-- Third Quarter Net Revenues Increase 41% to $525.9 million
-- Earnings Per Share was $0.04, In Line With Guidance
-- Company Revises Fourth Quarter Guidance and Initiates FY07 Guidance
Huntington Beach, Calif - Quiksilver, Inc. announced operating results for the third quarter ended July 31, 2006. Consolidated net revenues for the third quarter of fiscal 2006 increased 41% to $525.9 million from $373.8 million in the third quarter of fiscal 2005. Consolidated net income for the third quarter of fiscal 2006 was $5.3 million compared to $24.6 million the year before. The Company's fiscal 2006 quarterly results include Rossignol and Cleveland Golf, which were acquired at the end of July 2005. Rossignol's business is seasonal and has a positive effect on the Company's first and fourth quarters when it generates profits but has a negative effect in the second and third quarters during its seasonally low shipping periods. Consolidated net income for the third quarter of fiscal 2006 includes $3.5 million in stock compensation required to be expensed by current accounting standards. No stock compensation expense was recorded in the third quarter of fiscal 2005. Third quarter fully diluted earnings per share was $0.04 versus $0.20 for the third quarter of fiscal 2005. Earnings per share on a fully diluted basis, excluding stock compensation expense and the related tax effect, was $0.07 for the third quarter of fiscal 2006, in line with the Company's previous guidance. The $0.03 difference between $0.07 per share, excluding stock compensation expense, and actual earnings per share of $0.04 per share is determined by dividing $3.5 million, which is the tax-effected stock compensation expense, by 127.7 million weighted average common shares outstanding, assuming dilution.
Net revenues from the company's newly acquired Rossignol and Cleveland Golf businesses totaled $76.8 million during the third quarter ended July 31, 2006.
Robert B. McKnight, Jr., Chairman of the Board and Chief Executive Officer of Quiksilver, Inc., commented, "During the third quarter, we continued to execute at a high level. Our core business, which was strong across the board, drove our solid results. While we have some interim issues in the golf market which will have a moderate impact on our fourth quarter expectations, we are encouraged with the ongoing momentum in our core business and remain enthusiastic about our future prospects."
Net revenues in the Americas increased 41% during the third quarter of fiscal 2006 to $277.4 million from $196.3 million in the third quarter of fiscal 2005. As measured in U.S. dollars and reported in the financial statements, European net revenues increased 43% during the third quarter of fiscal 2006 to $191.0 million from $133.6 million in the third quarter of fiscal 2005. As measured in euros, European net revenues increased 38% for those same periods. Asia/Pacific net revenues increased 31% to $56.3 million in the third quarter of fiscal 2006 from $43.1 million in the third quarter of fiscal 2005. As measured in Australian dollars, Asia/Pacific net revenues increased 32% for those same periods.
Consolidated inventories increased 18% to $516.4 million at July 31, 2006 from $438.3 million at July 31, 2005. Inventories grew 14% in constant dollars. Consolidated trade accounts receivable increased 15% to $492.4 million at July 31, 2006 from $428.3 million at July 31, 2005.
Bernard Mariette, President of Quiksilver, Inc., commented, "We were pleased to once again meet our expectations for the third quarter. There is no question, particularly within our core base of accounts, that our brands continue to be among the most powerful in their respective markets. Our board sports brands had one of the best summer seasons in the history of our company. Quiksilver, Roxy, and DC Shoes all performed very well, demonstrating strength in nearly every product category. At the same time, we remain excited to leverage Rossignol to both reinforce its core ski position and to translate the worldwide strength of its brand into a full collection of outdoor lifestyle products."
Mr. Mariette continued, "The diversification of our business--by brand, channel, gender and category--coupled with a world class team of talented people, continues to drive our success both here and abroad. Our management team is energized to take the next steps for both the continued growth of our long-standing brands and territories as well as for the push into new businesses, new products, and new markets. We are dedicated to achieving our vision of becoming the dominant outdoor lifestyle company and are advancing our leadership position each and every day."
The Company has revised its fourth quarter fiscal 2006 guidance and initiated fiscal 2007 guidance. Due to softness in the golf market, the Company now expects fiscal 2006 fourth quarter diluted earnings per share to be approximately $0.53, before stock compensation expense and the related tax effect, or $0.51 including stock compensation expense. For fiscal 2006, the Company expects to report diluted earnings per share of approximately $0.84, before stock compensation expense and the related tax effect, or $0.73, including stock compensation expense. Revenue expectations were also updated to reflect current foreign currency exchange rates and strength in the Company's business in the Americas. For the fourth quarter of fiscal 2006, revenues are now expected to range from $745 million to $750 million, which would result in full year fiscal 2006 revenues approximating $2.33 billion. For fiscal 2007, the Company's initial guidance is for revenues of approximately $2.5 billion and diluted earnings per share, including stock compensation expense and the related tax effect, ranging from $0.88 to $0.92, which represents earnings per share growth ranging from 21% to 26%.
Mr. McKnight concluded, "We recently returned from trade shows both in the U.S. and Europe, and the response from retailers continues to be extremely positive. We have always been focused on product and innovation, and with each passing season we are creating newness and excitement which allows us to further our unique connection with our customers around the world."
About Quiksilver
Quiksilver, Inc. (NYSE:ZQK) is the world's leading outdoor sports lifestyle company, which designs, produces and distributes a diversified mix of branded apparel, wintersports and golf equipment, footwear, accessories 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, while its wintersports and golf brands symbolize a long standing commitment to technical expertise and competitive success on the mountains and on the links.
The reputation of Quiksilver Inc.'s brands is based on different outdoor sports. The Company's Quiksilver, Roxy, DC Shoes and Hawk brands are synonymous with the heritage and culture of surfing, skateboarding and snowboarding, and its beach and water oriented swimwear brands include Raisins, Radio Fiji and Leilani. The Rossignol, Dynastar, Lange, Look and Kerma brands are leaders in the alpine ski market, and the Company makes snowboarding equipment under its Rossignol, Dynastar, DC Shoes, Roxy, Lib Technologies, Gnu and Bent Metal labels. The Company's golf business includes Cleveland Golf, as well as Never Compromise putters and Fidra apparel. Gotcha is the Company's surf-based European brand addressing street fashion.
The Company's products are sold in over 90 countries in a wide range of distribution, including surf shops, ski shops, skateboard shops, snowboard shops, proprietary Boardriders Club shops, 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 and St. Jean de Moirans, France, and its Asia/Pacific headquarters are in Torquay, Australia.
Todd Richard, sponsored by Quiksilver at 2006 Fiesta de la Pipa in Mammoth