Quiksilver CEO reports 'solid' Q3 results; revenues up 14%, company spending also on the rise

By Lisa Kerner

Charlotte, N.C., Sept. 1 - Quiksilver Inc.'s "solid" financial performance in the third quarter reflects the strength of its brands, "which are resonating with consumers around the world despite global economic pressures," chairman, chief executive officer and president Robert B. McKnight, Jr. said during an earnings call on Thursday.

Revenues for the third fiscal quarter ended July 31 were up 14% from the prior-year period at $503.3 million.

The increase was better than expected just one quarter ago, according to chief financial officer Joseph Scirocco, who also spoke on the call.

He said sales in the Americas region, which rose 11%, helped drive up revenues and noted that Quiksilver's e-commerce business grew by 65% for the period.

Selling, general and administrative expenses were up $12 million compared to the third quarter of 2010 due primarily to product development costs and marketing expenses for new growth initiatives, Scirocco said.

Capital expenditures were up $2 million, or $13 million, and included planned spending in stores and on the company's enterprise resource planning implementation.

According to Scirocco, Quiksilver focuses on EBITDA as a measure of its performance. For the third quarter, the company had pro-forma adjusted EBITDA of about $53 million, which is essentially unchanged from the prior-year period.

Interest expense was down to $16 million, from $21 million, as the result of Quiksilver's improved debt structure.

The company reported pro-forma income from continuing operations for the quarter of $10.4 million, or $0.06 per share, compared to the third quarter of 2010, when it reported $12.5 million, or $0.08 per share.

Inventory was up 24% or $365 million from last year. Scirocco explained that the company bought inventory to ensure timely production and delivery. The move also allowed Quiksilver to take advantage of in-season selling opportunities.

At quarter-end, Quiksilver had net debt of $621 million, a 10% drop from one year ago, and cash on hand totaling $126 million.

Quiksilver's ratio of net debt to pro-forma consolidated EBITDA is 3.1 times. compared to 3.4 times for the third quarter in 2010.

Scirocco said Quiksilver's focus remains on growth and profitability. The company is on track to reach its goal or generating annual revenue of between $2.5 billion and $3.5 billion, and annual EBITDA of $350 million.

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

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