MOSS ADAMS CAPITAL: Apparel and foowear market monitor highlights notable deals, stock prices and results.
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Net Revenues of $468 million versus $494 million in prior year
— Pro-Forma Income from Continuing Operations of $0.11 per share versus $0.05 per share in prior year
— Income from Continuing Operations of $0.06 per share versus $0.04 per share in prior year
Huntington Beach, California, June 3, 2010--Quiksilver, Inc. (NYSE:ZQK) today announced operating results for the second fiscal quarter ended April 30, 2010. 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 for the second quarter of fiscal 2010 was $15.7 million, or $0.11 per share, compared to $6.6 million, or $0.05 per share, for the second quarter of fiscal 2009. 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. A reconciliation of GAAP results to pro-forma results is included in the accompanying tables. 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.
· Net debt at April 30, 2010, was $733 million, reduced by $201 million compared to $934 million at April 30, 2009.
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. 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 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.
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, snowboards 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 outdoor action sports. The company’s Quiksilver, Roxy, DC, Lib Tech and Hawk brands are synonymous with the heritage and culture of surfing, skateboarding and snowboarding.
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 revenue guidance, diluted earnings per share guidance, pro-forma adjusted EBITDA guidance and other future activities. 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.