Quiksilver’s Q1 09 results show a $9 million loss and an 11 percent drop in revenue compared to Q1 08, and the company forecasts a mid-teen decline in Q2.
The loss grows to $65.9 million when the costs of its severance to 200 laid off employees and a charge-off for deferred tax assets are included.
Revenues decreased 13 percent in the Americas, 9 percent in Europe and 5 percent in Asia.
Chairman and CEO Bob McKnight says in the statement below that the company continues to pursue ways to increase liquidity, including a strategic move or refinancing outstanding credit facilities.
I’ll have more from the conference call later this afternoon.
Here’s the news release from today:
HUNTINGTON BEACH, Calif.–(BUSINESS WIRE)–Quiksilver, Inc. (NYSE:ZQK – News) today announced operating results for the first quarter ended January 31, 2009.
Consolidated net revenues from continuing operations for the first quarter of fiscal 2009 decreased 11% to $443.3 million from $496.6 million in the first quarter of fiscal 2008. The pro-forma consolidated loss from continuing operations for the first quarter of fiscal 2009 was $9.0 million, or $0.07 per share, compared to income of $7.6 million, or $0.06 per share, for the first quarter of fiscal 2008.
The pro-forma net loss excludes a $6.1 million severance charge in the Americas and a $50.8 million non-cash charge to write off the Company’s deferred tax assets in the United States. Including these charges, the loss from continuing operations was $65.9 million or $0.52 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 November 2008 and is reported as discontinued operations.
Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc., commented, “While our performance in the quarter was in line with our overall expectations, deteriorating macro conditions made for a very difficult operating environment. Weak consumer traffic drove lower sales and margin compression which resulted in a loss for the quarter.”
Net revenues in the Americas decreased 13% during the first quarter of fiscal 2009 to $203.4 million from $234.9 million in the first quarter of fiscal 2008. As measured in U.S. dollars and reported in the financial statements, European net revenues decreased 9% during the first quarter of fiscal 2009 to $181.7 million from $200.3 million in the first quarter of fiscal 2008.
Changes in foreign currency exchange rates accounted for a decrease in European revenues of approximately $20.1 million for those same periods. As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues decreased 5% to $57.6 million in the first quarter of fiscal 2009 from $60.4 million in the first quarter of fiscal 2008. Changes in foreign currency exchange rates accounted for a decrease in Asia/Pacific’s revenues of approximately $14.7 million for those same periods.
Consolidated inventories increased 4% to $380.5 million at January 31, 2009 from $364.4 million at January 31, 2008. Consolidated trade accounts receivable decreased 7% to $373.4 million at January 31, 2009 from $402.5 million at January 31, 2008.
As previously disclosed, Quiksilver has been exploring a wide range of strategic and financing alternatives with the objective of improving its liquidity position and capital structure. To accommodate the timing of a potential transaction, the Company’s European banks extended the maturity of its €55 million line of credit from March 14 to June 30, 2009.
Mr. McKnight added, “Increasing liquidity and improving our capital structure continue to be our highest priority initiatives. Even though the credit markets remain difficult, we continue to make good progress on these objectives. And as we monitor the global retail environment, we remain committed to taking appropriate actions to adjust our business where necessary.”
Addressing its outlook for continuing operations, the Company stated that based on current trends second quarter revenues will likely be down in the mid-teens on a percentage basis compared to the same quarter a year ago and that diluted earnings per share are expected to be in the mid-single-digit range. The Company indicated that longer term visibility into revenues and earnings remains limited at the present time.
About Quiksilver:
Quiksilver, Inc. (NYSE:ZQK – News) 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 future revenue guidance, future diluted earnings per share guidance, future financing transactions 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 on Form 10-K and Quarterly Reports on Form 10-Q.
NOTE: For further information about Quiksilver, Inc., you are invited to take a look at our world at www.quiksilver.com, www.roxy.com, www.dcshoecousa.com, www.quiksilveredition.com and www.hawkclothing.com.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended January 31,
In thousands, except per share amounts
2009 2008
Revenues, net $ 443,278 $ 496,581
Cost of goods sold 236,115 253,057
Gross profit 207,163 243,524
Selling, general and administrative expense 206,818 221,410
Operating income 345 22,114
Interest expense 14,154 11,048
Foreign currency loss (gain) 1,430 (616 )
Minority interest and other expense 42 74
(Loss) income before provision for income taxes (15,281 ) 11,608
Provision for income taxes 50,581 4,038
(Loss) income from continuing operations $ (65,862 ) $ 7,570
Loss from discontinued operations (128,564 ) (29,510 )
Net Loss $ (194,426 ) $ (21,940 )
(Loss) income per share from continuing operations
$ (0.52 ) $ 0.06
Loss per share from discontinued operations $ (1.01 ) $ (0.24 )
Net loss per share $ (1.53 ) $ (0.18 )
(Loss) income per share from continuing
operations, assuming dilution
$ (0.52 ) $ 0.06
Loss per share from discontinued operations,
assuming dilution
$ (1.01 ) $ (0.23 )
Net loss per share, assuming dilution $ (1.53 ) $ (0.17 )
Weighted average common shares outstanding 127,039 124,508
Weighted average common shares outstanding,
assuming dilution
127,039 129,149
CONSOLIDATED BALANCE SHEETS (Unaudited)
In thousand
January 31, 2009 January 31, 2008
ASSETS
Current assets:
Cash and cash equivalents $ 42,089 $ 75,181
Trade accounts receivable, less allowance
for doubtful accounts of $30,899 (2009)
and $23,103 (2008)
373,357 402,536
Income taxes receivable
— 4,646
Other receivables 65,650 33,767
Inventories 380,502 364,362
Deferred income taxes – short-term 88,284 46,811
Prepaid expenses and other current assets 37,337 33,952
Current assets held for sale 18,043 415,360
Total current assets 1,005,262 1,376,615
Restricted cash 45,824 —
Fixed assets, net 229,152 251,885
Intangibles, net 143,683 142,059
Goodwill 295,406 213,887
Other assets 39,844 43,603
Deferred income taxes – long-term 647 21,703
Non-current assets held for sale — 369,872
Total assets $ 1,759,818 $ 2,419,624
LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities:
Lines of credit $ 237,299 $ 130,731
Accounts payable 252,557 225,927
Accrued liabilities 84,730 132,653
Current portion of long-term debt 33,051 34,538
Income taxes payable 3,763 —
Current liabilities of assets held for sale 3,925 275,430
Total current liabilities 615,325 799,279
Long-term debt 742,976 650,500
Other long-term liabilities 35,635 33,575
Non-current liabilities of assets held for sale — 81,347
Total liabilities 1,393,936 1,564,701
Stockholders’ equity:
Common stock 1,310 1,291
Additional paid-in capital 337,870 312,575
Treasury stock (6,778 ) (6,778 )
(Accumulated deficit) retained earnings (4,007 ) 394,744
Accumulated other comprehensive income 37,487 153,091
Total stockholders’ equity 365,882 854,923
Total liabilities & stockholders’ equity $ 1,759,818 $ 2,419,624
Information related to operating segments is as follows (unaudited):
Three Months Ended January 31,
In thousands
2009 2008
Revenues, net:
Americas $ 203,413 $ 234,935
Europe 181,698 200,283
Asia/Pacific 57,590 60,376
Corporate operations 577 987
$ 443,278 $ 496,581
Gross Profit:
Americas $ 75,666 $ 101,756
Europe 100,766 109,697
Asia/Pacific 30,701 31,735
Corporate operations 30 336
$ 207,163 $ 243,524
SG&A Expense:
Americas $ 92,006 $ 94,610
Europe 78,765 88,079
Asia/Pacific 26,916 27,914
Corporate operations 9,131 10,807
$ 206,818 $ 221,410
Operating (Loss) Income:
Americas $ (16,340 ) $ 7,146
Europe 22,001 21,618
Asia/Pacific 3,785 3,821
Corporate operations (9,101 ) (10,471 )
$ 345 $ 22,114
GAAP TO PRO-FORMA RECONCILIATION (UNAUDITED)
Three Months Ended
January 31, 2009
Loss from continuing operations $ (65,862 )
U.S. severance charges 6,103
Effect of U.S. tax valuation allowance 50,778
Pro-forma loss from continuing operations $ (8,981 )
Pro-forma loss per share from continuing operations $ (0.07 )
Pro-forma loss per share from continuing operations, assuming dilution
$ (0.07 )
Weighted average common shares outstanding 127,039
Weighted average common shares outstanding, assuming dilution 127,039
