Q2 2013 Earnings Call
June 06, 2013 4:30 pm ET
Andrew P. Mooney - Chief Executive Officer, President and Director
Richard J. Shields - Chief Financial Officer and Principal Accounting Officer
Taposh Bari - Goldman Sachs Group Inc., Research Division
David M. King - Roth Capital Partners, LLC, Research Division
Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division
Jeffrey Wallin Van Sinderen - B. Riley Caris, Research Division
Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division
Eric B. Tracy - Janney Montgomery Scott LLC, Research Division
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Thank you, operator. Good afternoon, everyone, and welcome to Quiksilver Fiscal 2013 Second Quarter Earnings Conference Call. On the call today are Andy Mooney, President and Chief Executive Officer; Bob McKnight, Executive Chairman; and Richard Shields, our Chief Financial Officer. Rich is joining us from our offices in Europe.
Before we begin, I'd like to briefly review the company's Safe Harbor statement. Throughout our call today, items may be 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 those 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 and in our quarterly reports on Form 10-Q. All forward-looking statements made on this call speak only as of today's date, June 6, 2013, and the company undertakes no duty to update any forward-looking statement.
In addition, this presentation may contain references to non-GAAP financial information. A reconciliation of non-GAAP financial information. A reconciliation to the most directly comparable GAAP financial information is included in our press release, which can be found in an electronic form on our website at www.quiksilverinc.com.
In addition to our financial results, management will be providing comments on the company's multi-year profit improvement plan which we announced on May 16, 2013. Elements of the plan are discussed in the May 16 news release, as well as in a PowerPoint slide presentation, both of which can be found in the Investor Relations section of the company's website.
With that, I'd like to now turn the call over to Andy Mooney.
Andrew P. Mooney
Thank you, Robert. Good afternoon, everyone, and thank you for joining our call today. I'll begin with a summary of our profit improvement plan and then discuss our second quarter results. Rich will go into the financial details, followed by an outlook for the balance of the current fiscal year. We'll then open the call to questions.
Shortly after joining the company, I convened a multi-day meeting with the senior management team. The purpose of the meeting was to discuss organizational strengths and weaknesses, and to begin building a plan designed to enhance the strength and address areas for improvement. With the aid of outside specialist, the management team developed a profit improvement plan, which was then presented to our Board of Directors in late April. The board, after much discussion and input, unanimously approved that plan.
I think it's important to share 2 overarching aspects of the plan. First, the 3 core strategies we've consistently communicated, that of strengthening our brands, expanding sales and driving operational efficiencies will continue to guide our efforts. The plan, however, is designed to accelerate progress against these 3 key strategies. And second, the plan is quite detailed with tactics and areas of responsibility clearly defined. It includes 71 specific initiatives. These initiatives are being tracked and monitored by our project management team, which has been implemented and is being led by one of our senior staff that has accepted this position full-time.
To summarize, the plan calls for an increased focus on our 3 flagship brands of Quiksilver, Roxy and DC, each with a clear plan and a clarified brand positioning. Modest sales growth, improved cost structure and increased investment and demand creation. We believe the plan, when fully implemented in 2016, will improve EBITDA by approximately $150 million compared to fiscal 2012 results.
Approximately 1/2 of the improvement will come from supply chain optimization and the other half primarily from corporate overhead reductions, licensing opportunities, net revenue growth and improved pricing management. More specifically, the plan calls for improvement over the same period in the following areas: net revenues to increase at a Compound Annual Growth Rate of approximately 2.5%; and pro forma adjusted EBITDA to increase to at least 13% of net revenues. We do not, however, expect the improvement to be linear.
So where exactly are we in the process? We've completed the reorganization of the company from a regional structure to a global organization, with strong functional expertise in the key leadership roles. We have a essentially completed recruiting a new leadership team, having named Pierre Agnes, Global Head of Apparel; Tom Hartge, Global Head of Footwear; Kasey Mazzone Global Head of Supply Chain; Nicholas Drake, our newly appointed Chief Marketing Officer; Pam Leford [ph], Global Head of Licensing; Steve Finney, Head of Retail and E-com for North America; John Graham, SVP of wholesale sales for North America. The only open senior position is the Global Head of Retail Sales at the moment and we have retained a recruiting firm to help with the search.