Quiksilver's financial restructuring eases near-term liquidity issues

By Lisa Kerner

Charlotte, N.C., Sept. 3 - Quiksilver, Inc. chief executive officer Robert B. McKnight Jr. said the company delivered on the financial expectations it set a quarter ago.

McKnight called the third quarter "an important period" during a company conference call on Thursday.

In June Quiksilver announced it completed a financial restructuring plan that allows the company to maintain full ownership of its three core brands and provide capital to further strengthen the business.

As previously reported by Prospect News, the financial restructuring plan is based on a new $150 million term loan from international private equity firm, Rhone, and a new $200 million asset-based line of credit in the company's Americas region from Bank of America and GE Capital.

The third component of the plan involves consolidating the company's European debt into a new committed four-year facility before the end of the month.

Quiksilver had at one point considered selling its assets including one of its core brands, which are Quiksilver, Roxy and DC.

With the restructuring, Quiksilver eliminated near-term liquidity issues, McKnight said.

Quiksilver had approximately $147 million of availability under its credit lines and approximately $117 million of unrestricted cash at the end of the third quarter, according to a company news release.

For the third quarter ended July 31, Quiksilver had consolidated net revenues from continuing operations of $501.4 million, down from $564.9 million in the third quarter of fiscal 2008.

The company's consolidated pro-forma income from continuing operations for the third quarter was $3.7 million, or $0.03 per share, compared to $33.1 million, or $0.25 per share, for the prior year period.

Challenging fourth quarter

McKnight said "with the proper funding now at hand, we are evaluating every aspect of our business to streamline operations improve productivity and increase profitability."

According to McKnight the retail environment remains "very challenging" and Quiksilver will continue to adapt its cost structure going forward.

Fourth quarter revenues are expected to be down in the mid-teens on a percentage basis compared to the same quarter a year ago. A loss per share in the mid-single-digit range is also expected.

Quiksilver is an outdoor sports lifestyle company based in Huntington Beach, Calif.

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