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Quiksilver Inc. (ZQK)

F4Q09 Earnings Call

December 17, 2009 4:30 pm ET


Bob McKnight - Chairman, President & Chief Executive Officer

Joe Scirocco - Chief Financial Officer

Steve Tully - President

Bruce Thomas - Vice President of Investor Relations


Jeff Van Sinderen - B. Riley

Andrew Burns - Thomas Weisel

Sean Naughton - Piper Jaffray

William Reuter - Banc of America

Grant Jordan - Wells Fargo

Carla Casella - JP Morgan

Todd Slater - Lazard Capital



Good afternoon, ladies and gentlemen. Thank you for standing by. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. (Operator Instructions) I would now like to remind everyone that this conference is being recorded.

I’d now like to introduce Bruce Thomas, Quiksilver’s Vice President of Investor Relations, who will chair this afternoon’s call.

Bruce Thomas

Thanks operator. Good afternoon everyone and welcome to the Quiksilver fourth quarter fiscal 2009 earnings conference call. Our speakers’ today are Bob McKnight, our Chairman, President and Chief Executive Officer; and Joe Scirocco, our Chief Financial Officer.

Before we begin, I’d like to briefly review the company’s Safe Harbor language. Throughout our call today, items maybe discussed that are not based on historical facts and are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

In particular, statements regarding Quiksilver’s business outlook and future performance constitute forward-looking statements and results could differ materially from those stated or implied by these forward-looking statements as a result of risks, uncertainties and other factors, including those identified in our filings with the Securities and Exchange Commission, specifically under the section titled risk factors in our most recent Annual Report on Form 10-K.

All forward-looking statements made on this call speak only as of today’s date and the company undertakes no duty to update any forward-looking statements. In addition, this presentation may contain references to non-GAAP financial information. A reconciliation of non-GAAP financial information to the most directly comparable GAAP financial information is included in our press release, which can be found in electronic form on our website at

With that out of the way, I’d like to turn the call over to Bob McKnight.

Bob McKnight

Thanks Bruce. Good afternoon everyone and thanks for joining us on our fourth quarter conference call. Our fourth quarter was again very challenging, as retailers bought conservatively for the holiday season and traffic in our own retailer stores remain sluggish. In that context we were very pleased that our results were somewhat better than we expected.

Beyond the finance results, we also accomplished several important business objectives during the quarter. We introduced a number of innovative items to the market, reinforcing our product leadership. We maintained and even expanded our leading global market positions to brand and product promotion, and relationship building initiatives with our retail partners.

We stays a number of existing and entertaining events further connecting our brands with the broad group of consumers that either participate in or are inspired by action sports. We continued our focused efforts on cutting cost, improving operational efficiency and improving gross margins. We’ll expand on each of these points within our prepared remarks.

As I said retailers bought conservatively for the holiday season and traffic in our own retailer stores remain sluggish through October. Since that time, the holiday selling period as shown a number of encouraging data points, but it’s still a highly promotional environment and we’re not yet ready to draw any conclusions about the holiday season until we’re able to observe our performance through January clearance. In the context of that business environment, let’s now turn to the high level financial highlights from the fourth quarter.

Consolidated net revenues declined 11% to $539 million, consolidated gross profit declined by 50 basis points to 47.6% of sales. While recurring expenses during the quarter decreased by $13 million compared to the same quarter a year ago, this excludes $12 million in special charges that Joe will discuss a bit later. Excluding these items our income from continued operations was $3 million or $0.02 per share compared to income of $42 million or $0.32 per share in the fourth quarter of 2008.

With regard to our full year results, fiscal 2009 revenues from continued operations decline 13% to $2 billion, compared to $2.3 billion in fiscal 2008. Excluding special charges are adjusted earnings was $0.04 per share compared to $0.93 per share in fiscal 2008. There’s no doubt, this has been an extremely challenging year for our company.

Yet, we are proud of several important accomplishments that were critical to positioning our company’s future. These included that completion of the Rossignol sales, the refinancing of our capital structure, which included a strategic investment by Rhone and a new multiyear credit facilities and both the Americas and Europe, as well as the operational restructuring of our business. Having accomplished these objectives, we believe that we’re now much better positioned to operate within today’s environment.

With regard to our restructuring, we streamlined our operation and eliminated duplication of the effort. During prior periods of growth at Quiksliver, we organized along brand lines, in order to provide each brand, the opportunity to maximize growth. However, given the global recession and the anticipated slow pace of economic recovery, we have now transitioned our back offices to be more functionally based.

In this new model, our sales, marketing, sourcing, and production functions have been reorganized to support all of our brands. The Quiksilver team has really come together to make this restructuring happen. We’ve asked many of our employees to take on more responsibility and I’m very impressed by their enthusiasm as we continue to make adjustments to new roles and get use to supporting whole teams of people in a more efficient environment.

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