Quiksilver Inc. (USA) reported a quarterly profit that topped Wall Street’s expectations and said it had reworked a line of credit with a lower interest rate. Quiksilver reported a profit of US$12.5 million before charges for the three months through July. That was up from a profit of $3.7 million a year earlier. Analysts were looking for a profit of $3.7 million. Including restructuring and other charges, Quiksilver reported a profit of $7.8 million. Sales were $441.5 million, down 12% from a year earlier and shy of the $442.9 expected by Wall Street. Asia/Pacific net revenues decreased 1% to $54.5 million in the third quarter of fiscal 2010 from $55.1 million in the third quarter of fiscal 2009. In constant currency, Asia/Pacific segment net revenues decreased 10% compared to the prior year. "We're very pleased to again deliver financial results that exceeded our prior expectations. Our team executed well in an economic environment that continues to present significant challenges around the world. We're also delighted to report substantial continued improvement to our capital structure, especially after completing the debt-for-equity exchange with Rhone in early August," said Robert B. McKnight, Jr., Chairman of the Board, Chief Executive Officer and President of Quiksilver, Inc. Quiksilver continues to dig out of a hole it created for itself with 2005’s ill-fated buy of French ski maker Rossignol. Quiksilver bought money-losing Rossignol for $560 million and sold it in a 2008 fire sale for $50 million. Lingering debt from the deal coupled with the downturn nearly sunk Quiksilver last year. The company took another step away from the wreckage having reworked terms of a $150 million credit line with Bank of America Merrill Lynch and General Electric Co.’s GE Capital. The interest rate on the credit line was cut by about 150 basis points. Commitment fees to keep the unused line of credit open were cut by 50 basis points. The reworking came after a debt-for-stock swap by Quiksilver. In August, Quiksilver exchanged shares for $140 million in debt in a move that bolstered the company’s once crippling balance sheet. Quiksilver exchanged approximately 31.1 million shares of Quiksilver common stock priced at $4.50 per share giving Rhone roughly 35% on its board of directors. The debt stems from a deal struck with Rhone last year that helped Quiksilver get a U.S. line of credit and consolidate its European debt. However, the deal has come at a price—Rhone now owns nearly a third of Quiksilver, up from 16% before the stock-for-debt swap. Quiksilver still carries $843 million in total debt, however it had approximately $167 million of availability under its credit lines in addition to approximately $156 million of unrestricted cash at the end of the third quarter. Net revenues in the Americas decreased 9% during the third quarter of fiscal 2010 to $234.6 million from $256.8 million in the third quarter of fiscal 2009. As measured in U.S. dollars and reported in the financial statements, European net revenues decreased 20% during the third quarter of fiscal 2010 to $151.7 million from $189.0 million in the third quarter of fiscal 2009. In constant currency, European segment net revenues decreased 11% compared to the prior year. Consolidated inventories decreased 19% to $270.9 million at July 31, 2010 from $334.2 million at July 31, 2009. Consolidated trade accounts receivable decreased 20% to $340.9 million at July 31, 2010 from $424.2 million at July 31, 2009. Addressing its outlook for continuing operations, Quiksilver stated that based on current trends, fourth quarter revenues are expected to be down in the mid-teens on a percentage basis compared to the same quarter a year ago and that it expects to generate earnings per share on a diluted basis in the mid-single-digit cents range.

Third Quarter Financial Highlights: -- Pro-forma Adjusted EBITDA increased 22% to $53.5 million compared to $44.0 million in the third quarter of fiscal 2009 despite a 12% revenue decline. -- Gross margin improved 560 basis points to 52.3% compared to 46.7% in the third quarter of fiscal 2009. -- Operating income in the Americas region was 11.8% of revenues as gross margin improved 900 basis points to 46.7% from 37.7% in the third quarter of fiscal 2009. -- Net debt at July 31, 2010, was $687 million, reduced by $183 million compared to $870 million at July 31, 2009.