Press release:
Revenues of $426 million were ahead of plan and up compared to last year in constant currency
Gross Profit surpasses prior year as margin expands
Pro-forma Adjusted EBITDA in line with plan and on track for full fiscal year
Net Debt at January 31 reduced $237 million to $541 million
HUNTINGTON BEACH, Calif.–(BUSINESS WIRE)– Quiksilver, Inc. (NYSE:ZQK – News) today announced operating results for the first fiscal quarter ended January 31, 2011. Revenues were $426.5 million as compared to $432.7 million in the first quarter of fiscal 2010 but were up compared to the same period last year in constant currency.
Consolidated gross profit of $223.5 million exceeded that of the first quarter of fiscal 2010 as gross margin expanded 110 basis points to 52.4% of revenues. As previously communicated, the company invested in several new business initiatives in the first quarter ahead of revenue generation.
Therefore, pro-forma Adjusted EBITDA of $28.2 million was down $10.6 million, as planned, compared to the same quarter a year ago. This result was in line with the company’s expectations for the first quarter, in which revenues are historically lower than for the remaining three quarters of the year.
The pro-forma loss from continuing operations was $7.7 million or $0.05 per share compared to a loss of $2.5 million or $0.02 per share in the first quarter of fiscal 2010.
The pro-forma loss for the first quarter of fiscal 2011 excludes $8.6 million of net after-tax charges, primarily comprised of a non-cash write-off of deferred debt issuance costs associated with previous financings. Including this amount, the loss from continuing operations was $16.3 million, or $0.10 per share, compared to $5.4 million, or $0.04 per share, for the first quarter of fiscal 2010. 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 very pleased with our results for the first quarter. Our top line and operating performance continue to improve with revenues up in constant currency for the first time in 9 quarters and gross profit margins expanding to 52.4% as the level of discounting in our business continues to decline.
“We also feel very good about new growth initiatives presently underway. As we’ve indicated in the past, now that our financial restructuring is complete, we have shifted our focus toward investing in our brands and their long-term potential. Looking forward, we expect fiscal 2011 as a whole to be a transition year with growth accelerating in the second half of the year and beyond as these initiatives gain traction.”
On page 2: Net revenues, brand highlights, 2011 outlook
Net revenues in the Americas increased 4% during the first quarter of fiscal 2011 to $193.8 million from $187.0 million in the first quarter of fiscal 2010. In constant currency, European segment net revenues increased 1% in the first quarter of fiscal 2011 compared to the prior year. As measured in U.S. dollars and reported in the financial statements, European net revenues decreased 7% to $165.2 million from $177.9 million in the first quarter of fiscal 2010.
In constant currency, Asia/Pacific segment net revenues decreased 8% in the first quarter of fiscal 2011 compared to the prior year. As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues remained unchanged at $67.0 million as compared to $67.1 million in the first quarter of fiscal 2010. 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.
In December, the company completed its previously-announced sale of €200 million aggregate principal amount of 8.875% Senior Notes due 2017 by its wholly-owned European subsidiary, Boardriders S.A. Quiksilver used the proceeds of the offering to repay approximately €190 million of existing secured European term loans and to pay related fees and expenses. As a result, the company eliminated certain collateral obligations, extended its debt maturities and eliminated certain restrictions on the transfer of cash between its subsidiaries.
Q1 Brand Highlights
• Quiksilver and the Association of Surfing Professionals (ASP) announced the Quiksilver Pro New York surf competition, set to take place on Long Island’s Long Beach from September 4-15. The Quiksilver Pro New York will be the 6th stop on the ASP 2011 World Tour and the first-ever World Championship Tour stop on the east coast of the United States. The surf contest will coincide with a series of events for enthusiasts of surf, skate, art and music who are expected to gather in New York as summer comes to a close. The Quiksilver Pro New York will expand the Quiksilver Pro Global Series, which also includes the Quiksilver Pro Gold Coast in Australia (February 26-March 9) and the Quiksilver Pro France (October 4-15).
• Quiksilver announced the signing of 4-time defending ASP Women’s World Champion surfer Stephanie Gilmore to a 5-year endorsement agreement. Gilmore joined the Quiksilver surf team and has become a brand ambassador representing Quiksilver’s lines for women. The addition of Gilmore coincides with the recent debut of Quiksilver’s new global girls line, targeting 18-24-year-old females.
• DC Shoes announced the signing of Chris Cole, one of the best and most influential skaters of his generation. Cole, who has now joined the DC skate team, is only the second skater to become Thrasher Magazine’s “Skater of the Year” twice – after DC’s Danny Way – and he has also been honored with TransWorld SKATEboarding Magazine’s “Readers Choice Award.”
Company Outlook
Addressing its outlook, the company confirmed that it continues to expect full-year revenues to be slightly above those of fiscal 2010 and pro-forma Adjusted EBITDA to be roughly in line with last year.
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.
