Quiksilver Inc. reported a loss of $175 million, or $1.04 per share, in the fourth quarter ended Oct. 31 due to a drop in revenue and a steeper income-tax provision. Among its brands, Quiksilver was flat at $190 million, Roxy was flat at $137 million, and DC decreased 25 percent to $139 million.

“We made solid progress on key elements of our Profit Improvement Plan over the last few months,” said Andy Mooney, President and Chief Executive Officer of Quiksilver, Inc. “During the fourth quarter, we continued right-sizing our global operations, closing underperforming retail stores, trimming our global athlete roster, divesting non-core operations and making important headway in establishing global controls in the supply chain management processes. In November, we acquired full ownership of our high-growth operations in Brazil and Mexico and entered into our first substantial licensing agreement.

“I am pleased that our cost reduction efforts generated an increase of $3 million and $7 million in pro forma adjusted EBITDA for the fourth quarter and second half of fiscal 2013, respectively, versus the comparable prior year periods,” continued Mooney. “While net revenues were lower due to the expected decrease in DC brand sales, we generated higher gross margin and drove down selling, general and administrative expenses.”

As previously announced, the company sold its snowboard business, Mervin Manufacturing, and intends to pursue the divestiture of other non-core businesses. As a result, Quiksilver has reclassified the current and prior year operating results of Mervin and the other non-core businesses as discontinued operations. All of the results presented below represent the company’s continuing operations.

Fiscal 2013 Fourth Quarter Review:

The following comparisons refer to results of continuing operations for the fourth quarter of fiscal 2013 versus the fourth quarter of fiscal 2012.

Net revenues were $476 million compared with $529 million, and were down 9 percent, or $47 million, in constant currency.

  •     Americas net revenues decreased 15 percent to $223 million from $263 million, and were down 14 percent in constant currency.
  •     EMEA net revenues decreased 6 percent to $168 million from $179 million, and were down 9 percent in constant currency.
  •     APAC net revenues decreased 4 percent to $83 million from $86 million, but were up 9 percent in constant currency.

Gross margin increased to 47.0 percent of net revenues compared with 45.6 percent, due to gross margin improvement in the EMEA region, partially offset by a modest decline to gross margin in the APAC region.

SG&A expense decreased $7 million to $220 million from $227 million, primarily due to reduced expenses related to employee compensation, marketing expenses and administrative costs.

Pro-forma Adjusted EBITDA from continuing operations increased to $35 million from $32 million.

Provision for income taxes was $157 million, which included a $157 million charge related to recording valuation allowances against certain deferred tax assets in the company’s EMEA segment, versus benefit for income taxes of $10 million.

Net loss from continuing operations attributable to Quiksilver, Inc. was $175 million, or $1.04 per share, versus net loss from continuing operations attributable to Quiksilver, Inc. of $0.4 million, or $0.00 per diluted share.

Pro-forma loss from continuing operations, which excludes a non-cash tax valuation allowance and the after-tax impact of restructuring and other special charges, non-cash asset impairments, gain on store sale and non-cash interest charges, was $7 million, or $0.04 per share, versus pro-forma income from continuing operations of $8 million, or $0.05 per diluted share.

Fiscal 2013 Q4 Net Revenue Highlights:

Net revenues from continuing operations (in constant currency) by brand and channel for the fourth quarter of fiscal 2013 compared with the fourth quarter of fiscal 2012 were as follows.

Brands (constant currency):

  •         Quiksilver was flat at $190 million;
  •         Roxy was flat at $137 million; and,
  •         DC decreased $47 million, or 25 percent, to $139 million.
  •     Distribution channels (constant currency):
  •         Wholesale revenues decreased 12 percent to $353 million;
  •         Retail revenues increased slightly to $107 million. Same-store sales in company-owned retail stores were flat. Company-owned retail stores totaled 631 at the end of fiscal 2013 compared with 605 at the end of fiscal 2012; and,
  •         E-commerce revenues grew 22 percent to $16 million.


Emerging markets generated net revenue growth of 32 percent in constant currency.

Fiscal 2013 Full Year Review:

The following comparisons refer to results of continuing operations for the full year of fiscal 2013 versus the full year of fiscal 2012.

Net revenues were $1.81 billion compared with $1.94 billion, and were down 6 percent, or $110 million, in constant currency.

  •     Americas net revenues decreased 7 percent to $893 million from $961 million, and were down 6 percent in constant currency.
  •     EMEA net revenues decreased 6 percent to $632 million from $672 million, and were down 7 percent in constant currency.
  •     APAC net revenues decreased 8 percent to $282 million from $306 million, and were flat in constant currency.

Gross margin decreased slightly to 48.2 percent of net revenues compared with 48.5 percent, with gross margin declines on DC brand sales in the Americas wholesale channel, largely offset by gross margin improvement in the EMEA wholesale channel.

SG&A expense decreased $31 million to $858 million from $888 million, primarily due to reduced expenses related to employee compensation, marketing expenses and administrative costs.

Pro-forma Adjusted EBITDA from continuing operations was $118 million compared with $141 million.

Provision for income taxes was $166 million, which included a $157 million charge related to recording valuation allowances against certain deferred tax assets in the company’s EMEA segment, compared with $4 million.

Net loss from continuing operations attributable to Quiksilver, Inc. was $239 million, or $1.43 per share, compared with $18 million, or $0.11 per share.

Pro-forma loss from continuing operations, which excludes a non-cash tax valuation allowance and the after-tax impact of restructuring and other special charges, non-cash asset impairments, gain on store sale and non-cash interest charges, was $38 million, or $0.23 per share, versus pro-forma income from continuing operations of $0.1 million, or $0.00 per diluted share.

Fiscal 2013 Net Revenue Highlights:

Net revenues from continuing operations (in constant currency) by brand and channel for the full year of fiscal 2013 compared with the full year of fiscal 2012 were as follows.

    Brands (constant currency):

  •         Quiksilver decreased 7 percent to $721 million;
  •         Roxy decreased 2 percent to $511 million; and,
  •         DC decreased 8 percent to $542 million.
  •     Distribution channels (constant currency):
  •         Wholesale revenues decreased 8 percent to $1.29 billion;
  •         Retail revenues decreased 1 percent to $447 million. Same-store sales in company-owned retail stores were flat; and,
  •         E-commerce revenues grew 25 percent to $69 million.

Emerging markets generated net revenue growth of 21 percent in constant currency.

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QUIKSILVER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 


 
 
 Three months ended
 
 Twelve months ended

In thousands, except per share amounts


October 31,
October 31,


2013
 
 2012
2013
 
 2012









 
Revenues, net
$ 475,913

$ 529,230

$ 1,810,570

$ 1,941,849

Cost of goods sold

 
252,241
 

 
287,997
 

 
938,139
 

 
1,000,530
 









 
Gross profit

223,672


241,233


872,431


941,319









 

Selling, general and administrative expense


220,404



227,361



857,557



888,250

Asset impairments

 
1,675
 

 
6,678
 

 
12,327
 

 
7,234
 









 
Operating income

1,593


7,194


2,547


45,835









 

Interest expense


20,000



15,354



71,049



60,885

Foreign currency loss/(gain)

 
319
 

 
3,067
 

 
4,689
 

 
(1,709
)









 
Loss before provision/(benefit) for income taxes

(18,726 )

(11,227 )

(73,191 )

(13,341 )









 

Provision/(benefit) for income taxes

 
157,496
 

 
(9,738
)

 
166,220
 

 
3,904
 









 
Loss from continuing operations

(176,222 )

(1,489 )

(239,411 )

(17,245 )

Income from discontinued operations, net of tax

 
3,647
 

 
4,736
 

 
6,201
 

 
7,263
 









 
Net (loss)/income

(172,575 )

3,247


(233,210 )

(9,982 )

Less: net loss/(income) attributable to non-controlling interest

 
1,463
 

 
1,112
 

 
645
 

 
(774
)