Press Release:
HUNTINGTON BEACH, Calif.–(BUSINESS WIRE)–Quiksilver, Inc. (NYSE:ZQK – News) today announced operating results for the third fiscal quarter ended July 31, 2010. Consolidated net revenues from continuing operations for the third quarter of fiscal 2010 were $441.5 million compared to $501.4 million in the third quarter of fiscal 2009.
Pro-forma consolidated income from continuing operations for the third quarter of fiscal 2010 was $12.5 million, or $0.08 per share, compared to $3.7 million, or $0.03 per share, for the third quarter of fiscal 2009. Pro-forma income for the third quarter of fiscal 2010 excludes $2.6 million of asset impairment charges and $1.8 million in restructuring charges, consisting primarily of lease loss accruals.
Including these amounts, income from continuing operations was $8.2 million, or $0.05 per share, compared to $3.4 million, or $0.03 per share, for the third quarter of fiscal 2009. 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 the 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, “We’re very pleased to again deliver financial results that exceeded our prior expectations. Our team executed well in an economic environment that continues to present significant challenges around the world. We’re also delighted to report substantial continued improvement to our capital structure, especially after completing the debt-for-equity exchange with Rhône in early August.”
Third Quarter Financial Highlights:
Pro-forma Adjusted EBITDA increased 22% to $53.5 million compared to $44.0 million in the third quarter of fiscal 2009 despite a 12% revenue decline.
Gross margin improved 560 basis points to 52.3% compared to 46.7% in the third quarter of fiscal 2009.
Operating income in the Americas region was 11.8% of revenues as gross margin improved 900 basis points to 46.7% from 37.7% in the third quarter of fiscal 2009.
Net debt at July 31, 2010, was $687 million, reduced by $183 million compared to $870 million at July 31, 2009.
Net revenues in the Americas decreased 9% during the third quarter of fiscal 2010 to $234.6 million from $256.8 million in the third quarter of fiscal 2009.
As measured in U.S. dollars and reported in the financial statements, European net revenues decreased 20% during the third quarter of fiscal 2010 to $151.7 million from $189.0 million in the third quarter of fiscal 2009. In constant currency, European segment net revenues decreased 11% compared to the prior year.
As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues decreased 1% to $54.5 million in the third quarter of fiscal 2010 from $55.1 million in the third quarter of fiscal 2009.
In constant currency, Asia/Pacific segment net revenues decreased 10% 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 our Europe and Asia/Pacific segments.
Consolidated inventories decreased 19% to $270.9 million at July 31, 2010 from $334.2 million at July 31, 2009. Consolidated trade accounts receivable decreased 20% to $340.9 million at July 31, 2010 from $424.2 million at July 31, 2009.
The Company reduced its total debt to approximately $843 million and had approximately $167 million of availability under its credit lines in addition to approximately $156 million of unrestricted cash at the end of the third quarter.
Shortly after the end of the third quarter the Company completed a debt-for-equity exchange with its investment partner Rhône Capital after receiving overwhelming support from stockholders in a special meeting vote. As a result of the transaction, the Company further reduced its quarter-end debt level by $140 million in exchange for approximately 31.1 million shares of Quiksilver common stock priced at $4.50 per share.
In a separate announcement today, the Company disclosed that it had amended and extended its asset-based line of credit in the Americas with Bank of America Merrill Lynch and GE Capital under substantially better terms.
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 generate earnings per share on a diluted basis in the mid-single-digit cents range.
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, 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.
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 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.dcshoes.com, www.lib-tech.com and www.hawkclothing.com.
