Quiksilver, Inc. reported that its profit from continuing operations fell 88.8% in its third quarter ended July 31, to $3.7 million, or 3 cents share, from $33.1 million, or 25 cents, a year ago. Revenues dropped 11.2% to $501.4 million from $564.9 million a year ago. Adjusting for changes in foreign currency as compared to the U.S. dollar, sales were down 5% in constant currencies.
The pro-forma income from continuing operations for the three months ended July 31, 2009 excludes severance and facility related restructuring charges of $7.3 million net of tax and an offsetting tax adjustment of comparable amount. Including these items, income from continuing operations was $3.4 million, or 3 cents per share. Net revenues and income from continuing operations for all periods exclude the results of our Rossignol wintersports business, which was sold in the first quarter of fiscal 2009 and is reported as discontinued operations.
Net revenues in the Americas segment decreased 6% during the third quarter of fiscal 2009 to $256.8 million from $271.9 million in the third quarter of fiscal 2008. In constant currency, European segment net revenues decreased 8% compared to the prior year. As reported in the financial statements, European segment net revenues decreased 19% during the third quarter of fiscal 2009 to $189.0 million from $232.0 million in the third quarter of fiscal 2008. In constant currency, Asia/Pacific segment net revenues increased 12% compared to the prior year. As reported in the financial statements, Asia/Pacific segment net revenues decreased 8% to $55.1 million in the third quarter of fiscal 2009 from $59.6 million in the third quarter of fiscal 2008. Please refer to the accompanying tables in order to better understand the impact of foreign currency on revenue trends in our Europe and Asia/Pacific segments.
Consolidated inventories decreased 7% to $334.2 million at July 31, 2009 from $358.6 million at July 31, 2008. Consolidated trade accounts receivable decreased 14% to $424.2 million at July 31, 2009 from $491.4 million at July 31, 2008.
Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc., commented, “The fiscal third quarter was a very important period for our company as we delivered on the financial expectations we set a quarter ago and secured our global refinancing plan. In doing so, we have returned our focus to the continuing development of our core businesses. The retail environment remains very challenging and we will continue to adapt our cost structure to this trend as we go forward.”
Addressing its outlook for continuing operations, the company stated that based on current trends, fourth quarter revenues are expected to be down in the mid-teens on a percentage basis compared to the same quarter a year ago and that it expects to incur a loss per share on a diluted basis in the mid-single-digit range. The company indicated that longer term visibility into revenues and earnings remains limited due to global economic conditions.
The company also provided an update on the commitment it had reached to consolidate its European debt obligations, including previously uncommitted lines of credit, into a new committed 4-year facility. The new financing with the company’s European banking partners remains on track with the time table expressed by Quiksilver at the time the transaction was first announced and is expected to close before the end of September. Quiksilver previously announced that two separate transactions had closed and funded at the end of July. In the first transaction, Rhône, an international private equity firm with offices in New York, London and Paris, funded a 5-year senior secured term loan of approximately $150 million. In the second transaction, Bank of America and GE Capital, as joint lead arrangers, funded a new 3-year $200 million asset-based credit facility for Quiksilver’s Americas business.
With its new funding in place, the company had approximately $147 million of availability under its credit lines and approximately $117 million of unrestricted cash at the end of the third quarter.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||||||||||
| Three Months Ended July 31, | ||||||||||||
| In thousands, except per share amounts | 2009 | 2008 | ||||||||||
| Revenues, net | $ | 501,394 | $ | 564,876 | ||||||||
| Cost of goods sold | 267,030 | 280,047 | ||||||||||
| Gross profit | 234,364 | 284,829 | ||||||||||
| Selling, general and administrative expense | 211,771 | 232,094 | ||||||||||
| Operating income | 22,593 | 52,735 | ||||||||||
| Interest expense | 15,347 | 11,801 | ||||||||||
| Foreign currency loss (gain) | 3,473 | (1,231 | ) | |||||||||
| Minority interest and other (income) expense | (36 | ) | 415 | |||||||||
| Income before provision for income taxes | 3,809 | 41,750 | ||||||||||
| Provision for income taxes | 396 | 8,677 | ||||||||||
| Income from continuing operations | $ | 3,413 | $ | 33,073 | ||||||||
| Loss from discontinued operations, net of tax | (2,067 | ) | (30,219 | ) | ||||||||
| Net income | $ | 1,346 | $ | 2,854 | ||||||||
| Income per share from continuing operations | $ | 0.03 | $ | 0.26 | ||||||||
| Loss per share from discontinued operations | $ | (0.02 | ) | $ | (0.24 | ) | ||||||
| Net income per share | $ | 0.01 | $ | 0.02 | ||||||||
| Income per share from continuing operations, | ||||||||||||
| assuming dilution | $ | 0.03 | $ | 0.25 | ||||||||
| Loss per share from discontinued operations, | ||||||||||||
| assuming dilution | $ | (0.02 | ) | $ | (0.23 | ) | ||||||
| Net income per share, assuming dilution | $ | 0.01 | $ | 0.02 | ||||||||
| Weighted average common shares outstanding | ||||||||||||
