Outdoor financials: Quiksilver reports Q3 earnings, plus Big 5, Wellman, Saucony, Kellwood

Quiksilver reports Q3 earnings
Quiksilver (NYSE: ZQK), new parent of Skis Rossignol S.A., said net revenues for the 2005 third quarter increased 11 percent to $373.8 million from $337.9 million in 2004. Consolidated net income increased 26 percent to $24.6 million from $19.5 million the year before. Third quarter fully diluted earnings per share was $0.20 versus $0.16 last year, both amounts as adjusted for the two-for-one stock split that took effect in May 2005.

Net revenues in the Americas increased 4 percent during the third quarter to $196.3 million from $187.9 million. As measured in U.S. dollars and reported in the financial statements, European net revenues increased 16 percent to $133.6 million versus $115.4 million last year. As measured in euros, European net revenues increased 14 percent for those same periods. Asia/Pacific net revenues increased 30 percent to $43.1 million from $33.1 million in 2004. As measured in Australian dollars, Asia/Pacific net revenues increased 21 percent for those same periods.

“Our integration plans for Rossignol continue to exceed our expectations, and we are more encouraged than ever with regard to our future in the snow and mountain lifestyle market,” Bernard Mariette, president of Quiksilver, said. “Even as we focus on maximizing the opportunities for the core business within Rossignol, we recognize that our largest prospect for growth with Rossignol will come from expanding the brand into a leader in the sportswear and outerwear market. Our design and merchandising teams are excited about this opportunity, and just as we have come to be the leading lifestyle brand for the beach, we intend to dominate the mountain as well.”

Excluding the inventory acquired as part of the Rossignol acquisition, consolidated inventories amounted to $204.4 million, a 19 percent increase from $171.6 million last year. Excluding the accounts receivable acquired as part of the Rossignol acquisition, consolidated trade accounts receivable increased 23 percent to $333.5 million from $271.4 million in 2004.

The company also indicated its expectations for the fourth quarter ending Oct. 31, 2005, that revenues will range between $582 million and $592 million, and diluted earnings per share will range from $0.26 to $0.27. For the full fiscal year, revenues are expected to range between $1.73 billion and $1.74 billion with diluted earnings per share ranging from $0.86 to $0.87.

Big 5 Nasdaq listing still hanging on
Nasdaq gave Big 5 Sporting Goods (Nasdaq: BGFVE) another reprieve and has agreed to continue listing its stock since the company filed its 2004 annual report. The company could still face delisting, though, if it doesn’t file its first- and second-quarter reports by Sept. 30 — Nasdaq’s pushed-back deadline and final extension.

Big 5 said it expects to submit the quarterly reports “as soon as possible” but added that “there can be no assurance the company will be able to file these quarterly reports by the Sept. 30 deadline.” The company, which had delayed filing its annual report to restate its 2002 and 2003 results, submitted the results to the SEC on Sept. 6.

Nasdaq originally granted Big 5 a filing extension to Aug. 31, but the company missed the deadline. Big 5 said it requested an additional extension. However, Big 5 submitted the report before receiving a response from Nasdaq management, which today denied the company’s request. Nasdaq agreed to let the stock continue listing because the forms were filed before the denial was announced.

The company said it restated its prior financial reports to correct an accounting error the company found during its normal year-end process.

Wellman to record pretax charge, increases prices
Wellman (NYSE: WLM) will record a pretax charge of $8 million in the third quarter of 2005 arising from the settlement of the federal class action lawsuits of direct purchasers alleging that the company engaged in price fixing and customer allocation relating to sales of polyester staple fiber. Once approved by the courts, Wellman will have settled substantially all of the federal claims of the direct purchasers.

The after-tax effect of the charge will be $5.2 million or $0.16 per share in the third quarter of 2005. When combined with the $24 million pre-tax charge recorded in the second quarter of 2005, the total after-tax effect is $20.8 million, or $0.66 per share, which represents the company’s best estimate of its total costs including all agreed upon settlements as well as the future costs to defend or settle any remaining litigation including state claims by indirect purchasers.

Wellman denies any wrongdoing and said it has strong defenses to any claims; however, it is settling the class action lawsuits to minimize future expenses, risk and disruption of business that occurs with any litigation.

Also, Wellman is increasing the price of all polyester staple fiber products by 16 cents a pound due to Hurricane Katrina. The company said in a statement that the action was necessary due to the “unprecedented increases in chemical and energy costs” it is incurring because of the storm.

The company said its results for the third quarter will be reduced by this charge as well as the effects from Hurricane Katrina. But these two events do not affect the long-term profitability of its business.

ISS supports Saucony sale
Institutional Shareholder Services is giving the thumbs-up to Saucony (Nasdaq: SCNYA and SCNYB) shareholders to vote for Saucony’s proposed acquisition by Stride Rite (NYSE: SRR). In its report, ISS said it believes that the merger agreement warrants shareholder support. It also noted that the company’s decision to sell was reached following a lengthy sale process, in which a total of 46 parties were contacted.

Saucony, the parent of Hind, and Stride Rite entered into a definitive agreement in June under which Stride Rite agreed to pay $23 in cash for each outstanding share of Saucony Class A and Class B common stock, or approximately $172 million in aggregate value. Saucony’s board of directors also unanimously recommends that stockholders vote for the proposed acquisition. The vote is planned for Sept. 16.

Kellwood appoints new board member
Kellwood (KWD) has elected Ben B. Blount Jr. to the company’s board of directors, raising the number of Kellwood directors to 10 — eight independent directors and two management directors. He will become a member of the audit committee. Blount, an executive in the apparel industry for more than 40 years, most recently served as executive vice president, finance, planning and administration, and chief financial officer; and director of Oxford Industries. He retired in 2004.

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