If there was one thing to take away from today’s Quiksilver conference call (and there really was only one) it was this: Quiksilver management is focused on strengthening its balance sheet by increasing liquidity and improving its capital structure.
That line was repeated over and over. CEO Bob McKnight said it. Then then unflappable CFO Joe Scirocco would say it again. During the call we imagined that line billboarded on the wall of the Quiksilver conference room as a reminder to use it as an answer for every question.
It began making more sense when Scirocco laid it all out like this:
“In our current business plan we believe we have adequate liquidity in each region for the forseeable future. Nonetheless the current retail environment is significantly uncertain and we believe that we should further improve liquidity,” he said. “To that end we expect to decide on the course of action sometime between now and the end of June. We expect to increase liquidity either through a sale of assets or by issuing secured debt as well as to arrange committed credit facilities from our European banks and a new ABL with our US lenders.”
The European lenders who yesterday gave Quiksilver a three-month extension on their 55 million Euro loan expect to be paid before June 30. And Quiksilver expects to solve a $316 million debt problem on the same timeline. What are their options? Scirocco was about a direct as he could legally be:
In terms of what types of asset sales we’re looking at,” he said. “We’ve looked at everything (some are more strategic than others) and yeah they could include a brand. What we’re after here in terms of a strategy is liquidity and improving the capital structure.
Oh really? During the Q&A several analysts tried to ask the DC Shoes question. Some very cleverly worded their questions regard the DC Shoe business and what a hypothetical sale would mean to Quiksilver but Scirocco stayed firm and answered all the questions thoughfully, reminding everyone that he really couldn’t talk about specifics related to their plans to increase liquidity.
One thing is certain: we will all know before June 30, 2009. And if we were betting . . .
[Update: In other news Reuters is reporting that Quik has hired mergers and acquisitions bank Peter J. Solomon to “help find funding or an investor.”]
