Looks like we should have jumped in on the $.80 Quiksilver share prices several weeks ago because Quiksilver is fighting its way through some rough times. In their conference call today with analysts they stated that they doing well, but still have a ways to go.
Consolidated net revenues for the fourth quarter of fiscal 2008 increased 3% to $606.9 million compared to $587.3 million in the fourth quarter of fiscal 2007. . . . Consolidated net revenues for the full year of fiscal 2008 increased 11% to $2.26 billion compared to $2.05 billion in fiscal 2007. . . . European net revenues increased 16% during the full year of fiscal 2008 to $933.1 million and were up 4% in local currency.
Bob McKnight says:
I am proud of the efforts of the entire Quiksilver team around the world as we fought through a deteriorating global economy to deliver financial results that were consistent with the outlook we provided 6 months ago. As economic conditions continue to worsen in our key markets in the US and in Europe, we’ve continued our efforts to reduce expenses and capital expenditures, to carefully control inventory and to reconfigure our post-Rossignol capital structure.”
Notes from the conference call:
- Europe has been doing extremely well for the company.
- The DC footwear business has been “quite strong.”
- Sales will be down in the low double digits for the first quarter of 09
- Expecting a revenue decline in the high single to low double digits for 2009
- Every five cent swing in the Euro translates into $30 million in sales.
- Quik will open “very few new stores” in 2009. “Two in the US and maybe 2 or 3 in Asia Pacific and a couple in Europe”
- The company is looking to 25 retail stores. Nine will close in 2009; 21 of the stores are in the US, 12 are full-price stores and 41 percent of those are in California, Arizona, Florida.
- Quiksilver’s top 30 customers worldwide do less than 25 percent of the company’s sales.
- Capital expenditures for the coming year will be cut approximately $34 million from $94 million to $60 million.
- They are looking at every area of expenditure and trying to adjust to a new reality as to the projected 2009 revenue.
- Company debt still in the $1 billion range
- In 2009 there will be $70 million in interest expense
- The company also has a $55 million loan, which CFO Joe Scirocco called “the big one” is due on March 14, 2009
The Street appeared happy with the report as the stock rose 10% in after-hours trading.
For the whole press release, follow the jump, or click here for a transcript, or listen to the whole call right here.
HUNTINGTON BEACH, Calif.–Quiksilver, Inc. (NYSE: ZQK) today announced operating results for the fourth quarter and full year ended October 31, 2008. Consolidated net revenues for the fourth quarter of fiscal 2008 increased 3% to $606.9 million compared to $587.3 million in the fourth quarter of fiscal 2007. Fourth quarter pro-forma income from continuing operations was $41.6 million or $0.32 per share, and excludes a $55.4 million goodwill impairment charge associated with the company’s revised outlook for its business in the Asia/Pacific region. The pro-forma earnings result exceeded the company’s expectations because of an unanticipated tax benefit of $4.6 million or $0.04 per share. The goodwill impairment charge is a non-cash expense and does not affect the company’s operations, cash flows or covenants associated with its debt. A reconciliation of GAAP results to pro-forma results is provided in the accompanying tables. Including the goodwill charge, the loss from continuing operations for the fourth quarter was $13.8 million or $0.11 per share, compared to income of $43.9 million or $0.34 per share in the same quarter a year ago. Net revenues and income from continuing operations for all periods exclude the results of the Rossignol wintersports and golf equipment businesses which are reported as discontinued operations.
Consolidated net revenues for the full year of fiscal 2008 increased 11% to $2.26 billion compared to $2.05 billion in fiscal 2007. Full year pro-forma income from continuing operations for fiscal 2008, adjusted to exclude the goodwill charge, was $120.9 million or $0.93 per share. Full year income from continuing operations for fiscal 2008, including the goodwill charge, was $65.5 million or $0.51 per share, compared to income of $116.7 million or $0.90 per share in fiscal 2007.
Robert B. McKnight, Jr., Chairman of the Board, President and Chief Executive Officer of Quiksilver, Inc., commented, “I am proud of the efforts of the entire Quiksilver team around the world as we fought through a deteriorating global economy to deliver financial results that were consistent with the outlook we provided 6 months ago. As economic conditions continue to worsen in our key markets in the US and in Europe, we’ve continued our efforts to reduce expenses and capital expenditures, to carefully control inventory and to reconfigure our post-Rossignol capital structure.”
Net revenues in the Americas increased 10% during the fourth quarter of fiscal 2008 to $306.9 million. European net revenues decreased 4% during the fourth quarter to $216.3 million and declined 6% in local currency. Asia/Pacific net revenues increased 2% to $82.6 million in the fourth quarter and increased 10% in local currency.
Net revenues in the Americas for the full year of fiscal 2008 increased 7% to $1,061.4 million. European net revenues increased 16% during the full year of fiscal 2008 to $933.1 million and were up 4% in local currency. Asia/Pacific net revenues increased 9% to $265.1 million in fiscal 2008 and were up 3% in local currency.
Consolidated inventories increased 5% to $312.1 million at October 31, 2008 from $296.2 million at October 31, 2007. Inventories grew 15% in local currency. Consolidated trade accounts receivable decreased 2% to $470.1 million at October 31, 2008 from $478.0 million at October 31, 2007. Trade accounts receivable grew 6% in local currency.
The company completed the sale of the Rossignol Group in November 2008 and sold Roger Cleveland Golf Company in December 2007. Both of these businesses are treated as discontinued operations in the consolidated statements of income attached to this press release. Quiksilver expects to recognize a non-cash loss of approximately $150 million in the first fiscal quarter of 2009 associated with the sale of Rossignol.
The company stated that as of October 31, 2008, it had approximately $215 million of available liquidity, including non-restricted cash and available borrowing capacity on its existing credit facilities. The company ended fiscal 2008 with $1,071 million of debt, including $11 million of debt within liabilities held for sale. The company is currently in discussions with its European and Asia/Pacific banks to refinance its short-term debt, including $167 million which is uncommitted, and a $72 million facility due to mature in March 2009. In addition, the company is negotiating a term loan to supplement its current credit availability in the US, subject to approval by its US lenders. The company believes that its projected cash flow from operations, together with its existing credit facilities, will be adequate to service its debt and to finance the projected capital requirements of the business. The company also believes that it can obtain additional financing needed to extend the maturities of its debt, reduce the amount of short-term uncommitted lines of credit and better position itself for the long term.
Mr. McKnight concluded, “Now that we have completed the sale of Rossignol and eliminated our exposure to hardgoods manufacturing, we’ve refocused our attention toward our three strong boardsport lifestyle brands Quiksilver, Roxy and DC. Despite an increasingly challenging retail environment, Quiksilver remains the clear number one surf brand in the world, Roxy is still the number one female surf brand and DC is one of the top three footwear brands in the entire action sports industry.”
About Quiksilver:
Quiksilver, Inc. (NYSE: ZQK) 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 financial and liquidity forecasts as well as its ability to refinance its existing indebtedness. 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 and www.hawkclothing.com.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended October 31,
In thousands, except per share amounts 2008 2007
Revenues, net $ 606,899 $ 587,268
Cost of goods sold 315,008 298,764
Gross profit 291,891 288,504
Selling, general and administrative expense 231,629 216,576
Goodwill impairment 55,400 —
Retail store impairments 10,047 —
Operating (loss) income (5,185 ) 71,928
Interest expense 9,482 11,151
Foreign currency (gain) loss (5,298 ) 3,125
Minority interest and other expense 701 82
(Loss) income before provision for income taxes (10,070 ) 57,570
Provision for income taxes 3,754 13,636
(Loss) income from continuing operations $ (13,824 ) $ 43,934
Income (loss) from discontinued operations $ 12,869 $ (154,861 )
Net loss $ (955 ) $ (110,927 )
(Loss) income per share from continuing $ (0.11 ) $ 0.35
operations
Income (loss) per share from discontinued $ 0.10 $ (1.24 )
operations
Net loss per share $ (0.01 ) $ (0.89 )
(Loss) income per share from continuing $ (0.11 ) $ 0.34
operations, assuming dilution
Income (loss) per share from discontinued $ 0.10 $ (1.19 )
operations, assuming dilution
Net loss per share, assuming dilution $ (0.01 ) $ (0.85 )
Weighted average common shares outstanding 127,067 124,492
Weighted average common shares outstanding, 127,067 130,127
assuming dilution
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Fiscal Year Ended October 31,
In thousands, except per share amounts 2008 2007
Revenues, net $ 2,264,636 $ 2,047,072
Cost of goods sold 1,144,050 1,062,027
Gross profit 1,120,586 985,045
Selling, general and administrative expense 915,933 782,263
Goodwill impairment 55,400 —
Retail store impairments 10,397 —
Operating income 138,856 202,782
Interest expense 45,327 46,571
Foreign currency (gain) loss (5,761 ) 4,857
Minority interest and other expense 719 121
Income before provision for income taxes 98,571 151,233
Provision for income taxes 33,027 34,506
Income from continuing operations $ 65,544 $ 116,727
Loss from discontinued operations $ (291,809 ) $ (237,846 )
Net loss $ (226,265 ) $ (121,119 )
Income per share from continuing operations $ 0.52 $ 0.94
Loss per share from discontinued operations $ (2.32 ) $ (1.92 )
Net loss per share $ (1.80 ) $ (0.98 )
Income per share from continuing operations, $ 0.51 $ 0.90
assuming dilution
Loss per share from discontinued operations, $ (2.25 ) $ (1.83 )
assuming dilution
Net loss per share, assuming dilution $ (1.75 ) $ (0.93 )
Weighted average common shares outstanding 125,975 123,770
Weighted average common shares outstanding, 129,485 129,706
assuming dilution
Information related to geographic segments is as follows (unaudited):
Three Months Ended October 31,
Amounts in thousands 2008 2007
Revenues, net:
Americas $ 306,879 $ 279,836
Europe 216,349 224,703
Asia/Pacific 82,573 81,080
Corporate operations 1,098 1,649
$ 606,899 $ 587,268
Gross Profit:
Americas $ 125,294 $ 117,934
Europe 122,168 127,713
Asia/Pacific 43,649 41,820
Corporate operations 780 1,037
$ 291,891 $ 288,504
SG&A Expense:
Americas $ 98,290 $ 82,210
Europe 96,735 96,456
Asia/Pacific 28,558 27,575
Corporate operations 8,046 10,335
$ 231,629 $ 216,576
Asset Impairments:
Americas $ 8,967 $ —
Europe 692 —
Asia/Pacific 55,788 —
Corporate operations — —
$ 65,447 $ —
Operating (Loss) Income:
Americas $ 18,037 $ 35,724
Europe 24,741 31,257
Asia/Pacific (40,697 ) 14,245
Corporate operations (7,266 ) (9,298 )
$ (5,185 ) $ 71,928
Information related to geographic segments (continued):
Fiscal Year Ended October 31,
Amounts in thousands 2008 2007
Revenues, net:
Americas $ 1,061,370 $ 995,801
Europe 933,119 803,395
Asia/Pacific 265,067 243,064
Corporate operations 5,080 4,812
$ 2,264,636 $ 2,047,072
Gross Profit:
Americas $ 445,381 $ 418,021
Europe 532,034 442,923
Asia/Pacific 140,168 120,411
Corporate operations 3,003 3,690
$ 1,120,586 $ 985,045
SG&A Expense:
Americas $ 371,958 $ 311,757
Europe 380,374 316,867
Asia/Pacific 117,219 100,922
Corporate operations 46,382 52,717
$ 915,933 $ 782,263
Asset Impairments:
Americas $ 9,317 $ —
Europe 692 —
Asia/Pacific 55,788 —
Corporate operations — —
$ 65,797 $ —
Operating Income:
Americas $ 64,106 $ 106,264
Europe 150,968 126,056
Asia/Pacific (32,839 ) 19,489
Corporate operations (43,379 ) (49,027 )
$ 138,856 $ 202,782
GAAP TO PRO-FORMA RECONCILIATION (UNAUDITED)
Three Months Ended
October 31,2008
Loss from continuing operations $ (13,824 )
Goodwill impairment 55,400
Pro-forma income from continuing operations $ 41,576
Pro-forma income per share from continuing operations $ 0.33
Pro-forma income per share from continuing operations, $ 0.32
assuming dilution
Weighted average common shares outstanding 127,067
Weighted average common shares outstanding, assuming 129,183
dilution
GAAP TO PRO-FORMA RECONCILIATION (UNAUDITED)
Fiscal Year Ended
October 31,2008
Income from continuing operations $ 65,544
Goodwill impairment 55,400
Pro-forma income from continuing operations $ 120,944
Pro-forma income per share from continuing operations $ 0.96
Pro-forma income per share from continuing operations, $ 0.93
assuming dilution
Weighted average common shares outstanding 125,975
Weighted average common shares outstanding, assuming 129,485
dilution
CONSOLIDATED SELECTED BALANCE SHEET INFORMATION (UNAUDITED)
October 31,
Amounts in thousands 2008 2007
Cash and cash equivalents $ 53,042 $ 74,348
Restricted cash 46,475 —
Trade accounts receivable, net 470,059 478,049
Inventories 312,138 296,167
Lines of credit and long-term debt 1,060,318 857,446
Principal payments on lines of credit and long-term debt are due
approximately as follows:
Fiscal Year Ended October 31,
Amounts in thousands 2008 2007
Uncommitted debt $ 166,519 $ 124,634
2008 — 33,903
2009 103,701 34,346
2010 284,403 207,211
2011 81,946 35,752
2012 20,227 21,205
2013 3,522 395
2014 — —
2015 400,000 400,000
$ 1,060,318 $ 857,446
Source: Quiksilver, Inc.
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