, except per Common Share amounts)
Unaudited | Unaudited | |||||||||||
Pro Forma | Pro Forma | |||||||||||
As Reported Net of | Adjustments | Statement of | ||||||||||
Cleveland Golf | Rossignol | Operations | ||||||||||
Revenues, net | $ | 1,734,528 | $ | (172,111 | ) | a | $ | 1,562,417 | ||||
Cost of goods sold | 945,982 | (102,449 | ) | a | 843,533 | |||||||
Gross profit | 788,546 | (69,662 | ) | 718,884 | ||||||||
Selling, general and administrative expense | 607,450 | (48,512 | ) | a | 558,938 | |||||||
Operating income | 181,096 | (21,150 | ) | 159,946 | ||||||||
Interest expense | 20,825 | (3,880 | ) | a | 16,945 | |||||||
Foreign currency gain | (160 | ) | 30 | a | (130 | ) | ||||||
Minority interest and other expense | 365 | 23 | a | 388 | ||||||||
Income before provision for income taxes | 160,066 | (17,323 | ) | 142,743 | ||||||||
Provision for income taxes | 51,776 | (5,188 | ) | a | 46,588 | |||||||
Net income from continuing operations | $ | 108,290 | $ | (12,135 | ) | $ | 96,155 | |||||
Income per share from continuing operations | $ | 0.91 | $ | (0.10 | ) | a | $ | 0.81 | ||||
Income per share from continuing operations, assuming dilution | $ | 0.87 | $ | (0.10 | ) | a | $ | 0.77 | ||||
Weighted average common shares outstanding | 118,920 | ¾ | 118,920 | |||||||||
Weighted average common shares outstanding, assuming dilution | 124,335 | ¾ | 124,335 | |||||||||
QUIKSILVER, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JULY 31, 2008
(In thousands)
AS OF JULY 31, 2008
(In thousands)
As Reported | Unaudited | |||||||||||
Unaudited Net | Pro Forma | Unaudited | ||||||||||
of Rossignol and | Adjustments | Pro Forma | ||||||||||
Cleveland Golf | Rossignol | Balance Sheet | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 99,491 | $ | 45,786 | c | $ | 145,277 | |||||
Trade accounts receivable, net | 491,369 | ¾ | 491,369 | |||||||||
Other receivables | 18,893 | ¾ | 18,893 | |||||||||
Inventories | 358,646 | ¾ | 358,646 | |||||||||
Deferred income taxes | 100,777 | ¾ | 100,777 | |||||||||
Prepaid expenses and other current assets | 29,221 | ¾ | 29,221 | |||||||||
Current assets held for sale | 358,832 | (340,697 | ) | e | 18,135 | |||||||
Total current assets | 1,457,229 | (294,911 | ) | 1,162,318 | ||||||||
Fixed assets, net | 258,920 | ¾ | 258,920 | |||||||||
Intangible assets, net | 146,862 | ¾ | 146,862 | |||||||||
Goodwill | 417,486 | ¾ | 417,486 | |||||||||
Other assets | 44,892 | 9,351 | d | 54,243 | ||||||||
Deferred income taxes long-term | 14,007 | 39,733 | i | 53,740 | ||||||||
Total assets | $ | 2,339,396 | $ | (245,827 | ) | $ | 2,093,569 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Lines of credit | $ | 274,685 | $ | ¾ | $ | 274,685 | ||||||
Accounts payable | 251,623 | ¾ | 251,623 | |||||||||
Accrued liabilities | 129,803 | 8,379 | f | 138,182 | ||||||||
Current portion of long-term debt | 35,584 | ¾ | 35,584 | |||||||||
Income taxes payable | 13,447 | ¾ | 13,447 | |||||||||
Current liabilities related to assets held for sale | 144,882 | (136,013) | e | 8,869 | ||||||||
Total current liabilities | 850,024 | �� | (127,634 | ) | 722,390 | |||||||
Long-term debt, net of current portion | 744,127 | ¾ | 744,127 | |||||||||
Other long-term liabilities | 37,164 | ¾ | 37,164 | |||||||||
Non-current liabilities related to assets held for sale | 7,736 | (7,736 | ) | e | ¾ | |||||||
Total liabilities | 1,639,051 | (135,370 | ) | 1,503,681 | ||||||||
Stockholders’ equity | ||||||||||||
Preferred stock, $.01 par value, authorized shares – 5,000,000; issued and outstanding shares – none | ¾ | ¾ | ¾ | |||||||||
Common stock, $.01 par value, authorized shares – 185,000,000; issued shares – 130,579,766 | 1,306 | ¾ | 1,306 | |||||||||
Additional paid-in capital | 331,269 | ¾ | 331,269 | |||||||||
Treasury stock, 2,885,200 shares | (6,778 | ) | ¾ | (6,778 | ) | |||||||
Retained earnings | 191,374 | (60,130 | ) | h | 131,244 | |||||||
Accumulated other comprehensive income | 183,174 | (50,327 | ) | g | 132,847 | |||||||
Total stockholders’ equity | 700,345 | (110,457 | ) | 589,888 | ||||||||
Total liabilities and stockholders’ equity | $ | 2,339,396 | $ | (245,827 | ) | $ | 2,093,569 | |||||
QUIKSILVER, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited pro forma consolidated financial statements give effect to the pro forma adjustments necessary to reflect the disposition of the Cleveland Golf business and Rossignol group as if the disposition occurred at the beginning of the periods presented in the pro forma statements of earnings and as of October 31, 2007 in the pro forma balance sheet. In accordance with Regulation S-X under the Securities Act, the pro forma statements of earnings present earnings from continuing operations before nonrecurring charges and therefore exclude historical losses from discontinued operations of $304.7 million for the nine months ended July 31, 2008, historical losses from discontinued operations of $237.8 million for the fiscal year ended October 31, 2007 and historical earnings from discontinued operations of $3.6 million and $11.0 million for the fiscal years ended October 31, 2006 and 2005, respectively.
2. PRO FORMA ADJUSTMENTS
The unaudited pro forma consolidated statements of earnings and balance sheet reflect the effect of the following pro forma adjustments:
a) | Reduction of revenue and expenses are the result of the disposition of the Cleveland Golf business and the Rossignol group. | ||
b) | Because the adjusted statement of operations reflects net income after pro forma adjustments, this adjustment restores the dilutive effect of the weighted average common shares outstanding. | ||
c) | Cash proceeds received of€30 million net of purchase price adjustments and Rossignol debt assumed as part of the transaction included as a reduction cash as of July 31, 2008. The Company plans to use the net proceeds from the sale of the Rossignol group to pay down outstanding debt. | ||
d) | Seller’s note received of€10 million discounted to net present value and included as a long-term asset as of July 31, 2008. | ||
e) | The elimination of assets and liabilities associated with the Cleveland Golf and Rossignol businesses included in the Company’s historical consolidated financial statements. | ||
f) | The Company’s estimate of the total costs before taxes to be incurred in connection with the sale of the Rossignol group yet to be paid, which includes transaction costs, employee related costs, and other costs. The amount is reflected as an increase to accrued liabilities. | ||
g) | Foreign currency translation gains from the Rossignol group of approximately $50.5 million, partially offset by $0.2 million of losses on cash flow hedges and interest rate swaps. The amount is included as a reduction to accumulated other comprehensive income as of July 31, 2008. | ||
h) | Net loss on sale of the Rossignol group, reflected as a reduction of retained earnings as of July 31, 2008. The actual sale of the Rossignol group occurred on November 12, 2008. The excess of net working capital over net transaction value on the closing date will be recorded as a loss in the first quarter of fiscal 2009. This loss will be materially higher than the loss reflected in the pro forma balance sheet herein, based upon seasonality. | ||
i) | Reflects the tax benefit affecting the pro forma financial statements assuming the sale of the Rossignol group on July 31, 2008. |