--Company Provides Updated Outlook for
Fiscal 2015--
Quiksilver, Inc. (NYSE:ZQK) (the “Company”) today announced
financial results for its fiscal 2015 second quarter ended April
30, 2015.
Pierre Agnes, Chief Executive Officer, stated, “Our second
quarter performance came in largely as expected with revenues
adjusted for currencies and licensed categories essentially
stabilized. We also reduced operating expenses, which allowed the
Company to meet its EBITDA goal for the quarter on a constant
currency basis. We are encouraged by customer feedback on our
Spring ‘15 product offering across all brands. In addition, as our
order book for the Fall ‘15 product line continues to develop, we
are confident in our ability to drive revenue growth in the medium
term. Overall, we are quite happy with our product lines.”
Mr. Agnes continued, “Currency exchange fluctuations are a major
headwind this year, with a negative impact of roughly thirty
million dollars to the initial EBITDA guidance for fiscal 2015.
Also, we are still working on execution issues that are going to
impact our business in the second half of this year, particularly
in North America where sales and margins are affected by poor
deliveries and an evolving distribution channel strategy. The
Company had expected significant profit improvement in North
America in the back half of the year when it provided guidance for
fiscal 2015. We are still confident this improvement can be
achieved, but not in that time period. We have a number of
important steps underway that we believe will take our Company
forward, including recommitting to our roots while at the same time
enabling us to execute our business more effectively. We have
reorganized the Company and have a tremendously talented team in
place that is focused on delivering significant and sustainable
EBITDA growth in 2016 and the following years.”
Please refer to the accompanying tables for a reconciliation of
GAAP results from continuing operations to certain non-GAAP results
from continuing operations, including pro-forma adjusted EBITDA; a
definition of the Company’s emerging markets; and changes in net
revenue on a constant currency continuing category basis, which
adjusts prior period net revenues for changes in currency exchange
rates and excludes prior period wholesale net revenues for product
categories now licensed to third parties, as well as removes
current period licensing net revenues for the same licensed product
categories, in order to provide comparability of net revenues
between periods.
Second Quarter Review:
The following comparisons refer to results of continuing
operations for the second quarter of fiscal 2015 versus the second
quarter of fiscal 2014.
Net revenues, as reported, were $333 million compared
with $397 million. Net revenues were down 2%, or $5 million, on a
constant currency continuing category basis.
- Americas net revenues, as
reported, were $160 million compared with $186 million. Americas
net revenues were down 4%, or $6 million, on a constant currency
continuing category basis.
- EMEA net revenues, as reported,
were $116 million compared with $151 million. EMEA net revenues
were down 3%, or $4 million, on a constant currency continuing
category basis.
- APAC net revenues, as reported,
were $56 million compared with $60 million. APAC net revenues were
up 7%, or $4 million, on a constant currency continuing category
basis.
Net revenues from emerging markets, as reported, were $45
million compared with $51 million. Net revenues from emerging
markets were up 10%, or $4 million, on a constant currency
continuing category basis.
Gross margin decreased to 47.1% from 48.9%. The 180 basis
point decline in gross margin reflects higher discounting and
freight expenses due to late deliveries, and unfavorable currency
exchange rates, mainly in Europe, partially offset by the favorable
impact of a higher percentage of sales mix in direct to consumer
channels.
SG&A expense decreased $33 million to $175 million
from $208 million. The decrease was primarily driven by currency
exchange rates, reduced bad debt and employee compensation
expenses.
Pro-forma Adjusted EBITDA was $7 million compared with
$13 million.
Net loss from continuing operations attributable to
Quiksilver, Inc. was $38 million, or $0.22 per share, in the
second quarter of each of fiscal 2015 and 2014.
Cash and availability on credit facilities at the end of
the quarter was $118 million.
Q2 Net Revenue Highlights:
Net revenues from continuing operations by brand, sales channel
and product group for the second quarter of fiscal 2015 compared
with the second quarter of fiscal 2014 were as follows.
Brands:
- Quiksilver net revenues, as reported,
were $139 million compared with $167 million. Quiksilver net
revenues were down 1%, or $1 million, on a constant currency
continuing category basis;
- Roxy net revenues, as reported, were
$105 million compared with $120 million. Roxy net revenues were up
1%, or $1 million, on a constant currency continuing category
basis;
- DC net revenues, as reported, were $81
million compared with $103 million. DC net revenues were down 9%,
or $8 million, on a constant currency continuing category
basis.
Distribution channels:
- Wholesale net revenues, as reported,
were $230 million compared with $286 million. Wholesale net
revenues were down 4%, or $9 million, on a constant currency
continuing category basis;
- Retail net revenues, as reported, were
$84 million compared with $90 million. Retail net revenues were up
6% on a constant currency continuing category basis. Same-store
sales in company-owned retail stores decreased 3%. Company-owned
retail stores totaled 719 at the end of the fiscal 2015 second
quarter compared with 658 at the end of the fiscal 2014 second
quarter;
- E-commerce net revenues, as reported,
were $16 million compared with $19 million. E-commerce net revenues
were down 6%, or $1 million, on a constant currency continuing
category basis.
Product groups:
- Apparel and accessories net revenues,
as reported, were $232 million compared with $283 million. Apparel
and accessories net revenues were down 2%, or $5 million, on a
constant currency continuing category basis;
- Footwear net revenues were $101 million
compared with $114 million. Footwear net revenues were flat on a
constant currency continuing category basis.
Outlook:
Based on management’s current assessment of the business, the
Company is rescinding its previously stated financial guidance for
the fiscal year 2015. The Company may choose to reinstate the
policy of providing forward guidance in the future, but will not be
providing an outlook for fiscal 2015 at this time.
About Quiksilver:
Quiksilver, Inc., one of the world’s leading outdoor sports
lifestyle companies, designs, produces and distributes branded
apparel, footwear and accessories. The Company’s apparel and
footwear brands, inspired by a passion for outdoor action sports,
represent a casual lifestyle for young-minded people who connect
with its boardriding culture and heritage. The Company’s
Quiksilver, Roxy, and DC brands have authentic roots and heritage
in surf, snow and skate. The Company’s products are sold in more
than 100 countries in a wide range of distribution, including surf
shops, skate shops, snow shops, its proprietary Boardriders shops
and other company-owned retail stores, other specialty stores,
select department stores and through various e-commerce channels.
The Company’s corporate headquarters are in Huntington Beach,
California.
Forward-looking statements:
This press release contains forward-looking statements
including, but not limited to, statements regarding management’s
expectations for the Company’s net revenues, and EBITDA in future
periods. These forward-looking statements are subject to risks and
uncertainties, and actual results may differ materially. The
Company undertakes no obligation to update these statements, which
are made only as of the date of this press release. For the factors
that could cause actual results to differ materially from
expectations, please refer to the Company’s SEC filings and
specifically the sections titled “Risk Factors,” “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” and “Forward-Looking Statements” in the Company’s
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
NOTE: For further information about Quiksilver, Inc., please
visit our website at www.quiksilverinc.com. We also invite you to
explore our brand sites, www.quiksilver.com, www.roxy.com and
www.dcshoes.com.
QUIKSILVER, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF OPERATIONS (UNAUDITED) Second quarter ended
First half ended April 30, April 30,
2015 2014
2015
2014 In thousands, except per share
amounts
Revenues, net $ 333,052 $
396,941 $ 673,906 $ 791,851 Cost
of goods sold 176,254 202,651
347,664 396,921
Gross profit
156,798 194,290 326,242 394,930
Selling, general and administrative expense 175,179 207,921 345,683
411,705 Asset impairments 703 4,583
958 5,466
Operating loss
(19,084 ) (18,214 ) (20,399
) (22,241 ) Interest expense 18,040
19,222 36,442 38,642 Foreign currency (gain)/loss (3,258 )
887 (2,601 ) 3,715
Loss before provision/(benefit) for income taxes
(33,866 ) (38,323 ) (54,240
) (64,598 ) Provision/(Benefit) for
income taxes 3,728 (443 ) 1,644
(4,828 )
Loss from continuing operations
(37,594 ) (37,880 ) (55,884
) (59,770 ) (Loss)/income from discontinued
operations, net of tax - (22,981 )
6,732 14,636
Net loss
(37,594 ) (60,861 ) (49,152
) (45,134 ) Less: net loss/(income)
attributable to non-controlling interest -
7,737 788 8,201
Net
loss attributable to Quiksilver, Inc. $ (37,594
) $ (53,124 ) $ (48,364
) $ (36,933 ) Loss per share
from continuing operations attributable to Quiksilver, Inc.:
Basic $ (0.22 ) $ (0.22
) $ (0.33 ) $ (0.35
) Diluted $ (0.22 ) $
(0.22 ) $ (0.33 ) $
(0.35 ) (Loss)/income per share from
discontinued operations attributable to Quiksilver, Inc.:
Basic $ - $ (0.09 )
$ 0.04 $ 0.13 Diluted $
- $ (0.09 ) $ 0.04
$ 0.13 Weighted average common shares
outstanding: Basic 171,343 170,475
171,188 170,105 Diluted 171,343
170,475 171,188 170,105 Amounts
attributable to Quiksilver, Inc.: Loss from continuing
operations $ (37,594 ) $
(37,880 ) $ (55,884 ) $
(59,409 ) (Loss)/income from discontinued
operations, net of tax -
(15,244 ) 7,520
22,476 Net loss $ (37,594
) $ (53,124 ) $ (48,364
) $ (36,933 )
QUIKSILVER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
April 30, 2015 October 31,
2014 In thousands
ASSETS
Current Assets Cash and cash equivalents $ 48,078 $ 46,664
Restricted cash 4,449 4,687 Trade accounts receivable (net of
allowance of $52,940 and $63,991, respectively) 251,947 311,014
Other receivables 42,800 40,847 Income taxes receivable 494 -
Inventories 291,248 284,517 Deferred income taxes 4,838 4,926
Prepaid expenses and other current assets 30,425 28,080 Current
assets held for sale - 20,265
Total
Current Assets 674,279 741,000 Restricted
cash 2,868 16,514 Fixed assets, net 189,673 213,768 Intangible
assets, net 138,038 135,510 Goodwill 80,102 80,622 Other assets
39,450 47,086 Deferred income taxes - long-term 14,182 16,088
Non-current assets held for sale - 5,394
TOTAL ASSETS $ 1,138,592
$ 1,255,982
LIABILITIES AND
EQUITY/(DEFICIT)
Current Liabilities Lines of credit $ 33,037 $ 32,929
Accounts payable 149,968 168,307 Accrued liabilities 105,446
112,701 Current portion of long-term debt 2,248 2,432 Income taxes
payable - 1,124 Deferred income taxes 19,167 19,628 Liabilities
related to assets held for sale - 13,266
Total Current Liabilities 309,866
350,387 Long-term debt, net of current portion
785,482 793,229 Other long-term liabilities 35,747 39,342 Deferred
income taxes - long-term 22,130 16,790
Total Liabilities 1,153,225 1,199,748
Equity/(Deficit) Common stock 1,743 1,741 Additional paid-in
capital 591,656 589,032 Treasury stock (6,778 ) (6,778 )
Accumulated deficit (635,771 ) (587,407 ) Accumulated other
comprehensive income 34,517 57,288
Total Quiksilver, Inc. Stockholders' Equity/(Deficit)
(14,633 ) 53,876 Non-controlling interest
- 2,358
Total Equity/(Deficit)
(14,633 ) 56,234
TOTAL LIABILITIES AND EQUITY/(DEFICIT) $
1,138,592 $ 1,255,982
QUIKSILVER, INC. AND SUBSIDIARIES ADJUSTED EBITDA &
PRO-FORMA ADJUSTED EBITDA RECONCILIATION (UNAUDITED)
Second quarter ended First half ended April
30, April 30, 2015
2014
2015 2014
In thousands
Loss from continuing operations
attributable to Quiksilver, Inc.
$ (37,594 ) $ (37,880 )
$ (55,884 ) $ (59,409 )
Provision/(benefit) for income taxes 3,728 (443 ) 1,644 (4,828 )
Interest expense 18,040 19,222 36,442 38,642 Depreciation and
amortization 9,701 14,273 20,452 24,818 Non-cash stock-based
compensation expense 483 6,525 2,252 11,588 Non-cash asset
impairments, net 703 4,583 958
5,466
Adjusted EBITDA
(4,939 ) 6,280 5,864 16,277
Restructuring and other special charges 11,648
6,382 10,948 12,830
Pro-forma Adjusted EBITDA 6,709 12,662
16,812 29,107
Definition of Adjusted EBITDA and
Pro-forma Adjusted EBITDA:
Adjusted EBITDA is defined as net loss from continuing
operations attributable to Quiksilver, Inc. before (i) interest
expense, (ii) (benefit)/provision for income taxes, (iii)
depreciation and amortization, (iv) non-cash stock-based
compensation expense and (v) non-cash asset impairments. Pro-forma
Adjusted EBITDA is defined as Adjusted EBITDA excluding
restructuring and other special charges (including, but not limited
to, reserves and other charges associated with restructuring
activities, non-operating charges for gains and losses on lease
exit activities, as well as severance and other employee
termination costs as a result of downsizing and reorganization).
Adjusted EBITDA and Pro-forma Adjusted EBITDA are not defined under
generally accepted accounting principles (“GAAP”), and may not be
comparable to similarly titled measures reported by other
companies. We use Adjusted EBITDA and Pro-forma Adjusted EBITDA,
along with other GAAP measures, as measures of profitability
because Adjusted EBITDA and Pro-forma Adjusted EBITDA 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, the effect of
non-cash stock-based compensation expense and restructuring and
other special charges. 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 the 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 asset
impairments from Adjusted EBITDA for the same reason that we remove
depreciation and amortization as it is part of the non-cash impact
of our asset base. We also remove from Pro-forma Adjusted EBITDA
the impact of certain reserves and charges associated with
restructuring activities, non-operating charges for gains and
losses on lease exit activities, as well as severance and other
employee termination costs as these costs are not typically part of
normal, day-to-day operations. Adjusted EBITDA and Pro-forma
Adjusted EBITDA have limitations as profitability measures in that
they do 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, the effect of asset
impairments and the effect of restructuring and other special
charges.
Definition of Emerging
Markets:
The Company's references to emerging markets in this press
release refer to net revenues generated in Brazil, Mexico, Korea,
China, Indonesia, Taiwan and Russia, collectively.
CONSTANT CURRENCY CONTINUING CATEGORY NET
REVENUE RECONCILIATION
We make reference to net revenues on a
"constant currency continuing category" basis in order to provide
additional comparable information with regard to changes in net
revenues. Constant currency continuing category reporting provides
valuable comparisons of net revenues as it adjusts for the effect
of changes in foreign currency exchange rates and for the impact on
our wholesale channel of transitioning certain product categories
to a third-party licensing model. Constant currency is calculated
by taking the average foreign currency exchange rate for the
current period and applying that same rate to the comparable prior
year period. Continuing category impacts are determined by removing
the comparable prior period net revenues generated from product
categories which are now licensed as well as removing current
period licensing net revenues generated from those same licensed
product categories.
The following table presents net revenues from
continuing operations by segment, brand, channel and product group
on both an as reported basis and a comparable constant currency
continuing category basis for the second quarters ended April 30,
2015 and 2014 (in thousands):
Fiscal 2015 Net Revenues As Reported (GAAP)
Less Fiscal 2015 Licensing Revenue from Licensed
Product Categories Fiscal 2015 Comparable Net
Revenues (Non-GAAP) Fiscal 2014 Net Revenues
As Reported (GAAP) Impact of Fiscal 2015
Foreign Exchange Rates on Fiscal 2014 Net Revenues
Less Fiscal 2014 Net Revenues from Licensed Product
Categories Fiscal 2014 Constant Currency
Continuing Category Net Revenues (Non-GAAP) %Δ
Fiscal 2015 GAAP Net Revenues vs Fiscal 2014 GAAP Net Revenues
%Δ Fiscal 2015 Non-GAAP Net Revenues vs Fiscal
2014 Non-GAAP Net Revenues
By
Region:
Americas 159,987 (1,226 ) 158,761 186,247 (7,316 ) (14,202 )
164,729 -14 % -4 % EMEA 115,792 - 115,792 150,884 (30,908 ) (59 )
119,917 -23 % -3 % APAC 56,276 - 56,276 59,721 (7,107 ) (150 )
52,464 -6 % 7 % Corporate 997 -
997 89 (33 ) - 56
1020 % 1680 %
333,052 (1,226 )
331,826 396,941
(45,364 ) (14,411 )
337,166 -16 % -2 %
By
Brand:
Quiksilver 138,701 (153 ) 138,548 166,643 (20,461 ) (6,860 )
139,322 -17 % -1 % Roxy 104,747 (970 ) 103,777 120,091 (12,338 )
(5,353 ) 102,400 -13 % 1 % DC 80,896 (103 ) 80,793 102,909 (11,506
) (2,198 ) 89,205 -21 % -9 % Other 8,708 -
8,708 7,298 (1,059 ) -
6,239 19 % 40 %
333,052
(1,226 ) 331,826 396,941
(45,364 ) (14,411
) 337,166 -16 % -2
%
By
Channel:
Wholesale 229,837 - 229,837 286,205 (33,413 ) (14,411 ) 238,381 -20
% -4 % Retail 83,523 - 83,523 89,510 (10,516 ) - 78,994 -7 % 6 %
E-commerce 16,149 - 16,149 18,551 (1,435 ) - 17,116 -13 % -6 %
Licensing/Royalties 3,543 (1,226 )
2,317 2,675 - -
2,675 32 % -13 %
333,052 (1,226
) 331,826 396,941
(45,364 ) (14,411 )
337,166 -16 % -2 %
By Product
Group:
Apparel & Accessories 231,579 (1,226 ) 230,353 282,547 (32,605
) (14,411 ) 235,531 -18 % -2 % Footwear 101,473 -
101,473 114,394 (12,759 )
- 101,635 -11 % 0 %
333,052
(1,226 ) 331,826
396,941 (45,364 )
(14,411 ) 337,166 -16
% -2 %
The following table presents net revenues from continuing
operations by segment, brand, channel and product group on both an
as reported basis and a comparable constant currency continuing
category basis for the first halves ended April 30, 2015 and 2014
(in thousands):
Fiscal 2015 Net Revenues As Reported (GAAP) Less Fiscal
2015 Licensing Revenue from Licensed Product Categories
Fiscal 2015 Comparable Net Revenues (Non-GAAP) Fiscal
2014 Net Revenues As Reported (GAAP) Impact of Fiscal 2015
Foreign Exchange Rates on Fiscal 2014 Net Revenues Less
Fiscal 2014 Net Revenues from Licensed Product Categories
Fiscal 2014 Constant Currency Continuing Category Net Revenues
(Non-GAAP) %Δ Fiscal 2015 GAAP Net Revenues vs Fiscal 2014
GAAP Net Revenues %Δ Fiscal 2015 Non-GAAP Net Revenues vs
Fiscal 2014 Non-GAAP Net Revenues
By
Region:
Americas 307,754 (1,703 ) 306,051 361,710 (11,308 ) (24,927 )
325,475 -15 % -6 % EMEA 241,605 - 241,605 300,280 (51,127 ) (123 )
249,030 -20 % -3 % APAC 122,874 - 122,874 129,596 (12,686 ) (215 )
116,695 -5 % 5 % Corporate 1,673 -
1,673 265 (50 ) -
215 531 % 678 %
673,906 (1,703
) 672,203 791,851
(75,171 ) (25,264 )
691,416 -15 % -3 %
By
Brand:
Quiksilver 279,289 (223 ) 279,066 330,487 (33,264 ) (12,382 )
284,841 -15 % -2 % Roxy 205,164 (1,314 ) 203,850 238,118 (20,710 )
(8,131 ) 209,277 -14 % -3 % DC 170,110 (166 ) 169,944 205,899
(19,121 ) (4,751 ) 182,027 -17 % -7 % Other 19,343 -
19,343 17,347 (2,076 )
- 15,271 12 % 27 %
673,906
(1,703 ) 672,203
791,851 (75,171 )
(25,264 ) 691,416 -15
% -3 %
By
Channel:
Wholesale 422,202 - 422,202 524,901 (50,082 ) (25,264 ) 449,555 -20
% -6 % Retail 202,647 - 202,647 220,078 (22,432 ) - 197,646 -8 % 3
% E-commerce 42,810 - 42,810 42,025 (2,657 ) - 39,368 2 % 9 %
Licensing/Royalties 6,247 (1,703 )
4,544 4,847 - -
4,847 29 % -6 %
673,906 (1,703
) 672,203 791,851
(75,171 ) (25,264 )
691,416 -15 % -3 %
By Product
Group:
Apparel & Accessories 482,941 (1,703 ) 481,238 588,954 (57,022
) (25,264 ) 506,668 -18 % -5 % Footwear 190,965 -
190,965 202,897 (18,149 )
- 184,748 -6 % 3 %
673,906
(1,703 ) 672,203
791,851 (75,171 )
(25,264 ) 691,416 -15
% -3 %
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version on businesswire.com: http://www.businesswire.com/news/home/20150609005382/en/
ICR, Inc.Investors:Jean Fontana,
646-277-1214zqk@quiksilver.comorMedia:Julia Young,
646-277-1280Julia.young@icrinc.com