Quiksilver, Inc. reported consolidated net revenues from continuing operations for the second quarter of fiscal 2010 decreased 5% to $468.3 million from $494.2 million in the second quarter of fiscal 2009. Pro-forma consolidated income from continuing operations more than doubled to $15.7 million, or 11 cents a share, compared to $6.6 million, or 5 cents, a year ago.
Pro-forma income for the second quarter of fiscal 2010 excludes $2.9 million in restructuring charges, consisting primarily of severance pay, as well as a non-cash charge of $5.2 million for incremental stock compensation expense related to the appreciation in value of shares of company stock granted to Kelly Slater during the quarter following stockholder approval. These charges were partially offset by a gain of $1.3 million on the sale of the Raisins swimwear trademarks. Including these amounts, income from continuing operations was $8.8 million, or $0.06 per share, compared to $4.9 million, or $0.04 per share, for the second quarter of fiscal 2009.
Net revenues and the 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. Even as the global economies exhibit inconsistent signs of recovery, it's clear that the bold steps we've taken over the past several quarters to improve our operations and to stabilize our financial structure have made us a much stronger company. With inventories well-managed and great products in the market, we are well positioned to deliver improved financial performance in the future.”
Second Quarter Financial Highlights:
Pro-forma Adjusted EBITDA was $62.4 million compared to $45.4 million in the second quarter of fiscal 2009 despite a 5% revenue decline.
Gross margin improved 600 basis points to 53.2% compared to 47.2% in the second quarter of fiscal 2009 led by a 970 basis point improvement in the Americas.
Operating income in Europe, the company”s most profitable region, was 18.8% of revenues as gross margin improved 320 basis points to 59.9% from 56.7% in the second quarter of fiscal 2009.
By region, net revenues in the Americas decreased 13% during the second quarter of fiscal 2010 to $199.7 million from $230.0 million in the second quarter of fiscal 2009.
As measured in U.S. dollars and reported in the financial statements, European net revenues decreased 1% during the second quarter of fiscal 2010 to $208.7 million from $210.5 million in the second quarter of fiscal 2009. In constant currency, European segment net revenues decreased 5% compared to the prior year. As measured in U.S. dollars and reported in the financial statements, Asia/Pacific net revenues increased 12% to $58.6 million in the second quarter of fiscal 2010 from $52.3 million in the second quarter of fiscal 2009. In constant currency, Asia/Pacific segment net revenues decreased 17% compared to the prior year.
Consolidated inventories decreased 26% to $226.4 million at April 30, 2010 from $307.7 million at April 30, 2009. Consolidated trade accounts receivable decreased 19% to $333.3 million at April 30, 2010 from $411.0 million at April 30, 2009.
The company reduced its total debt to approximately $878 million and had approximately $155 million of availability under its credit lines in addition to approximately $145 million of unrestricted cash at the end of the second quarter.
Addressing its outlook for continuing operations, the company stated that based on current trends, third quarter revenues are expected to be down in the low 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 low-single-digit cents range. The company also indicated that it now expects Pro-forma Adjusted EBITDA for the full-year fiscal 2010 to be at the high-end of its previously stated range of 20 to 25% above fiscal 2009.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||
| Three Months Ended April 30, | ||||||||||
| In thousands, except per share amounts | 2010 | 2009 | ||||||||
| Revenues, net | $ | 468,289 | $ | 494,173 | ||||||
| Cost of goods sold | 219,002 | 261,055 | ||||||||
| Gross profit | 249,287 | 233,118 | ||||||||
| Selling, general and administrative expense | 213,416 | 202,589 | ||||||||
| Operating income | 35,871 | 30,529 | ||||||||
| Interest expense | 21,039 | 13,552 | ||||||||
| Foreign currency (gain) loss | (4,614 | ) | 1,926 | |||||||
| Other (income) expense | (5 | ) | 172 | |||||||
| Income before provision for income taxes | 19,451 | 14,879 | ||||||||
| Provision for income taxes | 9,419 | 9,528 | ||||||||
| Income from continuing operations | 10,032 | 5,351 | ||||||||
| Income (loss) from discontinued operations | 602 | (2,132 | ) | |||||||
| Net income | 10,634 | 3,219 | ||||||||
| Less: net income attributable to non-controlling interest | (1,210 | ) | (406 | ) | ||||||
| Net income attributable to Quiksilver, Inc. | $ | 9,424 | $ | 2,813 | ||||||
Income per share from continuing operations attributable to Quiksilver, Inc. | $ | 0.07 | $ | 0.04 | ||||||
Income (loss) per share from discontinued operations attributable to Quiksilver, Inc. | $ | 0.00 | $ | (0.02 | ) | |||||
| Net income per share attributable to Quiksilver, Inc. | $ | 0.07 | $ | 0.02 | ||||||
Income per share from continuing operations attributable to Quiksilver, Inc., assuming dilution | $ | 0.06 | $ | 0.04 | ||||||
Income (loss) per share from discontinued operations attributable to Quiksilver, Inc., assuming dilution | $ | 0.00 | $ | (0.02 | ) | |||||
Net income per share attributable to Quiksilver, Inc., assuming dilution
| $ | 0.06 | $ | 0.02 | ||||||
| Weighted average common shares outstanding | 128,090 | 127,324 | ||||||||
Weighted average common shares outstanding, assuming dilution
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