UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

______________________________________________________

FORM 10-K

______________________________________________________

(Mark One)



ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 2015



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-14229

______________________________________________________

QUIKSILVER, INC.

(Exact name of registrant as specified in its charter)

______________________________________________________



Delaware	33-0199426
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification Number)

5600 Argosy Circle BLDG 100

Huntington Beach, California

92649

(Address of principal executive offices)

(Zip Code)

(714) 889-2200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of Class

Common Stock

___________________________________________________

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No ý

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one).



Large accelerated filer	¨		Accelerated filer	x
Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý

The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant was approximately $226 million based upon the closing sale price per share on the New York Stock Exchange as of April 30, 2015, the last business day of Registrant’s most recently completed second fiscal quarter.

As of December 31, 2015, there were 172,114,522 shares of the Registrant’s Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Not Applicable.

TABLE OF CONTENTS



		Page
PART I
Item 1.	BUSINESS
	Introduction	5
	Voluntary Reorganization under Chapter 11	5
	Notice of Delisting from the New York Stock Exchange	6
	Brands	6
	Distribution Channels	7
	Segment Information and Geographical Sales	8
	Product Categories	8
	Licensing Agreements	9
	Seasonality	9
	Retail Concepts	9
	Future Season Orders	10
	Product Design and Development	10
	Production and Raw Materials	10
	Imports and Import Restrictions	11
	Promotion and Advertising	11
	Trademarks and Patents	11
	Competition	11
	Employees	12
	Environmental Matters	12
	Discontinued Operations	12
	Available Information	13
Item 1A.	RISK FACTORS	14
Item 1B.	UNRESOLVED STAFF COMMENTS	24
Item 2.	PROPERTIES	25
Item 3.	LEGAL PROCEEDINGS	25
Item 4.	MINE SAFETY DISCLOSURES	26
PART II
Item 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	27
Item 6.	SELECTED FINANCIAL DATA	29
Item 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	60
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	61
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	61
Item 9A.	CONTROLS AND PROCEDURES	61
Item 9B.	OTHER INFORMATION	64
PART III
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	65
Item 11.	EXECUTIVE COMPENSATION	68
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	88
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	92
Item 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	93
PART IV
Item 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	95
SIGNATURES		153

EXPLANATORY NOTE

On September 9, 2015, Quiksilver and each of its ten wholly owned U.S. subsidiaries, filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware for relief under Chapter 11 of the United States Bankruptcy Code. The reorganization cases under Chapter 11 of the Bankruptcy Code are being jointly administered by the Bankruptcy Court as Case No. 15-11880. Quiksilver and each of its ten wholly owned U.S. subsidiaries will continue to operate as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court.

For additional information regarding the Bankruptcy Cases, see Item 1. Business - “Voluntary Reorganization under Chapter 11” and Notes 1 and 22 of the Notes to Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K. For a discussion of risk factors relating to the voluntary reorganization filed under Chapter 11, see Item 1A. Risk Factors. The disclosures in this Annual Report on Form 10-K should be read in the context of the voluntary reorganizations filed under Chapter 11.

PART I

Item 1. BUSINESS

Introduction

Quiksilver, Inc. (together with its subsidiaries, the “Company,” “we,” “us,” or “our”) is one of the world’s leading outdoor sports lifestyle companies. We design, develop and distribute branded apparel, footwear, accessories and related products. Our brands, inspired by the passion for outdoor action sports, represent a casual lifestyle for young-minded people who connect with our boardriding culture and heritage. Our three core brands, Quiksilver, Roxy, and DC, are synonymous with the heritage and culture of surfing, skateboarding and snowboarding. Our products combine decades of brand heritage, authenticity and design experience with the latest technical performance innovations available in the marketplace.

We began operations in 1976 as a California corporation making boardshorts for surfers in the United States under a license agreement with the Quiksilver brand founders in Australia. We reincorporated in Delaware and went public in 1986 and, in subsequent years, acquired the worldwide licenses and trademarks that created the global company that we are today. Our products are sold in over 110 countries through a wide range of distribution channels, including wholesale accounts (surf shops, skate shops, snow shops, sporting goods stores, discount centers, specialty stores, online retailers, licensee shops and select department stores), 961 owned or licensed Company retail stores, and via our e-commerce websites. In fiscal 2015, 65% of our revenue was generated outside of the United States. Our global headquarters is in Huntington Beach, California. Our fiscal year ends on October 31 (i.e., “fiscal 2015” refers to the year ended October 31, 2015).

Voluntary Reorganization under Chapter 11

On September 9, 2015 (the "Petition Date"), Quiksilver, Inc. and each of its ten wholly owned U.S. subsidiaries, (together with Quiksilver, Inc. the “Debtors”), filed voluntary petitions (the "Petitions") in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) for relief under Chapter 11 of the United States Bankruptcy Code. The reorganization cases under Chapter 11 of the Bankruptcy Code are being jointly administered by the Bankruptcy Court as Case No. 15-11880 (the “Bankruptcy Cases”). The Debtors will continue to operate as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court. The Company's foreign subsidiaries are not directly affected by the Petitions and none are expected to voluntarily commence reorganization proceedings or seek protection from creditors under any insolvency or similar law in the U.S. or elsewhere.

The Debtors’ proposal for the reorganization of their business is set forth in the Second Amended Joint Chapter 11 Plan of Reorganization of Quiksilver, Inc. and its Affiliated Debtors and Debtors in Possession (the “Plan”). The Proposed Plan (as defined below) is supported and sponsored by Oaktree Capital Management and certain of its affiliates ("Oaktree") as Plan Sponsor under the Plan Sponsor Agreement (the "PSA") and also as the Backstop Parties, under the Backstop Commitment Letter ("the Backstop Commitment Letter"). If implemented per the terms, the PSA and the Proposed Plan would provide a plan for the Debtors to emerge from bankruptcy as a going concern. The Company can offer no assurance that it will be able to continue as a going concern or obtain the Bankruptcy Court approval of the Proposed Plan. In addition, the Company can offer no assurance that it will be able to develop and successfully execute the Proposed Plan. The Company and its advisors continue to seek alternative restructuring transactions, including a sale of all or substantially all of the assets of the Company, and will continue such efforts pending confirmation of the Proposed Plan by the Bankruptcy Court. The Proposed Plan provides for a significant reduction in the Company's outstanding debt.

On September 10, 2015, the Bankruptcy Court approved, on an interim basis, the Company's debtor-in-possession financing in an aggregate amount of up to $175 million, consisting of (i) a $60 million asset-based loan revolving credit facility (the “DIP ABL Facility”) provided by Bank of America, N.A., and (ii) a $115 million delayed draw term loan facility (the “DIP Term Loan Facility” and, together with the DIP ABL Facility, the "DIP Facilities") provided by affiliates of Oaktree. Subject to the satisfaction of certain customary conditions to borrowing, the entire DIP ABL Facility and $70 million of the DIP Term Loan Facility became available upon entry of the interim order, and the balance of the DIP Term Loan Facility became available upon entry of the final order on October 28, 2015. The proceeds of the DIP Facilities were used in part to repay amounts outstanding under the pre-petition ABL Credit Facility (defined below), under which there were approximately $93 million in borrowings and letters of credit outstanding. The DIP Facilities will mature 150 days after the Petition Date, and contain representations, conditions, covenants and events of default customary for similar facilities.

On October 13, 2015, the Debtors filed with the Bankruptcy Court and the Securities and Exchange Commission a proposed plan of reorganization (as may be amended, modified or supplemented from time to time, the “Proposed Plan”) for the resolution of the outstanding claims against and interests in the Debtors pursuant to section 1121(a) of the Bankruptcy Code. On October 16, 2015, the Debtors filed with the Bankruptcy Court a related proposed disclosure statement (as may be

amended, modified or supplemented from time to time, the “Proposed Disclosure Statement”). On November 17, 2015, the Debtors filed a first amended Proposed Disclosure Statement, which includes a first amended Proposed Plan as Exhibit A thereto. On December 4, 2015, the Bankruptcy Court entered an order approving the adequacy of the Proposed Disclosure Statement and the Debtors have commenced solicitation of votes from eligible claimants in connection with the Proposed Plan.

If the terms of the Proposed Plan are implemented, new common shares will be issued to holders of the 2018 Notes. All of the Company’s existing equity securities, including its shares of common stock and warrants, will be cancelled and extinguished without holders receiving any distribution. In addition, new common shares will be offered to the holders of the 2018 Notes (as defined herein) and the 2020 Notes (as defined herein) in a $122.5 million rights offering (the “Exit Rights Offering”) and a €50 million rights offering (the “Euro Notes Rights Offering” and, together with the Exit Rights Offering, the “Rights Offerings”), each of which would be backstopped in full by Oaktree (the “Backstop Commitment”) pursuant to that certain backstop commitment letter (the “Backstop Commitment Letter”) approved by the Bankruptcy Court on December 4, 2015. Finally, the DIP Facilities will be repaid in full utilizing new financing to be obtained by the Debtors prior to consummation of the terms of the Proposed Plan.

For the duration of our Chapter 11 proceedings, our operations and our ability to develop and execute our business plan are subject to the risks and uncertainties associated with the Chapter 11 process as described in Item 1A, “Risk Factors.” As a result of these risks and uncertainties, the number of our outstanding shares and our shareholders, assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 proceedings, and the description of our operations, properties and obligations included in this Annual Report on Form 10-K may not accurately reflect our operations, properties and obligations following the Chapter 11 process.

Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign, or reject certain executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a pre-petition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a pre-petition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert claims against the applicable Debtor's estate for such damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with any Debtor in this Annual Report on Form 10-K, including where applicable a quantification of our obligations under any such executory contract or unexpired lease with such Debtor is qualified by any overriding rejection rights we have under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto.

Our ability to continue as a going concern is dependent upon, among other things, (i) our ability to obtain timely confirmation of the Proposed Plan under the Bankruptcy Code; (ii) the cost, duration and outcome of the reorganization process; (iii) our ability to achieve profitability as a company; (iv) our ability to maintain adequate cash on hand; and (v) our ability to generate cash from operations. There can be no assurances regarding our ability to successfully develop, confirm and consummate one or more plans of reorganization that satisfies the conditions of the Bankruptcy Code and, is authorized by the Bankruptcy Court.

Notice of Delisting from the New York Stock Exchange

We received notice from the New York Stock Exchange (the “NYSE”) that trading of our common stock was suspended at the opening of business on September 9, 2015 and the NYSE filed with the Securities and Exchange Commission (the "SEC") to remove our common stock from listing and registration on the NYSE. This decision was reached in view of our September 9, 2015 announcement commencing voluntary proceedings for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for us and our U.S. subsidiaries. On September 10, 2015, our common stock commenced trading on the over-the-counter market under the symbol "ZQKSQ." On September 29, 2015, the NYSE filed a Form 25 - Notification of Removal from Listing Under Section 12(b) of the Securities Exchange Act of 1934 - with respect to our common stock.

Brands

Our three core brands target the action sports lifestyle and broader outdoor market. Quiksilver and Roxy are leading brands rooted in surfing and are also prominent in snow sports. DC’s reputation is based in skateboarding but it is also popular in motocross and snowboarding.

Net revenues by brand, as a percentage of total net revenues from continuing operations, for each of the last three fiscal years were as follows:



	2015		2014		2013
Quiksilver	40	%	40	%	40	%
Roxy	30	%	31	%	28	%
DC	27	%	27	%	30	%
Other brands	3	%	2	%	2	%
Total	100	%	100	%	100	%

Quiksilver

We have grown our Quiksilver brand from its origins in 1976 as a line of boardshorts to include a full range of apparel and accessories for men and boys inspired by surfing and boardriding sports.

Roxy

Our Roxy brand, introduced in 1991, includes a full range of apparel, footwear and accessories for young women and girls inspired by surfing, beach and boardriding sports.

We have grown our DC brand, which we acquired in 2004, from its origins as a line of technical skateboarding shoes to include a full range of apparel, footwear and accessories for men, women and children inspired by skateboarding, motocross, rally car and snowboarding.

Distribution Channels

We sell our products in over 110 countries around the world through wholesale customers, our own retail stores and via e-commerce. Net revenues by distribution channel, as a percentage of total net revenues from continuing operations, for each of the last three fiscal years were as follows:



	2015		2014		2013
Wholesale	63	%	66	%	72	%
Retail	30	%	28	%	24	%
E-commerce	6	%	5	%	4	%
Licensing	1	%	1	%	—	%
Total	100	%	100	%	100	%

Our wholesale revenues are spread over a large and diversified customer base. During fiscal 2015, approximately 13% of our consolidated revenues from continuing operations were from our ten largest customers, and our largest customer accounted for approximately 2% of such revenues. In the wholesale channel, our products are sold in major markets by over 250 independent sales representatives in addition to our employee sales staff. In smaller markets, we use approximately 100 local distributors. Our independent sales representatives are generally compensated on a commission basis. We employ retail merchandise coordinators who travel between specified retail locations of our wholesale customers to further improve the presentation of our product and build our brand image at the retail level.

We believe that the integrity and success of our brands is dependent, in part, upon our careful selection of appropriate retailers to support our brands in the wholesale sales channel. A foundation of our business is the distribution of our products through surf shops, skateboard shops, snowboard shops, sporting goods stores, and our own proprietary retail concept stores, where the environment communicates our brand and culture. Our distribution channels serve as a base of legitimacy and long-term loyalty for our brands.

Our products are also distributed through active lifestyle specialty chains. This category includes chains in the United States such as Zumiez, Tilly’s, Famous Footwear, and Journeys, chains in Europe such as Go Sport, Intersport and Sport 2000, and chains in the Asia/Pacific region such as City Beach and Murasaki Sports. Limited collections of our products are distributed through department stores, including Macy’s in the United States, Galeries Lafayette in France, and El Corte Ingles in Spain.

For a discussion regarding our retail distribution channel, please see “Retail Concepts” below.

We also operate several e-commerce websites that sell our products throughout the world and provide online content for our customers regarding our brands, athletes, events and the lifestyle associated with our brands.

We have licensed the right to produce and sell products using our trademarks for certain specific product categories. We may continue to license additional product categories that we believe are peripheral to our core businesses, or where we believe that a licensee would have better expertise, wider product distribution capabilities, superior supply chain capabilities, or where we believe that licensing is a better operating structure for us. For further discussion, please see "Licensing Agreements" below.

Segment Information and Geographical Sales

Our sales are globally diversified. We have four operating segments consisting of the Americas, EMEA and APAC, each of which sells a full range of our products, as well as Corporate Operations. Our Americas segment, consisting of North, South, and Central America, includes net revenues generated primarily from the United States, Canada, Brazil, and Mexico. Net revenues in our Europe, Middle East and Africa segment (“EMEA”) are primarily generated from continental Europe, the United Kingdom, Russia and South Africa. Net revenues from our Asia/Pacific segment (“APAC”) are primarily generated from Australia, Japan, New Zealand, South Korea, Taiwan, and Indonesia. Net revenues in our emerging markets include Brazil, Russia, Indonesia, Mexico, South Korea, Taiwan and China. These markets are reported within their respective regional segments noted above. Royalties earned from various licensees in other international territories are categorized in Corporate Operations, along with revenues from sourcing services to our licensees. For information regarding the revenues, operating income/(loss), and identifiable assets from continuing operations attributable to our operating segments, see Note 3 — Segment and Geographic Information to our consolidated financial statements.

The following table summarizes our net revenues by country, as a percentage of total net revenues from continuing operations (excluding revenues from licensees), for each of the last three fiscal years:



	2015		2014		2013
United States	35	%	35	%	38	%
France	12	%	12	%	12	%
Australia/New Zealand	7	%	7	%	7	%
Spain	6	%	6	%	5	%
Canada	4	%	5	%	6	%
Japan	5	%	5	%	5	%
Brazil	4	%	4	%	3	%
Russia	3	%	3	%	2	%
Germany	3	%	3	%	3	%
All other countries	21	%	20	%	19	%
Total	100	%	100	%	100	%

We generally sell our apparel, footwear, accessories and related products to wholesale customers on a net-30 to net-90 day basis in the Americas and EMEA and on a net-10 to net-120 day or 30 day end of month basis in APAC depending on the country, product category, and whether we sell directly to retailers in the country or to a distributor. Some customers are required to pay for product upon delivery. We generally do not reimburse our customers for marketing expenses or guarantee margins to our customers. We offer consignment terms to certain accounts.

Product Categories

We offer apparel, footwear, accessories and related products within each of our core brands. Net revenues by major product group, as a percentage of total net revenues from continuing operations, for each of the last three fiscal years were as follows:



	2015		2014		2013
Apparel and accessories	72	%	75	%	75	%
Footwear	28	%	25	%	25	%
Total	100	%	100	%	100	%

Typical retail selling prices of some of our primary products on a segment basis, in the segment's currencies, are as follows:



	Americas (USD)	EMEA (Euros)	APAC (AUD)
T-shirt	23	23	32
Walking short	51	47	58
Snowboard jacket	310	123	147
Skate shoe	52	57	67

Licensing Agreements

Historically, we have licensed certain product categories to third party licensees which have the right to design, source, and sell those products bearing our trademarks. During fiscal 2014, we executed several licensing agreements for peripheral product categories. In the aggregate, these licensing agreements cover product categories that generated approximately $7 million and $51 million in wholesale net revenues during fiscal 2015 and 2014, respectively. No significant licensing agreements were entered into in fiscal 2015.

Seasonality

Our products are generally available throughout the year. Demand for certain product categories changes in different seasons of the year. Sales of shorts, short-sleeve shirts, t-shirts and swimwear are higher during the spring and summer seasons. Sales of pants, long-sleeve shirts, fleece, jackets, sweaters and technical outerwear are higher during the fall and holiday seasons. Our fiscal fourth quarter has historically been our largest in terms of net revenues due to the wholesale channel impact of our shipments to retailers in advance of the Christmas/holiday season. Net revenues from continuing operations by quarter, and the associated percentage of full fiscal year net revenues for each of the last three fiscal years, were as follows:



	2015				2014				2013
In millions			% of Net Revenues				% of Net Revenues				% of Net Revenues
1st Quarter ended January 31	$	341	25	%	$	395	25	%	$	416	23	%
2nd Quarter ended April 30	333		25	%	397		25	%	450		25	%
3rd Quarter ended July 31	336		25	%	378		24	%	474		26	%
4th Quarter ended October 31	336		25	%	401		26	%	480		26	%
Total	$	1,346	100	%	$	1,571	100	%	$	1,820	100	%

Retail Concepts

We believe retail stores are an important component of our overall global growth strategy. We operate a combination of our proprietary, multi-brand Boardriders stores as well as Quiksilver, Roxy and DC brand stores that feature a broad selection of products from our core brands and, at times, a limited selection of products from other brands. The proprietary design of our stores demonstrates our history, authenticity and commitment to surfing and other boardriding sports. In addition to our core brand stores, we operate 149 factory outlet stores in which we offer specifically designed products for this channel as well as prior season products. In various territories, we also operate Quiksilver and Roxy shops primarily within larger department stores. These “shop-in-shops” require a much smaller initial investment and are typically smaller than a traditional retail store while having many of the same operational characteristics.

Total Company-owned retail stores are detailed below, by format and segment, at the end of each of the last three fiscal years:



Company Owned Stores by Format	2015	2014	2013
Full-price stores	352	266	276
Shop-in-shops	222	270	225
Factory outlets	149	147	130
Total	723	683	631



Company Owned Stores by Segment	2015	2014	2013
EMEA	292	296	268
APAC	315	287	263
Americas	116	100	100
Total	723	683	631

In addition to the Company-owned stores noted above, we also had 238 stores licensed to independent third parties in various countries as of October 31, 2015.

Future Season Orders

At October 31, 2015, our backlog totaled $330 million compared to $365 million at October 31, 2014. Our backlog depends upon a number of factors and fluctuates based upon the timing of trade shows, sales meetings, the length and timing of various international selling seasons, changes in foreign currency exchange rates, decisions regarding brand distribution and product samples, market conditions, wholesale pricing, product quality, customer acceptance of the product line, and other factors. The timing of shipments also fluctuates from year to year based upon the production of goods, our ability to distribute our products in a timely manner, holidays and events, and customer requests for timing of product delivery. As a consequence, a comparison of backlog from season to season or year to year is not necessarily meaningful and may not be indicative of eventual shipments or forecasted revenues.

Product Design and Development

Our apparel, footwear, accessories and related products are designed to support the positioning of our brands. Creative design, innovative fabrics and quality of workmanship are emphasized. Our design and merchandising teams create seasonal product ranges for each of our brands. These design groups constantly monitor local, regional, and global fashion trends to develop specific product categories for each of our brands. Our apparel and accessories are created by design and merchandising teams based in St. Jean-De-Luz, France. Our footwear is created by the design and merchandising teams based in Huntington Beach, California. These global design centers share inspiration, design concepts, merchandising themes, graphics and style viewpoints that are globally consistent while reflecting local adaptations for differences in geography, culture and taste.

Production and Raw Materials

Our apparel, footwear, accessories and related products are generally sourced from a variety of suppliers principally in China, South Korea, Indonesia, India, Vietnam, and other parts of Asia. After being imported, some of these products require embellishments such as screen printing, dyeing, washing or embroidery. We generally do not enter into supply agreements with our vendors.

During fiscal 2015, one vendor accounted for approximately 10% of our consolidated production of finished goods. No other supplier of finished goods accounted for more than 7% of our consolidated production. Our largest raw material supplier accounted for approximately 30% of our expenditures for raw materials during fiscal 2015; however, our raw materials expenditures comprised less than 1% of our consolidated production costs. We believe that numerous finished goods and raw materials suppliers are available to provide additional capacity on an as-needed basis and that we enjoy favorable on-going relationships with these suppliers. However, shortages of raw materials or labor pricing pressures can result in delays in deliveries of our products by our suppliers or in increased costs to us.

In addition to our direct sourcing model, we retain independent buying agents, primarily located in China and Vietnam to assist in selecting and overseeing the majority of our independent third-party manufacturing and sourcing of finished goods, fabrics, and other products. These agents monitor trade regulations and perform some of our quality control functions.

We also employ staff in China, Vietnam, Indonesia, and other countries that are involved in sourcing and quality control functions to assist us in monitoring and coordinating our overseas production. By having employees in regions where we source our products, we enhance our ability to monitor factories to ensure their compliance with our standards of manufacturing practices. Our policies require every factory to comply with a code of conduct relating to factory working conditions and the treatment of workers involved in the manufacture of products.

We continue to explore new sourcing opportunities for finished goods and raw materials, and we believe we have established solid working relationships over many years with vendors who are financially stable and reputable, and who understand our product quality and delivery standards. However, in the event of any unanticipated substantial disruption of our relationships with, or performance by, key existing suppliers and/or contractors, there could be a short-term adverse effect on our operations.

A portion of our finished goods and raw materials must be committed to and purchased prior to the receipt of customer orders. If we overestimate the demand for a particular product, excess production can generally be distributed in our factory outlet stores or through secondary wholesale distribution channels, although this may be at reduced margins. If we overestimate the purchase of a particular raw material, it can generally be used in garments for subsequent seasons or in garments for distribution through our factory outlet stores or secondary wholesale distribution channels, although this may also be at reduced margins.

Imports and Import Restrictions

We import finished goods and raw materials for our domestic operations under multilateral and bilateral trade agreements between the U.S. and a number of foreign countries, including China and India. These agreements impose duties on the products that are imported into the U.S. from the affected countries. In Europe, we operate in the European Union (“EU”) within which there are few trade barriers. We also operate under constraints imposed on imports of finished goods and raw materials from outside the EU, including quotas and duty charges.

Promotion and Advertising

The strength of our brands is based upon our history of developing excellent products and our active involvement in surf, skate and snow sports. We sponsor athletes who use our products in outdoor sports, such as surfing, skateboarding, snowboarding, skiing, and motocross, and produce or sponsor events that showcase these sports. Our brands have become closely identified with the lifestyle that is associated with those who are active in these sports. Accordingly, our advertising efforts are focused on presenting our products in the context of these sports and the lifestyle represented by participants in these sports.

We have relationships with leading athletes worldwide. These include Torah Bright, Travis Rice, Candide Thorvex, Jeremy Flores, Robbie Madison and Stephanie Gilmore, among many others. Along with these athletes, many of whom have achieved world champion status in their individual sports, we sponsor up-and-coming professionals and grass roots amateurs. We believe that these athletes legitimize the performance of our products, maintain an authentic connection with the core users of our products and create a general aspiration to the lifestyle that these athletes represent.

We have, and may continue to, sponsor certain surf, snow and skateboard events, and our sponsored athletes may participate in certain events and promotions. These events have included world-class boardriding events, such as the Quiksilver Pro (in France and Australia), and the Quiksilver In Memory of Eddie Aikau, which we believe is the most prestigious event among surfers. Some of our Quiksilver, DC and Roxy athletes participate in the Summer and Winter X-Games as well as the Olympics.

Our brand messages are communicated through advertising, public relations, social media, editorial content and other programming in both core and mainstream media. Through various entertainment initiatives, we bring our lifestyle message to an even broader audience through television, films, social media, online video, books and co-sponsored events and products.

Trademarks and Patents

Trademarks

We own the “Quiksilver” and “Roxy” trademarks and the related "mountain and wave" and "heart" logos in virtually every country in the world in apparel, footwear and related accessory product classifications. For our DC brand, we own the trademarks “DC Shoes,” “DCSHOECOUSA,” and the related “DC Star” logo in many countries in apparel, footwear and related accessory product classifications. In addition, we maintain a portfolio of other trademarks related to both our core and non-core brands.

We apply for and register our trademarks throughout the world, mainly for use on apparel, footwear, accessories and related products, as well as for retail services. We believe our trademarks and our other intellectual property are crucial to the successful marketing and sale of our products, and we attempt to vigorously prosecute and defend our rights throughout the world. Because of the success of our trademarks, we also maintain global anti-counterfeiting programs to protect our brands.

Patents

Our patent portfolio contains patents and applications primarily related to wetsuits, skate shoes, watches, boardshorts and snowboard boots.

Competition

We face competition from many global lifestyle brands and companies such as Nike, VF Corp., Kering, Vans, Reebok, North Face, Billabong, Hurley, Rip Curl, Volcom, Etnies, O'Neil, and Under Armour, as well as other regional and local brands that compete with us for market share and floor space with our wholesale customers.

In addition to brand competition, we face distribution channel competition. Our retail stores compete with multi-brand wholesale accounts, as well as vertical retail brands such as Hollister, Gap, and Abercrombie & Fitch, and retail stores of our brand competitors such as Nike stores, Billabong stores, and Vans stores, among others. We also face competition from non-branded retailers such as H&M, Zara and Forever 21.

Our retail stores and e-commerce websites also compete with the e-commerce websites of our wholesale accounts, competitive brands, and online-only competitors such as Amazon and e-Bay, globally, Zappos in the Americas, Zalando in EMEA and TaoBao in China.

Some of our competitors are significantly larger than we are and may have substantially greater resources than we have.

We compete primarily on the basis of successful brand management, product design, product quality, pricing, service and delivery. To remain competitive, we must:


•	maintain our reputation for authenticity in the core outdoor sports lifestyle markets;


•	continue to develop and respond to global fashion and lifestyle trends in our markets;


•	create innovative, high quality and stylish products at appropriate price points;


•	convey our outdoor sports lifestyle messages to consumers worldwide; and


•	source and deliver products on time to our wholesale customers.

Employees

At October 31, 2015, we had approximately 5,700 full-time equivalent employees, consisting of approximately 1,900 in the Americas, approximately 2,200 in EMEA and approximately 1,600 in APAC. None of these employees are represented by trade unions. Certain French employees are represented by workers' councils who negotiate with management on behalf of the employees. Management is generally required to share its plans with the workers’ councils, to the extent that these plans affect the represented employees. We have never experienced a work stoppage and consider our working relationships with our employees and the workers’ councils to be good.

Environmental Matters

Some of our facilities and operations have been or are subject to various federal, state and local environmental laws and regulations which govern, among other things, the use and storage of hazardous materials, the storage and disposal of solid and hazardous wastes, the discharge of pollutants into the air, water and land, and the cleanup of contamination. Some of our third party manufacturing partners use, among other things, inks and dyes, and produce related by-products and wastes. We have acquired businesses and properties in the past, and may do so again in the future. In the event we or our predecessors fail or have failed to comply with environmental laws, or cause or have caused a release of hazardous substances or other environmental damage, whether at our sites or elsewhere, we could incur fines, penalties or other liabilities arising out of such noncompliance, releases or environmental damage. Compliance with and liabilities under environmental laws and regulations did not have a significant impact on our capital expenditures, results of operations or competitive position during the fiscal years presented in this report.

Discontinued Operations

We have divested or exited certain non-core businesses in order to improve our focus on our three flagship brands. In November 2013 (our fiscal 2014), we completed the sale of Mervin Manufacturing, Inc. (“Mervin”), a manufacturer of snowboards and related products under the Lib Technologies and GNU brands, for $58 million. In January 2014 (our fiscal 2014), we completed the sale of substantially all of the assets of Hawk Designs, Inc. (“Hawk”), our subsidiary that owned and operated our Hawk brand, for $19 million. Both the Mervin and Hawk businesses had been classified as "held for sale" as of October 31, 2013.

Our equity interest in Surfdome Shop, Ltd. (“Surfdome”), a multi-brand e-commerce retailer, has been classified as "held for sale" as of October 31, 2014 and 2013. In December 2014 (our fiscal 2015), we sold our 51% ownership stake in Surfdome. At the completion of the sale, we received net proceeds of approximately $16 million, which included payments to us for all outstanding loans and trade receivables.

The results of operations of these three businesses are reflected in discontinued operations for the period presented herein. See Note 19 — Discontinued Operations to our consolidated financial statements for further discussion of the operating results of our discontinued operations.

For additional information related to the sale of these businesses, see Item 7. "Management's Discussion and Analysis — Discontinued Operations."

Available Information

We file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and registration statements, and any amendments thereto, with the SEC. All such filings are available online through the SEC’s website at http://www.sec.gov or on our corporate website at http://www.quiksilverinc.com. We make available free of charge, on or through our corporate website, our annual, quarterly and current reports, and any amendments to those reports, as soon as reasonably practicable after electronically filing such reports with the SEC. All court documents and additional information regarding the Bankruptcy Cases are available online through our noticing agent’s website, http://www.kccllc.net/quiksilver. In addition, copies of the written charters for the committees of our board of directors, our Corporate Governance Guidelines, our Code of Ethics for Senior Financial Officers and our Code of Business Conduct and Ethics are also available on our website, and can be found under the Investor Relations-Corporate Governance links. Copies are also available in print, free of charge, by writing to Investor Relations, Quiksilver, Inc., 5600 Argosy Circle BLDG 100, Huntington Beach, California 92649. We may post amendments or waivers of our Code of Ethics for Senior Financial Officers and Code of Business Conduct and Ethics, if any, on our website. This website address is intended to be an inactive textual reference only, and none of the information contained on our website is part of this report or is incorporated in this report by reference.

Item 1A. RISK FACTORS

Cautionary Note Regarding Forward-Looking Statements

This report on Form 10-K contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are often, but not always, identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “outlook,” “strategy,” “future,” “likely,” “may,” “should,” “could,” “will” and similar references to future periods.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Any forward-looking statement made by us in this report is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

Our business faces numerous risks, many of which are beyond our control. The impact of these risks, as well as other unforeseen risks, could have a material negative impact on our business, financial condition or results of operations. The trading price of our common stock or our senior notes could decline as a result. You should consider these risks before deciding to invest in, or maintain your investment in, our common stock or senior notes.

Bankruptcy-Specific Risk Factors

Quiksilver, Inc. and certain of our subsidiaries are subject to risks and uncertainties associated with our voluntary proceedings under Chapter 11 of the Bankruptcy Code filed with the Bankruptcy Court on September 9, 2015. For the duration of the bankruptcy proceedings, our operations and our ability to execute our business strategy will be subject to risks and uncertainties associated with bankruptcy. These risks include:


•	our ability to continue as a going concern;


•	our ability to obtain Bankruptcy Court approval with respect to motions filed in the Bankruptcy Cases from time to time;


•	our ability to develop, execute, confirm and consummate the Proposed Plan or any other plan of reorganization with respect to the Bankruptcy Cases;


•	the ability of third parties to seek and obtain court approval to terminate or shorten the exclusivity period for us to propose and confirm a plan of reorganization, to appoint a U.S. trustee or to convert the Bankruptcy Cases to chapter 7 cases;


•	our ability to obtain and maintain normal payment and other terms with credit card companies, customers, vendors and service providers;


•	our ability to maintain contracts that are critical to our operations;


•	our ability to attract, motivate and retain management and other key employees;


•	our ability to retain key vendors or secure alternative supply sources;


•	our ability to fund and execute our business plan; and


•	our ability to obtain acceptable and appropriate financing.

We are subject to risks and uncertainties with respect to the actions and decisions of our creditors and other third parties who have interests in our Bankruptcy Cases that may be inconsistent with our plans.

These risks and uncertainties could significantly affect our business and operations in various ways. For example, negative publicity or events associated with the Bankruptcy Cases could adversely affect our relationships with our vendors and employees, as well as with customers, which in turn could adversely affect our operations and financial condition. Also, pursuant to the Bankruptcy Code, we need Bankruptcy Court approval for transactions outside the ordinary course of business, which may limit our ability to respond to certain events in a timely manner or take advantage of certain opportunities. Because of the risks and uncertainties associated with the Bankruptcy Cases, we cannot predict or quantify the ultimate impact that

events occurring during the Chapter 11 proceedings and its outcome will have on our business, financial condition and results of operations, and the certainty as to our ability to continue as a going concern.

As a result of the Bankruptcy Cases, realization of assets and liquidation of liabilities are subject to uncertainty. While operating under the protection of the Bankruptcy Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, we may sell or otherwise dispose of a portion or all of our assets and liquidate or settle liabilities for amounts other than those reflected in our consolidated financial statements. Further, a plan of reorganization could materially change the amounts and classifications reported in our consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

Our businesses could suffer from a long and protracted restructuring.

Our future results are dependent upon the successful confirmation and implementation of a plan of reorganization. Failure to obtain this approval in a timely manner could adversely affect our operating results and cash flows, as our ability to obtain financing to fund our operations may be adversely affected by a protracted bankruptcy proceeding. If a protracted reorganization or liquidation is to occur, there is a significant risk that our enterprise value would be substantially eroded to the detriment of all stakeholders.

Furthermore, we cannot predict the ultimate amount of all settlement terms for the liabilities that will be subject to the plan of reorganization. Even if a plan of reorganization is approved and implemented, our operating results and cash flows may be adversely affected by the possible reluctance of prospective lenders to do business with a company that may have recently emerged from bankruptcy.

Operating under Chapter 11 of the Bankruptcy Code may restrict our ability to pursue our business strategies.

Under Chapter 11 of the Bankruptcy Code, transactions outside the ordinary course of business will be subject to the prior approval of the Bankruptcy Court, which may limit our ability to respond to certain events in a timely manner or take advantage of certain opportunities. We must obtain Bankruptcy Court approval to, among other things:


•	engage in certain transactions with our vendors;


•	buy or sell assets outside the ordinary course of business;


•	consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and


•	borrow for our operations, investments or other capital needs or to engage in other business activities that would be in our interest.

We may not be able to obtain confirmation of our Proposed Plan, sufficient debtor-in-possession financing may not be available, and our emergence from the Bankruptcy Cases is not assured.

There can be no assurance that the Proposed Plan (or any other plan of reorganization) will be approved by the Bankruptcy Court, you should exercise extreme caution with respect to existing and future investments in our securities.

There can be no assurances that we will receive the requisite votes to confirm the Proposed Plan. We might also receive official objections to confirmation of the Proposed Plan from the various bankruptcy committees and stakeholders in the Bankruptcy Cases. As such, we cannot predict the impact that any objection might have on the Bankruptcy Court’s decision whether to confirm or not the Proposed Plan. Any objection may cause us to devote significant resources in response which could have a material adverse effect on our business, financial condition and results of operations. In addition, the DIP Facilities may not be sufficient to meet our liquidity requirements or may be restricted or ultimately terminated by the lenders under the DIP Facilities for our breach thereof.

If the Proposed Plan is not confirmed by the Bankruptcy Court, or cash flows and borrowings under the DIP Facilities are not sufficient to meet our liquidity requirements, it is uncertain whether we would be able to reorganize our business. It is also not certain whether any distributions holders of claims against us, including holders of our secured and unsecured debt and equity, would ultimately receive any sum of money with respect to their claims. Our debtors would likely incur significant costs in connection with developing and seeking approval of an alternative plan of reorganization, or additional financing, which might not be supported by any of the current debt holders, various bankruptcy committees or other stakeholders. If an alternative plan of reorganization could not be agreed upon, or additional financing could not be secured, it is possible that we would have to liquidate a portion or all of our assets, in which case it is likely that holders of claims would receive substantially less favorable distribution than they would receive if we were to emerge as a viable, reorganized entity. There can also be no assurance as to

whether we will successfully reorganize and emerge from the Bankruptcy Cases or, if we do successfully reorganize, as to when we would emerge from the Bankruptcy Cases.

The PSA may terminate.

The PSA may terminate if, among other things, the deadlines set forth therein are not met or if the conditions precedent to the Plan Sponsors’ obligation to support the Proposed Plan or to confirm the Proposed Plan are not satisfied in accordance with the terms of the PSA. If the PSA terminates, we may not be able to obtain the support necessary to confirm the Proposed Plan.

The Backstop Commitment Letter may terminate.

The occurrence of the effective date of the Proposed Plan is predicated on, among other things, the receipt of the Backstop Commitment (as defined in the Backstop Commitment Letter) pursuant to the Backstop Commitment Letter. The Backstop Commitment Letter may terminate if, among other things, any Plan Sponsor Termination Event, as described in § 5.01 of the PSA, occurs. If we do not receive the Backstop Commitment, we will not be able to effectuate the transactions scheduled for consummation on the Effective Date.

The Debtors may not be able to consummate the Rights Offering.

The occurrence of the Effective Date is predicated on, among other things, the consummation of the Rights Offerings. We may not be able to consummate the Rights Offerings if, among other things, we do not receive the Backstop Commitment from the Backstop Parties. Failure to consummate the Exit Rights Offering will result our inability to effectuate the transactions scheduled for consummation on the Effective Date.

The Debtors may not be able to obtain favorable pricing with respect to the Exit Facility or may not be able to secure commitments for exit financing.

The occurrence of the Effective Date is predicated on, among other things, the receipt of financing under the Exit Facility. We do not have committed financing for this credit facility. Although we intend to negotiate with the DIP Lenders and others with respect to the Exit Facility, there can be no assurance that we will be able to negotiate definitive documents and receive any or all of the necessary financing, or that we will receive the Exit Financing on favorable terms. If we do not receive the necessary financing under the Exit Facility, we will not be able to effectuate the transactions scheduled for consummation on the Effective Date.

We depend on key personnel and may not be able to retain those employees or recruit additional qualified personnel.

We are highly dependent on the continuing efforts of our senior management team and other key personnel to execute our business plans. Our deteriorating financial performance, along with the Bankruptcy Cases, puts us at risk of losing talent critical to the successful reorganization and ongoing operation of our business. Our business, financial condition, and results of operations could be materially adversely affected if we lose any of these persons during or subsequent to the Bankruptcy Cases, including as a result of any planned overhead reductions required by our business plan. Furthermore, we may be unable to attract and retain qualified replacements as needed in the future. Following the Effective Date, we plan to implement a Management Incentive Plan, which may mitigate some of the foregoing risks.

Our senior management team and other key personnel may not be able to execute the business plans as currently developed, given the substantial distraction to such individuals caused by these Bankruptcy Cases.

As discussed above, the execution of our business plans depends on the efforts of our senior management team and other key personnel to execute our business plans. Such individuals may be required to devote significant efforts to the Bankruptcy Cases, thereby potentially impairing their abilities to execute the business plans. Accordingly, our business plan may not be implemented as anticipated, which may cause its financial results to materially deviate from the current projections.

We may be subject to claims that will not be discharged in the Bankruptcy Cases, which could have a material adverse effect on our results of operations and profitability.

The Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation and specified debts arising afterwards. With few exceptions, all claims that arose prior to September 9, 2015 and before confirmation of the plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization or (ii) would be discharged in accordance with the Bankruptcy Code and the terms of the plan of reorganization. Any material claims not ultimately discharged by the Bankruptcy Court could have an adverse effect on our results of operations and profitability.

Our financial results may be volatile and may not reflect historical trends.

While in bankruptcy, we expect our financial results to continue to be volatile as asset impairments and dispositions, restructuring activities, contract terminations and rejections, and claims assessments may significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the bankruptcy filings. In addition, if we emerge from bankruptcy, the amounts reported in subsequent consolidated financial statements may materially change relative to historical consolidated financial statements, as a result of revisions to our operating plans pursuant to a plan of reorganization. Moreover, if we emerge from bankruptcy, we may be required to adopt fresh start accounting. If fresh start accounting is applicable, our assets and liabilities will be recorded at fair value as of the fresh start reporting date. The fair value of our assets and liabilities may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. If fresh start accounting is required, our financial results after the application of fresh start accounting may be materially different from historical trends.

We may not have sufficient cash to maintain our operations during the Bankruptcy Cases or fund our emergence from the bankruptcy.

Because of our weakened financial condition, we will have heightened exposure to, and less ability to withstand, the operating risks that are customary in our industry, such as fluctuations in raw material prices and currency exchange rates. Any of these factors could result in the need for substantial additional funding. A number of other factors, including our Chapter 11 filings, our financial results in recent years, our substantial indebtedness and the competitive environment we face, adversely affect the availability and terms of funding that might be available to us during, and upon emergence from, the bankruptcy. As such, we may not be able to source capital at rates acceptable to us, or at all, to fund our current operations or our exit from bankruptcy. The inability to obtain necessary additional funding on acceptable terms would have a material adverse impact on us and on our ability to sustain our operations, both currently and upon emergence from bankruptcy.

Additional Risk Factors

Financial and competitive difficulties of our wholesale customers (independent retailers) may negatively impact our revenues and profitability.

Our wholesale business has been negatively impacted in some areas due to financial and competitive difficulties experienced by some of our independent wholesale customers. Our business may continue to be adversely impacted in the future as a result of such difficulties. Any continuation of financial and competitive difficulties for, or deterioration in the financial health of, our current or prospective wholesale customers could result in decreased sales, uncollectible receivables, increased product returns, decreased margins, or an inability to introduce new products or generate new business. Also, any consolidation of retail accounts, or concentration of market share in a specific area, could significantly increase our credit risk. Any or all of these factors could have a material adverse effect on our business, financial condition, and results of operations.

Additionally, as consumers become more confident shopping online, our wholesale channel customers face increased competition from online competitors, including, but not limited to, Amazon in the Americas, Zalando in EMEA, and Taobao in China. These online competitors may have lower cost structures, higher sales volumes, wider product assortments, and faster marketing response times than some of our traditional wholesale channel customers. In addition, our smaller independent wholesale accounts may face competitive challenges from large multi-location accounts that benefit from better pricing and terms due to higher purchasing volume, larger marketing investments, higher levels of support from suppliers, and superior financial condition. Also, we have made, and plan to make, changes to our wholesale sales force structure whereby wholesale accounts generating less than a minimum annual order volume will not be serviced by a salesperson, but will instead be provided a self-service website from which they may order our products. Lastly, our plans to reduce the size of our product assortment available to wholesale customers could have the effect of reducing wholesale revenues. We have experienced, and expect to continue to experience, difficulties in expanding or maintaining our wholesale channel revenues due to these and other factors. Such difficulties in our wholesale channel could have a material adverse impact on our operating results, financial condition and the Bankruptcy Cases.

Unfavorable economic conditions could have a material adverse effect on our business, results of operations and financial condition.

Our financial performance has been, and may continue to be, negatively affected by unfavorable economic conditions. Continued or further recessionary economic conditions, or other macro economic factors, may have an adverse impact on our sales volumes, pricing levels and profitability. As domestic and international economic conditions change, trends in discretionary consumer spending become unpredictable and subject to reductions due to uncertainties about the future. When consumers reduce discretionary spending, purchases of specialty apparel and footwear, like our products, tend to decline which may result in reduced orders from retailers for our products, order cancellations, and/or unanticipated discounts. A continuation of the general reduction in consumer discretionary spending in the domestic and international economies, as well as the impact

of tight credit markets on us, our suppliers, other vendors or customers, could have a material adverse effect on our results of operations and financial condition.

The apparel, footwear and accessories industries are each highly competitive, and if we fail to compete effectively, we could lose our market position and/or market share.

The apparel, footwear and accessories industries are each highly competitive. We compete against a number of domestic and international brands, manufacturers, retailers and distributors of apparel, footwear and accessories. In order to compete effectively, we must: (1) maintain the image of our brands and our reputation for authenticity in our core markets; (2) be flexible and innovative in responding to rapidly changing market demands; and (3) offer consumers a wide variety of high quality products at competitive prices.

The purchasing decisions of consumers are highly subjective and can be influenced by many factors, such as brand image, marketing programs and product design. Several of our global competitors enjoy substantial competitive advantages, including greater financial resources for competitive activities, such as sales, marketing, strategic acquisitions and athlete endorsements. The number of our direct competitors and the intensity of competition may increase as we expand into other product lines or as other companies expand into our product categories. Our competitors may enter into business combinations or alliances that strengthen their competitive positions or prevent us from taking advantage of such combinations or alliances. Our competitors also may be able to respond more quickly and effectively than we can to new or changing opportunities, standards or consumer preferences. Our competitors may offers sales terms and conditions that we are unwilling or unable to match. If we fail to retain our competitive position, our sales could decline significantly which would have a material adverse effect on our market share or results of operations, financial condition and liquidity.

If we are unable to develop innovative and stylish products in response to rapid changes in consumer demands and fashion trends, we may suffer a decline in our revenues and market share.

The apparel, footwear and accessories industries are subject to rapidly changing consumer demands based on fashion trends and performance features. Our success depends, in part, on our ability to anticipate, gauge and respond to these changing consumer preferences in a timely manner while preserving the authenticity and image of our brands and the quality of our products.

As is typical with new products, market acceptance of new designs and products we may introduce is subject to uncertainty. In addition, we generally make decisions regarding product designs months in advance of the time when consumer acceptance can be measured. If trends shift away from our products, or if we misjudge the market for our product lines, we may be faced with significant amounts of unsold inventory or other conditions which could have a material adverse effect on our results of operations and financial condition.

The failure of new product designs or new product lines to gain market acceptance could also adversely affect our business and the image of our brands. Achieving market acceptance for new products may also require substantial marketing efforts and expenditures to expand consumer demand. These requirements could strain our management, financial and operational resources. If we do not continue to develop stylish and innovative products that provide better design and performance attributes than the products of our competitors, or if our future product lines misjudge consumer demands, we may lose consumer loyalty, which could result in a decline in our revenues and market share.

Our business could be harmed if we fail to maintain proper inventory levels.

We maintain an inventory of selected products that we anticipate will be in demand. We may be unable to sell the products we have ordered in advance from manufacturers or that we have in our inventory. Inventory levels in excess of customer demand may result in inventory write-downs or the sale of excess inventory at discounted or closeout prices. These events could significantly harm our operating results and impair the image of our brands. Conversely, if we underestimate consumer demand for our products or if our manufacturers fail to supply quality products in a timely manner, we may experience inventory shortages, which might result in unfilled orders, negatively impact customer relationships, diminish brand loyalty and result in lost revenues, any of which could harm our business.

Our business could be harmed if we fail to execute our internal plans to transition our supply chain and certain other business processes to global scope.

We are in the process of transitioning our footwear and apparel supply chains, as well as certain other business processes, to global scope. If our globalization efforts fail to produce planned efficiencies, or the transition is not managed effectively, we may experience excess inventories, inventory shortage, late deliveries, lost revenues, or increased costs. Any business disruption arising from our globalization efforts, or our failure to effectively execute our internal plans for globalization, could adversely impact our results of operations and financial condition.

Our business could be harmed if we are unable to accurately forecast demand for our products.

To ensure adequate inventory supply, we forecast inventory needs and place orders with our manufacturers before firm orders are placed by our customers. If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of product to deliver to our customers.

Inventory levels in excess of customer demand may result in inventory write-downs or write-offs and the sale of excess inventory at discounted prices, which would have an adverse effect on gross margin. In addition, if we underestimate the demand for our products, our manufacturers may not be able to produce products to meet our customer requirements, and this could result in delays in the shipment of our products and our ability to satisfy customer demand, as well as damage to our reputation and customer relationships. A failure to accurately predict the level of demand for our products could cause a decline in revenue and adversely impact our results of operations and financial condition.

The demand for our products is seasonal and is dependent upon several unpredictable factors.

Consumer demand for our products can fluctuate significantly from quarter to quarter and year to year. Consumer demand is dependent on many factors, including customer acceptance of our product designs, fashion trends, economic conditions, changes in consumer spending, weather patterns during peak selling periods, and numerous other factors beyond our control. The seasonality of our business and/or misjudgment in anticipating consumer demands could have a material adverse effect on our financial condition and results of operations.

Our industry is subject to pricing pressures that may adversely impact our financial performance.

We source many of our products offshore because manufacturing costs, particularly labor costs, are generally less than in the U.S. Many of our competitors also source their products offshore, possibly at lower costs than ours, and they may use these cost savings to reduce prices. To remain competitive, we may be forced to adjust our prices from time to time in response to these pricing pressures. As a result, our financial performance may be negatively affected if we are forced to reduce our prices while we are unable to reduce production costs or our production costs increase and we are unable to proportionately increase our prices. Any inability on our part to effectively respond to changing prices and sourcing costs could have a material adverse effect on our results of operations, financial condition and liquidity.

Fluctuations in the cost and availability of raw materials, labor, and transportation could cause manufacturing delays and increase our costs.

The prices of the fabrics used to manufacture our products depend largely on the market prices for the raw materials used to produce them, particularly cotton. The price and availability of such raw materials may fluctuate significantly, depending on many factors, including crop yields and weather patterns. In addition, the cost of labor at many of our third party manufacturers has been increasing significantly. The cost of logistics and transportation fluctuates in large part due to the price of oil. Any fluctuations in the cost and availability of any of our raw materials or other sourcing costs could have a material adverse effect on our gross margins and our ability to meet consumer demands.

Factors affecting international commerce and our international operations may seriously harm our financial condition.

We generate the majority of our revenues from outside of the United States, and we anticipate that revenue from our international operations could account for an increasingly larger portion of our revenue in the future. Our international operations are directly related to, and dependent on, the volume of international trade and foreign market conditions. International commerce and our international operations are subject to many risks, including:


•	recessions in foreign economies;


•	fluctuations in foreign currency exchange rates;


•	the adoption and expansion of trade restrictions;


•	limitations on repatriation of earnings;


•	difficulties in protecting our intellectual property or enforcing our intellectual property rights under the laws of other countries;


•	longer receivables collection periods and greater difficulty in collecting accounts receivable;


•	social, political and economic instability, terrorism or other hostilities;


•	unexpected changes in regulatory requirements;


•	fluctuations in foreign tax rates;


•	tariffs, sanctions and other trade barriers; and


•	U.S. government licensing requirements for exports.

The occurrence or consequences of any of these risks may restrict our ability to operate in the affected regions and decrease the profitability of our international operations, which may harm our financial condition.

We have established, and may continue to establish, joint ventures in various foreign territories with independent third party business partners to distribute and sell Quiksilver, Roxy, DC and other branded products in such territories. In addition, we may decide to acquire the remaining portion of existing joint ventures that we do not own. These joint ventures are subject to substantial risks and liabilities associated with their operations, as well as the risk that our relationships with our joint venture partners do not succeed in the manner that we anticipate. If our joint venture operations, or our relationships with our joint venture partners, are not successful, we could face litigation or legal costs in connection with exiting the relationship or delays in making planned changes to our operations in the applicable territories. These costs, delays, and/or investments could adversely impact our financial condition.

We have operations in certain emerging markets and developing countries where the risk of asset misappropriation, civil unrest or social instability, theft, other crimes, or frivolous claims is higher than in more developed countries. Likewise, there is less protection for intellectual property rights of foreign companies in these jurisdictions. These risks can significantly increase the cost of operations in such markets.

In addition, as we continue to expand our overseas operations, we are subject to certain anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, in addition to the laws of the foreign countries in which we operate. We must use all commercially reasonable efforts to ensure our employees and agents comply with these laws. If any of our overseas operations, or our employees or agents, violates such laws, we could become subject to sanctions or significant penalties that could negatively affect our reputation, business and operating results.

Uncertainty of changing international trade regulations and quotas on imports of textiles and apparel may adversely affect our business.

Quotas, duties or tariffs may have a material adverse effect on our business, financial condition and results of operations. We currently import raw materials and/or finished garments into the majority of countries in which we sell our products. Substantially all of our import operations are subject to customs duties.

In addition, the countries in which our products are manufactured or into which they are imported may, from time to time, impose new quotas, duties, tariffs, requirements as to where raw materials must be purchased, new workplace regulations or other restrictions on our imports, or otherwise adversely modify existing restrictions. Adverse changes in these costs and restrictions could harm our business.

We rely on third party manufacturers and problems with, or loss of, our suppliers or raw materials could harm our business and results of operations.

Substantially all of our products are produced by independent manufacturers. We face the risk that these third party manufacturers with whom we contract to produce our products may not produce and deliver our products on a timely basis, or at all. We also may be subject to credit reductions and other changes in our business relationships with our suppliers, vendors and customers if they perceive that we would be unable to pay our debts to them in a timely manner. We cannot be certain that we will not experience operational difficulties with our manufacturers, such as reductions in the availability of production capacity, errors in complying with product specifications and regulatory and customer requirements, insufficient quality control, failures to meet production deadlines, increases in materials and manufacturing costs or other business interruptions or failures due to deteriorating economies. The failure or unwillingness of any manufacturer to perform to our expectations could result in supply shortages or delays for certain products and harm our business. Our business may also be harmed by material increases to our cost of goods as a result of increasing labor costs, which manufacturers have recently faced.

If our independent manufacturers fail to comply with appropriate laws, regulations, safety codes, employment practices, human rights, quality standards, environmental standards, production practices, or other obligations and norms, our reputation and brand image could be negatively impacted and we could be exposed to litigation and additional costs which would adversely affect our operational efficiency and results of operations.

The capacity of our manufacturers to manufacture our products also is dependent, in part, upon the availability of raw materials. Our manufacturers may experience shortages of raw materials, which could result in delays in deliveries of our products by our manufacturers or increased costs to us. Any shortage of raw materials or inability of a manufacturer to

manufacture or ship our products in a timely manner, or at all, could impair our ability to ship orders of our products in a cost-efficient, timely manner and could cause us to miss the delivery requirements of our customers. As a result, we could experience cancellations of orders, refusals to accept deliveries, or reductions in our prices and margins, any of which could harm our financial performance and results of operations.

Our manufacturing and logistics providers may be unable or unwilling to do business with us, and manufacture or delivery of our goods and merchandise may be delayed.

We order goods for each “selling season” several months in advance of the start of such season, and the goods must be placed “on board” vessels for shipment as early as three months prior to the start of the season. As the first batches of products arrive in the United States, they are distributed through retail and wholesale channels to fill orders for the start of the selling season. If the first scheduled shipments are missed, there will simply not be time for another vendor to produce replacement goods. This would jeopardize our ability to service our customers, and would likely result in reduced customer goodwill and loss of market share. Not only would we be unable to supply its retail stores, our relationships with our wholesalers may be jeopardized, as the wholesalers may choose to work with other suppliers for the remainder of the season. If our manufacturers or logistics providers are unable, due to a natural disaster or otherwise, or unwilling, on account of the pendency of the Bankruptcy Cases or otherwise, to continue to produce, ship, and release goods to or for us, it could have a material adverse effect on our business.

The agreements governing our debt obligations contain, and the Exit Facility Credit Agreement will contain, various covenants that impose restrictions on us that may affect our ability to operate our business, and our failure to comply with these covenants could result in an acceleration of our indebtedness.

The DIP Facilities contain covenants that limit or restrict our ability to finance future operations or capital needs, to respond to changing business and economic conditions or to engage in other transactions or business activities that may be important to our growth strategy or otherwise important to us. The DIP Facilities, limit or restrict, among other things, our ability to:


•	incur or guarantee additional indebtedness;


•	pay dividends or make distributions on our capital stock or certain other restricted payments or investments;


•	make investments;


•	engage in transactions with affiliates;


•	transfer and sell assets;


•	effect a consolidation or merger; and


•	create liens on our assets to secure debt.

Our ability to comply with these provisions may be affected by events beyond our control. Any breach of the covenants in the DIP Facilities could cause a default under the DIP Facilities and other debt, which would restrict the ability to borrow under the DIP Facilities, thereby significantly impacting our liquidity, which could have a material adverse effect on our business, financial condition, cash flows or results of operations. If there were an event of default under the DIP Facilities that was not cured or waived, the holders of the defaulted debt could cause all amounts outstanding with respect to the debt instrument to be due and payable immediately. Our assets and cash flow may not be sufficient to fully repay borrowings under the DIP Facilities if accelerated upon an event of default. If, as or when required, we are unable to repay, refinance or restructure our indebtedness under, or amend the covenants contained in, the DIP Facilities, the lenders under those facilities could seek to institute foreclosure proceedings against the assets securing borrowings under the DIP Facilities.

The credit agreement for and all documents executed in connection with the Exit Facility (as amended, supplemented or otherwise modified from time to time, the “Exit Financing Credit Agreement”) contemplated by the Plan may contain covenants, restrictions, events of default, and other provisions similar to the DIP Facilities. Any breach of such covenants in the Exit Financing Credit Agreement could cause a default under the Exit Financing and other debt, which would restrict the ability to borrow under the Exit Financing, thereby significantly impacting our liquidity, which could have a material adverse effect on our business, financial condition, cash flows or results of operations. If there were an event of default under the Exit Financing Credit Agreement that was not cured or waived, the holders of the defaulted debt could exercise all rights and remedies under such credit agreement. Such rights and remedies may include causing all amounts outstanding with respect to the debt instrument to be due and payable immediately. Our assets and cash flows may not be sufficient to fully repay borrowings under the Exit Financing Credit Agreement if accelerated upon an event of default. If, as or when required, we are unable to repay, refinance, or restructure our indebtedness

under, or amend the covenants contained in the Exit Financing Credit Agreement, the lenders under the Exit Facility could seek to institute foreclosure proceedings against the assets securing borrowings under the Exit Financing Credit Agreement.

Our Euro Notes Indenture similarly contains covenants, restrictions, events of default, and other provisions that will remain applicable following the Effective Date, and any amendment of the Euro Notes Indenture in connection with the Exchange Offer may contain similar covenants, restrictions, events of default, and other provisions. Any breach of such covenants could cause a default under the Euro Notes Indenture. If there were an event of default, the holders of the Euro Notes could cause all amounts outstanding with respect to the Euro Notes to be due and payable immediately, and the same may occur with respect to any amended Euro Notes Indenture. Our assets and cash flow may not be sufficient to fully repay borrowings under the Euro Notes if accelerated upon an event of default.

Our success is dependent on our ability to protect our worldwide intellectual property rights, and our inability to enforce these rights could harm our business.

Our success depends to a significant degree upon our ability to protect and preserve our intellectual property, including copyrights, trademarks, patents, service marks, trade dress, trade secrets and similar intellectual property. We rely on the intellectual property, patent, trademark and copyright laws of the United States and other countries to protect our proprietary rights. However, we may be unable to prevent third parties from using our intellectual property without our authorization, particularly in those countries where the laws do not protect our proprietary rights as fully as in the United States. The use of our intellectual property or similar intellectual property by others could reduce or eliminate any competitive advantage we have developed, causing us to lose sales or otherwise harm our business. From time to time, we resort to litigation to protect these rights, and these proceedings can be burdensome and costly and we may not prevail.

We have obtained some U.S. and foreign trademarks, patents and service mark registrations, and have applied for additional ones, but cannot guarantee that any of our pending applications will be approved by the applicable governmental authorities. The loss of trademarks, patents and service marks, or the loss of the exclusive use of our trademarks, patents and service marks, could have a material adverse effect on our business, financial condition and results of operations. Accordingly, we devote substantial resources to the establishment and protection of our trademarks, patents and service marks on a worldwide basis and continue to evaluate the registration of additional trademarks, patents and service marks, as appropriate. There can be no assurance that our actions taken to establish and protect our trademarks, patents and service marks will be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as violations of their trademark, patent or other proprietary rights.

We may be subject to claims that our products have infringed upon the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.

We cannot be certain that our products do not and will not infringe the intellectual property rights of others. We may be subject to legal proceedings and claims in the ordinary course of our business, including claims of alleged infringement of the intellectual property rights of third parties by us or our customers in connection with their use of our products. Any such claims, whether or not meritorious, could result in costly litigation and divert the efforts of our personnel. Moreover, should we be found liable for infringement, we may be required to enter into licensing agreements (if available on acceptable terms or at all) or to pay damages and cease making or selling certain products. Moreover, we may need to redesign, discontinue or rename some of our products to avoid future infringement liability. Any of the foregoing could cause us to incur significant costs and prevent us from manufacturing or selling our products.

We may be adversely affected by legal proceedings to which we are, or may become, a party.

We, and our subsidiaries are currently, and may in the future become, subject to legal proceedings which could adversely affect our business, financial condition, cash flows or results of operations.

We rely significantly on information technology, and any failure, inadequacy, interruption, or security lapse of that technology could harm our ability to effectively operate our business.

Our ability to effectively manage and maintain our supply chain, ship products to customers, and invoice customers on a timely basis depends significantly on several key information systems. The failure of these systems to operate effectively or to integrate with other systems, or a breach in security of any of these systems, could cause delays in product fulfillment and reduced efficiency of our operations, and it could require significant capital investments to remediate any such failure, problem or breach.

In addition, hackers and data thieves are increasingly sophisticated and operate large scale and complex automated attacks. Despite security measures that we and our third party vendors have in place, any breach of our or our third party service providers’ networks

may result in the loss of valuable business data, our customers’ or employees’ personal information, or a disruption of our business, which could give rise to unwanted media attention, damage our customer relationships and reputation, and result in lost sales, fines or lawsuits. In addition, we must comply with increasingly complex regulatory standards enacted to protect this business and personal data. Any inability to maintain compliance with these regulatory standards could expose us to risks of litigation and liability, and adversely impact our results of operations and financial condition.

Changes in interest rates may affect the fair market value of our assets.

Changes in interest rates and foreign exchange rates may affect the fair market value of our assets. Specifically, decreases in interest rates will positively impact the value of our assets and the strengthening of the dollar will negatively impact the value of our net foreign assets.

Changes in foreign currency exchange rates could affect our reported revenues and costs.

We are exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income, and product purchases of our international subsidiaries that are denominated in currencies other than our functional currencies. We are also exposed to foreign currency gains and losses resulting from U.S. transactions that are not denominated in U.S. dollars. If we are unsuccessful in hedging these potential losses, our operating results could be negatively impacted and ours cash flows could be significantly reduced. In some cases, as part of its risk management strategies, we may choose not to hedge such risks. If we misjudge these risks, there could be a material adverse effect on our operating results and financial position. We may use foreign currency exchange contracts, or other derivatives, to hedge certain currency exchange risks. Such derivatives may expose us to counterparty risks, and there can be no guarantee that such derivatives will be effective as hedges.

Furthermore, we may be exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in our consolidated financial statements due to the translation of the statements of operations and balance sheets of its international subsidiaries into U.S. dollars. We may (but generally do not) use foreign currency exchange contracts to hedge the profit and loss effects of this translation effect because such exposures are generally non-cash in nature and because accounting rules would require us to mark these contracts to fair value in the statement of operations at the end of each financial reporting period. We translate our revenues and expenses at average exchange rates during the period. As a result, the reported revenues and expenses of our international subsidiaries would decrease if the U.S. dollar increased in value in relation to other currencies, including but not limited to the euro, Australian dollar, Japanese yen, Brazilian real, or Russian ruble.

Changes with respect to our licensing program could adversely impact our business.

Historically, we have licensed certain product categories to third party licensees which have the right to design, source, and sell certain products bearing our trademarks. By the first half of fiscal year 2017, we anticipate completing a transition to in-source substantially all licensee product categories. Unforeseen issues from this transition could result in (i) temporary sales pressure as the market adjusts to our in-house product offering and/or (ii) temporary inefficiencies in product design and sourcing.

Work stoppages or other labor issues could adversely affect our business, financial condition, cash flows or results of operations.

We have no unionized employees, but certain French employees are represented by workers’ counsels. As we have little control over union activities, we could face difficulties in the future should our workforce become unionized. There can be no assurance that we will not experience work stoppages or other labor problems in the future with our non-unionized employees or employees represented by workers’ counsels.

The effects of war, acts of terrorism, natural disasters, or other unforeseen wide-scale events could have a material adverse effect on our operating results and financial condition.

The continued threat of terrorism, and associated heightened security measures and military actions in response to acts of terrorism, have disrupted commerce and have intensified uncertainties in the U.S. and international economies. Any further acts of terrorism, escalated hostilities, a future war, or a widespread natural or other disaster may disrupt commerce, undermine consumer confidence and lead to a further downturn in the U.S. or international economies, which could negatively impact our revenues. Furthermore, an act of terrorism, war or the implementation of trade sanctions, or the threat thereof, or any natural or other disaster that results in unforeseen interruptions of commerce could negatively impact our business by interfering with our ability to obtain products from our manufacturers.

Trading in our securities during the pendency of the Bankruptcy Cases is highly speculative and poses substantial risks. It is probable our common stock will be canceled and that holders of such common stock will not receive any distribution with respect to, or be able to recover any portion of, their investments.

It is too early to definitively determine if our Chapter 11 plan of reorganization will allow for distributions with respect to our common stock. It is probable that these equity interests will be canceled and extinguished upon the approval by the Bankruptcy Court of any such plan and the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests. In the event of a cancellation of these equity interests, amounts invested by such holders in our outstanding equity securities will not be recoverable. Consequently, our currently outstanding common stock would have no value. Trading prices for our common stock are very volatile and may bear little or no relationship to the actual recovery, if any, by the holders of such securities in the Bankruptcy Cases. Accordingly, we encourage that extreme caution be exercised with respect to existing and future investments in our equity securities and any of our other securities.

Our common stock is delisted from the New York Stock Exchange and will not be listed on any other national securities exchange.

As a result, our common stock now trades in the over-the-counter ("OTC") market. The trading of our common stock in the OTC market rather than the NYSE may negatively impact the trading price of our common stock and the levels of liquidity available to our stockholders. In addition, securities which trade in the OTC market are not eligible for margin loans and make our common stock subject to the provisions of Rule 15g-9 of the Exchange Act, commonly referred to as the “penny stock rule.”

Our common stock may become subject to the associated risks of trading in an OTC market.

Securities traded in the OTC market generally have significantly less liquidity than securities traded on a national securities exchange, due to factors such as the reduced number of investors that will consider investing in the securities, the reduced number of market makers in the securities, and the reduced number of securities analysts that follow such securities. As a result, holders of shares of our common stock may find it difficult to resell their shares at prices quoted in the market or at all. Because of the limited market and generally low volume of trading in our common stock that could occur, the share price of our common stock could be more likely to be affected by broad market fluctuations, general market conditions, fluctuations in our operating results, changes in the market’s perception of our business, and announcements made by us, our competitors, parties with whom we have business relationships or third parties with interests in the Bankruptcy Cases. If our securities begin trading in the OTC market, in some cases, we may be subject to additional compliance requirements under applicable state laws in the issuance of our securities. The lack of liquidity in our common stock may also make it difficult for us to issue additional securities for financing or other purposes, or to otherwise arrange for any financing we may need in the future.

Item 1B. UNRESOLVED STAFF COMMENTS

None.

Item 2. PROPERTIES

As of October 31, 2015, our principal facilities in excess of 40,000 square feet were as follows:



Location	Principal Use	Square Footage	Lease Expiration
Huntington Beach, CA ⁽¹⁾	Offices	223,000	2034	*
Huntington Beach, CA	Offices	120,000	2024
Mira Loma, CA	Distribution center	683,000	2027	*
Huntington Beach, CA	Offices	102,000	2024
St. Jean de Luz, France	Offices	151,000	N/A	**
St. Jean de Luz, France	Distribution center	127,000	N/A	**
St. Jean de Luz, France	Offices	67,000	2021	*
Rives, France	Distribution center	206,000	2016
Torquay, Australia	Offices	54,000	2024	*
Geelong, Australia	Distribution center	81,000	2038	*
Geelong, Australia	Distribution center	134,000	2039	*

___________


(1)	On November 16, 2015, the Debtors rejected the unexpired lease on the facility.



*	Includes extension periods exercisable at our option.
**	These locations are owned.

As of October 31, 2015, we operated 116 retail stores in the Americas, 292 retail stores in EMEA, and 315 retail stores in APAC on leased premises. The leases for our facilities, including retail stores, required aggregate annual rentals of approximately $130 million in fiscal 2015. We anticipate that we will be able to extend those leases that expire in the near future on terms satisfactory to us, or, if necessary, locate substitute facilities on acceptable terms. We believe that our corporate, distribution and retail leased facilities are suitable and adequate to meet our current needs.

Item 3. LEGAL PROCEEDINGS

In April 2015, two putative securities class action complaints were filed against the Company and two of its former officers in the United States District Court for the Central District of California under the following captions: Leiland Stevens, Individually and on Behalf of All Others Similarly Situated v. Quiksilver, Inc., et al. and Shiva Stein, Individually and on Behalf of All Others Similarly Situated v. Quiksilver, Inc., et al. On June 26, 2015, the court consolidated these lawsuits and named Babulal Parmar as the lead plaintiff. On August 25, 2015, the lead plaintiff filed an amended complaint in the consolidated action. The amended complaint asserts claims for violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The putative class period in this action is from June 6, 2014 through March 26, 2015. The complaint seeks designation of this action as a class action, an award of unspecified compensatory damages, interest, costs and expenses, including attorneys’ fees and expert fees, and such other relief as the court deems appropriate. The Company cannot predict the outcome of this matter or estimate the potential impact on its results of operations, financial position or cash flows. The Company has not recorded a liability for this matter. On September 21, 2015, the court entered an order staying the action pending bankruptcy proceedings.

On June 2, 2015, a shareholder derivative complaint was filed against present and former members of the Company’s Board of Directors and former officers in the Superior Court of the State of California, County of Orange, under the following caption: An H. Vu, Derivatively on Behalf of Quiksilver, Inc. v. Andrew P. Mooney, et al., Defendants, and Quiksilver, Inc., Nominal Defendant. The complaint asserts claims for breach of fiduciary duty, unjust enrichment and gross mismanagement against the individual defendants. The complaint seeks a declaration that plaintiff may maintain the action on behalf of the Company, declaratory relief, unspecified compensatory and exemplary damages, restitution, disgorgement of all profits, benefits and other compensation obtained by the individual defendants, an order directing the Company and the individual defendants to take actions to reform and improve the Company's corporate governance and internal procedures, and all appropriate equitable and/or injunctive relief. The Company cannot predict the outcome of this matter or estimate the potential impact on its results of operations, financial position or cash flows. The Company has not recorded a liability for this matter. On September 14, 2015, the court entered an order suspending the case.

On September 9, 2015, Quiksilver and each of its wholly owned U.S. subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware seeking relief under the provisions of Chapter 11 of the Bankruptcy Code. The Debtors intend to continue to operate their business as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As a result of the filings, attempts to collect, secure, or enforce remedies with respect to pre-petition claims against us are subject to the automatic stay provisions of section 362 of the Bankruptcy Code, and absent further order of the Bankruptcy Court, no party, subject to certain exceptions, may take any action, also subject to certain exceptions, to recover on pre-petition claims against the Debtors. At this time, it is not possible to predict the outcome of the Bankruptcy Cases or their effect on our business. The Bankruptcy Cases are discussed in greater detail in the accompanying Notes to Consolidated Financial Statements.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

On September 10, 2015, our common stock commenced trading on the OTC market under the symbol "ZQKSQ." Prior to being suspended from trading on September 9, 2015, our common stock was traded on the NYSE under the symbol “ZQK.” The high and low sales prices of our common stock, as reported by the NYSE and OTC Pink Marketplace for the two most recent fiscal years, are set forth below.



	2015				2014
	High		Low		High		Low
4th Quarter ended October 31	$	0.55	$	0.01	$	3.35	$	1.40
3rd Quarter ended July 31	1.75		0.44		6.89		2.89
2nd Quarter ended April 30	2.46		1.54		8.27		6.14
1st Quarter ended January 31	2.75		1.44		9.28		6.90

We have historically reinvested our earnings in our business and have never paid a cash dividend. No change in this practice is currently being considered. Any payment of cash dividends in the future will be determined by our Board of Directors, considering conditions existing at that time, our voluntary proceedings for relief under Chapter 11 of the Bankruptcy Code, earnings, financial requirements and condition, opportunities for reinvesting earnings, business conditions and other factors. In addition, under the indentures related to our senior notes and under our other debt agreements, we must obtain prior consent to pay dividends to our stockholders above a pre-determined amount.

On December 31, 2015, there were 868 holders of record of our common stock and an estimated 14,955 beneficial stockholders.

Performance Graph

The following graph compares from November 1, 2010 to October 31, 2015 the yearly percentage change in Quiksilver Inc.'s cumulative total stockholder return on its common stock with the cumulative total return of (i) the NYSE Market Index and (ii) a group of peer companies that in our judgment manufacture and sell products similar to those that we manufacture and sell. The yearly percentage change has been measured by dividing (i) the sum of (A) the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and (B) the difference between the price of the stock at the end and the beginning of the measurement period; by (ii) the stock price at the beginning of the measurement period. The historical stock performance shown on the graph is not intended to, and may not be, indicative of future stock performance.

The performance graph below is being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201 (e) of Regulation S-K, and is not being filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any of our filings, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Comparison of 5-Year Cumulative Total Return

Among Quiksilver, Inc.,

NYSE Market Index & Peer Group Index

Assumes $100 Invested on November 1, 2010

Assumes Dividends Reinvested

Fiscal Year Ended October 31, 2015



	2010		2011		2012		2013		2014		2015
Quiksilver Inc.	$	100.00	$	80.34	$	76.74	$	199.52	$	41.97	$	0.24
NYSE Market Index	$	100.00	$	103.35	$	115.60	$	144.61	$	160.63	$	158.86
Peer Group Index	$	100.00	$	141.78	$	146.62	$	173.53	$	176.39	$	160.59

The following public companies were used in the graph above to represent the Peer Group:

Coach, Inc.

Columbia Sportswear Co

Guess, Inc.

Hampshire Group Ltd

Jones Group, Inc

Fifth & Pacific Companies, Inc

Oxford Industries, Inc

Phillips-Van Heusen Corp

Polo Ralph Lauren Corp

VF Corp

Item 6. SELECTED FINANCIAL DATA

Subsequent to the issuance of our consolidated financial statements for the year ended October 31, 2014, we identified and corrected certain immaterial errors related to inappropriate net revenue cut-off in fiscal 2014 and prior periods. Consequently, the consolidated statement of operations for fiscal year 2014 through 2011 and balance sheet the end of each such fiscal year have been revised to correct for these immaterial errors. See Note 21 — Restatement of Prior Period Financial Statements, in our Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K for additional details.

The statements of operations and balance sheet data shown below were derived from our consolidated financial statements for the periods presented. See Note 19 — Discontinued Operations to our consolidated financial statements for a discussion of the operating results of our discontinued businesses. This selected financial data should be read together with our Consolidated Financial Statements and the Notes thereto, as well as the discussion under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7.



	Year Ended October 31,
Amounts in thousands, except ratios and per share data	2015 ^{(1) (2)}			2014 ^{(1) (2)}			2013 ^{(1) (2)}			2012 ^{(1) (2)}			2011 ^{(1) (2)}
Statements of Operations Data
Revenues, net	$	1,345,940		$	1,571,454		$	1,819,544		$	1,942,464		$	1,906,751
Reorganization items ⁽⁵⁾	35,236			—			—			—			—
Loss before provision for income taxes ⁽⁶⁾	(298,055		)	(331,751		)	(70,050		)	(13,126		)	(45,852		)
Loss from continuing operations ^{(3) (6)}	(313,692		)	(327,033		)	(235,625		)	(17,804		)	(30,772		)
Income from discontinued operations ⁽³⁾	7,520			18,970			6,201			7,263			6,163
Net loss ^{(3) (6)}	(306,172		)	(308,063		)	(229,424		)	(10,541		)	(24,609		)
Loss per share from continuing operations ^{(3) (6)}	(1.83		)	(1.92		)	(1.41		)	(0.11		)	(0.19		)
Income per share from discontinued operations ⁽³⁾	0.04			0.11			0.04			0.04			0.04
Net loss per share ^{(3) (6)}	(1.79		)	(1.81		)	(1.37		)	(0.06		)	(0.15		)
Loss per share from continuing operations, assuming dilution ^{(3) (6)}	(1.83		)	(1.92		)	(1.41		)	(0.11		)	(0.19		)
Income per share from discontinued operations, assuming dilution ⁽³⁾	0.04			0.11			0.04			0.04			0.04
Net loss per share, assuming dilution ^{(3) (6)}	(1.79		)	(1.81		)	(1.37		)	(0.06		)	(0.15		)
Weighted average common shares outstanding	171,494			170,492			167,255			164,245			162,430
Weighted average common shares outstanding, assuming dilution	171,494			170,492			167,255			164,245			162,430

	October 31,
Amounts in thousands	2015			2014			2013			2012			2011
Balance Sheet Data
Total assets	$	922,523		$	1,255,982		$	1,617,012		$	1,711,641		$	1,757,409
Working capital	35,846			390,613			544,758			542,654			574,547
Lines of credit	25,143			32,929			—			18,147			18,335
Long-term debt	4,265			795,661			831,300			739,822			729,351
Liabilities subject to compromise ⁽⁴⁾	575,660			—			—			—			—
Stockholders’ equity/(deficit) ⁽³⁾	(289,667		)	53,876			366,248			576,711			603,284

___________


(1)	Fiscal 2015, 2014, 2013, 2012 and 2011 include asset impairments of $39 million, $11 million, $12 million, $7 million, and $12 million, respectively. Fiscal 2015 also includes goodwill impairments of $74 million in Americas and $6 million in APAC, and fiscal 2014 includes $178 million in EMEA.


(2)	All fiscal years reflect the operations of Mervin and Hawk as discontinued operations. Fiscal 2015, 2014, 2013 and 2012 reflect the operations of Surfdome as discontinued operations.


(3)	Attributable to Quiksilver, Inc.


(4)	Amount represents the Debtors' liabilities for known and estimated allowed claims incurred prior to the Petition Date which will be resolved as part of the Bankruptcy Cases. Includes $505 million of debt for the 2018 Notes and 2020 Notes.

(5)

Reorganization items include direct and incremental costs related to the Bankruptcy Proceedings. Such costs include professional fees related to the Bankruptcy Proceedings and debtor-in-possession financing, the write-off of unamortized deferred debt financing costs and original debt issuance discount on pre-petition debt, and losses on rejected executory contracts that the Company has determined to be both probable and estimable.


(6)	Amount includes reorganization items.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K. The MD&A contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” within Item 1A. As described under Voluntary Reorganization Under Chapter 11 below, we are currently operating as a debtor-in-possession under Chapter 11 protection. Although progress has been made against the PSA, we can offer no assurance that we will be successful in completing the plan of reorganization. In considering only those events and transactions that have occurred or closed prior to the filing of this Annual Report on Form 10-K, there is substantial doubt that we could continue as a going concern.

Overview

We began operations in 1976 as a California company making boardshorts for surfers in the United States under a license agreement with the Quiksilver brand founders in Australia. We reincorporated in Delaware and went public in 1986 and, in subsequent years, acquired the worldwide licenses and trademarks that created the global company that we are today. Our business is rooted in the strong heritage and authenticity of our core brands, Quiksilver, Roxy and DC, each of which caters to the casual, outdoor lifestyle associated with surfing, skateboarding, snowboarding, and motocross, among other activities. Today, our products are sold in over 110 countries through a wide range of distribution points, including wholesale accounts (surf shops, skate shops, snow shops, sporting goods stores, discount centers, specialty stores, online retailers, licensee shops, and select department stores), 723 Company-owned retail stores, and via our e-commerce websites. We operate in the outdoor market of the sporting goods industry in which we design, develop and distribute branded apparel, footwear, accessories and related products. We have four operating segments consisting of the Americas, EMEA and APAC, each of which sells a full range of our products, as well as Corporate Operations. Our Americas segment, consisting of North, South, and Central America, includes revenues primarily from the United States, Canada, Brazil, and Mexico. Our EMEA segment, consisting of Europe, the Middle East, and Africa, includes revenues primarily from continental Europe, the United Kingdom, Russia and South Africa. Our APAC segment, consisting of Australia, New Zealand, and Pacific Rim markets, includes revenues primarily from Australia, Japan, New Zealand, South Korea, Taiwan, and Indonesia. Royalties earned from various licensees in other international territories are categorized in Corporate Operations along with revenues from sourcing services for our licensees. For information regarding the operating income and identifiable assets attributed to our operating segments, see Note 3 — Segment and Geographic Information to our consolidated financial statements.

Voluntary Reorganization Under Chapter 11

On September 8, 2015, the Company reached agreements with holders of approximately 73% of its 2018 Notes in the form of a plan sponsor agreement (“PSA”) that if implemented pursuant to its terms, would significantly reduce the Company’s outstanding debt. The PSA, and specifically a Plan Sponsor Term Sheet appended thereto (the “Term Sheet”), contemplates that a restructuring of the Company’s capital structure would be implemented through a jointly proposed Chapter 11 plan of reorganization (a “Proposed Plan”). On September 9, 2015 (the “Petition Date”), Quiksilver, Inc. and each of its wholly owned U.S. subsidiaries - DC Direct, Inc., DC Shoes, Inc., Fidra, Inc., Hawk Designs, Inc., Mt. Waimea, Inc., Q.S. Optics, Inc., QS Retail, Inc., QS Wholesale, Inc., Quiksilver Entertainment, Inc. and Quiksilver Wetsuits, Inc. (together with Quiksilver, Inc. the “Debtors”) - filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under the provisions of Chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). The reorganization cases under chapter 11 of the Bankruptcy Code are being jointly administered by the Bankruptcy Court as Case No. 15-11880 (the “Bankruptcy Cases”).

Since the Petition Date, the Debtors have operated their business as “debtors-in-possession” pursuant to Sections 1107(a) and 1108 of the Bankruptcy Code, which will allow the Debtors to continue their operations in the ordinary course during the reorganization proceedings. Each Debtor will remain in possession of its assets and properties, and its business and affairs will continue to be managed by its directors and officers, subject in each case to the supervision of the Bankruptcy Court.

None of the Company's direct or indirect non-U.S. subsidiaries or affiliates have commenced proceedings under Chapter 11 of the Bankruptcy Code, and none are expected to voluntarily commence reorganization proceedings or seek protection from creditors under any insolvency or similar law in the U.S. or elsewhere.

The PSA provides for several milestones for consummation and implementation of the Proposed Plan, and on October 28, 2015, the Bankruptcy Court entered an order approving the Debtors’ assumption of the PSA with certain modifications to the milestones:


•	filing of the Proposed Plan, the Proposed Disclosure Statement, solicitation materials and the motion to approve the disclosure statement with the Bankruptcy Court no later than October 30, 2015;


•	approval of the Proposed Disclosure Statement by the Bankruptcy Court no later than December 4, 2015;


•	approval of the Proposed Plan by the Bankruptcy Court no later than January 29, 2016; and


•	consummation of the Plan no later than February 5, 2016.

On the Petition Date, the Company sought, and thereafter obtained, authority to take a broad range of actions, including, among others, authority to incur post-petition financing, continue certain customer programs, pay certain employee obligations and pay certain pre-petition vendor claims. Additionally, the Company sought, and thereafter obtained, other orders, including orders outlining the provisions of adequate assurance of payment to utility companies and the continued use of the Company’s existing cash management systems.

The Debtors have requested and obtained approval from the Bankruptcy Court on December 4, 2015 for Key Employee Incentive Plans and Key Executive Retention Plans, under which compensation of up to $2 million may be awarded to Company executives and other key employees upon successful execution of the Plan and other measurements. No compensation expense has been recognized for these plans as of October 31, 2015. In addition, $2 million of incentive compensation not subject to Bankruptcy Court approval has been recognized by the Company as of October 31, 2015.

The filing of the Bankruptcy Cases constituted an event of default that accelerated the obligations under the following debt instruments (collectively, the “Debt Documents”):


•	Amended and Restated Credit Agreement, dated as of May 24, 2013, (the "ABL Credit Facility") among the Company, as a guarantor, QS Wholesale, Inc., as lead borrower, the other borrowers and guarantors party thereto, Bank of America, N.A., as administrative agent, and the lenders and other agents party thereto.


•	Indenture, dated as of July 16, 2013, by and among the Company, QS Wholesale, Inc., the subsidiary guarantor parties thereto, and U.S. Bank, National Association (successor to Wells Fargo Bank, National Association), as trustee and collateral agent, with respect to an aggregate principal amount of $280 million of 2018 Notes, plus accrued and unpaid interest thereon.


•	Indenture, dated as of July 16, 2013, by and among the Company, QS Wholesale, Inc., the subsidiary guarantor parties thereto, and U.S. Bank, National Association (successor to Wells Fargo Bank, National Association), as trustee, with respect to an aggregate principal amount of $225 million of 2020 Notes, plus accrued and unpaid interest thereon.

Any efforts to enforce such payment obligations under the Debt Documents are automatically stayed as a result of the filing of the Petitions for relief and the holders’ rights of enforcement in respect of the Debt Documents are subject to the applicable provisions of the Bankruptcy Code. The filing of the Bankruptcy Cases constituted an event of default under the 2017 Notes; however, the Company obtained the consent of holders of more than the required majority in principal amount of the 2017 Notes to, among other things, rescind the acceleration of the obligations under the 2017 Notes and waive the events of default related thereto and compliance with the debt incurrence and lien covenants with respect to the incurrence of the DIP Facilities for a period of up to 210 days from September 9, 2015 which is February 5, 2016.

The filing of the Petitions on September 9, 2015 created defaults and cross defaults pursuant to the terms of the Company’s Indentures to its 2020 Notes, 2018 Notes, 2017 Notes, and the ABL Credit Facility, which accelerated the due dates for the obligations. The filing of a petition under the Bankruptcy Code results in the automatic stay of virtually all actions of creditors to collect pre-petition debts, until such time as the stay is modified or removed. With respect to the 2017 Notes, the Company has received waivers for the defaults and cross defaults and the rescission of the acceleration for a period of up to 210 days from September 9, 2015. The Company has presented its outstanding debt under the 2017 Notes in current liabilities not subject to compromise on its consolidated balance sheet as of October 31, 2015. The Company has presented its outstanding debt under the 2018 Notes and 2020 Notes in liabilities subject to compromise on its consolidated balance sheet as of October 31, 2015. Lastly, the ABL Credit Facility was paid-off in September 2015.

Subject to the satisfaction of certain customary conditions to borrowing, the entire DIP ABL Facility and $70 million of the DIP Term Loan Facility became available upon entry of the interim order, and the balance of the DIP Term Loan Facility became available upon entry of the final order on October 28, 2015. A portion of the proceeds of the DIP Facilities was used in part to repay amounts outstanding under the pre-petition ABL Credit Facility (defined below), under which there were approximately $93 million in borrowings and letters of credit outstanding.

The DIP Facilities will mature 150 days after the Petition Date, and will contain representations, conditions, covenants and events of default customary for similar facilities. The DIP Facilities will collectively be secured by all assets of the Debtors, and such liens will be senior to the lien of the 2018 Notes. The DIP ABL Facility will be secured by a first-priority lien on inventory, receivables, cash and other customary ABL collateral owned by the Debtors (“ABL Collateral”), and a second-priority lien on all other assets of the Debtors (“Term Loan Collateral”). The DIP Term Loan Facility will have a first-priority lien on Term Loan Collateral, and a second-priority lien on all ABL Collateral. A portion of the DIP ABL Facility will be funded to certain Australian, Canadian and Japanese subsidiaries of the Company, which loans will be secured by assets of such foreign subsidiaries.

Pursuant to the Proposed Plan, upon the Company’s emergence from the Bankruptcy Cases, the Company’s existing debt and accrued interest will be reduced by approximately $500 million, including the extinguishment of all of its 2018 Notes and 2020 Notes. The Company’s 2017 Notes would be reinstated upon the consummation of the transactions set forth in the Plan. As consideration for such extinguishment, the reorganized Company would issue:


•	new common shares to holders of its 2018 Notes; and


•	$12.5 million in cash, which will be allocated between holders of its 2020 Notes and holders of general unsecured claims.

All of the Company’s existing equity securities, including its shares of common stock and warrants, will be cancelled and extinguished without holders receiving any distribution. In addition, new common shares will be offered to the holders of the 2018 Notes and the 2020 Notes in a $122.5 million rights offering (the “Exit Rights Offering”) and a €50 million rights offering (the “Euro Notes Rights Offering” and, together with the Exit Rights Offering, the “Rights Offerings”), each of which would be backstopped in full by Oaktree (the “Backstop Commitment”) pursuant to that certain backstop commitment letter (the “Backstop Commitment Letter”) approved by the Bankruptcy Court on December 4, 2015. Finally, the DIP Facilities will be repaid in full utilizing new financing to be obtained by the Debtors prior to consummation of the terms of the Proposed Plan.

On November 17, 2015, the Debtors filed a first amended Proposed Disclosure Statement, which includes a first amended Proposed Plan as Exhibit A thereto. On December 4, 2015, the Bankruptcy Court entered an order approving the adequacy of the Proposed Disclosure Statement and the Debtors have commenced solicitation of votes from eligible claimants in connection with the Proposed Plan. The Company and its advisors continue to seek alternative restructuring transactions, including a sale of all or substantially all of the assets of the Company, and will continue such efforts pending confirmation of the Proposed Plan by the Bankruptcy Court.

Events Leading to the Commencement of the Chapter 11 Cases

In May of 2013, the Company announced a multi-year profit improvement plan (the “Multi-Year Turnaround Plan”) designed to accelerate the Company’s three fundamental strategies of strengthening its brands, growing sales, and improving operational efficiencies. The new strategy was designed to focus the Company on its three core brands, globalize key functions, and reduce cost structure. The Company’s previous organizational structure was decentralized with each of its three geographic segments: Americas (consisting of United States, Mexico, Brazil, and Canada), EMEA (consisting of Europe, the Middle East, and Africa), and APAC (consisting of Australia, New Zealand, and the Pacific Rim, and headquartered in Torquay, Australia), operating primarily independently. This framework created a fragmented enterprise with regional brand inconsistencies, suboptimal coordination and limited the Company’s ability to take advantage of its global scale. The Company was further challenged in managing its business as a result of the significant indebtedness incurred by the Company to finance the acquisition of Skis Rossignol, S.A. in July 2005. In response to these challenges, the senior management team, with assistance from outside consultants, completed a thorough review of the Company’s global operations to determine the best path for sustainable cost savings and profitable growth. The resulting Multi-Year Turnaround Plan was implemented with a focus on the following:


(a)	Brand Strength: (1) clarifying the positioning of the Company’s three flagship brands (Quiksilver, Roxy, and DC); (2) divesting certain non-core brands; (3) globalizing product design and merchandising; and (4) licensing of secondary or peripheral product categories;


(b)	Sales Growth: (1) reprioritizing marketing investments to emphasize in-store and print marketing along with digital and social media; (2) continued investment in emerging markets and e-commerce; and (3) improving sales execution; and

(c)

Operational Efficiencies: (1) optimizing the Company’s supply chain; (2) reducing product styles by over 30%; (3) improving, selling, general and administrative expense by at least 300 basis points; (4) centralizing global responsibility for key functions, including product design, supply chain, marketing, retail stores, licensing and administrative functions; and (5) closing underperforming retail stores.

As one component of the Multi-Year Turnaround Plan, in November 2013, the Company completed the sale of Mervin Manufacturing, Inc., a manufacturer of snowboards and related products, for $58 million. As a continuation of the Multi-Year Turnaround Plan, in 2014, the Company continued to divest certain non-core businesses in order to improve its focus on the operations of its three core brands (Quiksilver, Roxy, and DC Shoes). In January 2014, it completed the sale of substantially all of the assets of Hawk Designs, its subsidiary that owned and operated the “Hawk” brand, for $19 million. Lastly, in December 2014, at the completion of the sale of the Company’s 51% ownership stake in Surfdome Shop Ltd., a multi-brand e-commerce business, the Company received net proceeds of approximately $16 million.

In addition, as part of the Multi-Year Turnaround Plan initiatives, management spent considerable time on a plan to rationalize the Company’s retail store base, particularly in the United States. As a culmination of those efforts, the Company developed a store closing plan (the “Store Closing Plan”), which it continued to refine from time to time. In particular, during the prepetition period, the Company started to close stores consistent with the Store Closing Plan as and when underperforming store leases came up for renewal or otherwise when there was an opportunity to exit a lease early, such as due to a landlord request. In addition, the Company determined that it would be in the best interests of the Debtors to sell certain excess inventory. To that end, it began soliciting offers from potential liquidation firms to conduct sales of excess inventory (the “Pop Up Sales”) through a “pop up” store program - i.e., temporary locations outside of the Company’s stores (collectively, the “Pop Up Stores”). QS Retail, Inc. entered into the Letter Agreement Governing Inventory Disposition (the “Pop Up Store Agreement”) with Hilco Merchant Resources, LLC and Gordon Brothers Retail Partners, LLC (collectively, the “Agent”), dated June 8, 2015, to conduct the Pop Up Sales. QS Retail, Inc. then entered into a series of short-term license agreements that provided the limited right to use the space to sell merchandise for a limited period - i.e., locations at which to conduct the Pop Up Sales.

Notwithstanding these efforts, in the first fiscal quarter of 2015, the Company reported a net loss, following softer revenue results, year over year from 2014, although gross margin remained largely flat. Specifically, the Company, like many others with a major distribution center located in the western U.S., suffered the impact of the Los Angeles port labor dispute during the early months of 2015. In addition, although the Company’s EMEA operation performed relatively consistently over the same period, the Company’s overall results did not reflect this favorable performance due to the impact of currency exchange rates between the euro and the U.S. dollar (in which currency the Company’s results are reported).

At the end of March 2015, the Company announced management changes in several key areas. First, Pierre Agnes, formerly President, was promoted to Chief Executive Officer and appointed to the board of directors. With over twenty-seven years at the Company, Mr. Agnes was (and remains) well positioned to lead the future of the Company. Second, Greg Healy was promoted to President. Mr. Healy has been with the Company since 1998 and has held several management positions within the Company, including CEO of the Australasia region and CFO, COO, and President of the APAC region. Third, Thomas Chambolle, formerly the regional CFO of EMEA, was promoted to global CFO. Mr. Chambolle’s experience includes working with French government agencies during the global financial crisis as well as serving as CFO of other large companies.

The Strategy Review Committee

As new management continued to execute and refine the Multi-Year Turnaround Plan, the Company continued to face liquidity challenges, particularly in the U.S. In order to support management’s efforts to address liquidity issues, the board of directors formed the Strategy Review Committee (the “SRC”), a subcommittee of the board.

The members of the SRC include Joseph Berardino (Chairman), Michael Clarke, Andrew Sweet, and William M. Barnum, Jr. Mr. Berardino is a managing director in charge of the East region of Alvarez & Marsal’s business consulting practice, and has served on the full board of directors of the Company since 2011. Mr. Clarke has held a number of executive management positions in some of the most recognized companies in the world, including Kraft Foods Europe and The Coca-Cola Company, among others, currently serves as the CEO of Treasury Wine Estates, and has served on the full board of directors of the Company since 2013. Mr. Sweet has extensive experience in private equity and investment banking, is currently a managing director of private equity firm Rhône Group, and has served on the full board of directors of the Company since 2009. Finally, Mr. Barnum serves as a director of several private companies, has been a managing member of venture capital and private

equity investment firm Brentwood Associates since 1986, and has served on the full board of directors of the Company since 1991.

Initially, the SRC recommended engaging financial professionals from Alix Partners (“Alix”) to support management’s efforts to develop the Company’s general business plan, liquidity forecast and restore supply chain efficiencies. In addition, the SRC recommended that the Company retain Peter J. Solomon Company (“PJSC”) as investment banker to explore and advise the SRC and the Company with respect to all range of strategic alternatives.

Following preliminary due diligence, and given its deep background with the Company in connection with prior engagements, PJSC recommended that the Company explore a global refinancing of existing indebtedness at the Company’s full board meeting on June 13, 2015. The purpose of the global refinancing was to supplement the Company’s liquidity and address the maturity of the €200 Euro Notes due December 15, 2017. PJSC initiated contact with parties interested in refinancing the Euro Notes and supplemented the process with outreach to well-recognized second lien lenders to explore the possibility of providing further advances under the borrowing base collateral within the Prepetition ABL Facility.

With respect to refinancing the Euro Notes, PJSC identified 19 potential sources of financing, of which eight executed confidentiality agreements. Of those, PJSC engaged in more advanced discussions with two. Ultimately, as negotiations evolved, Oaktree, who ultimately became the Plan Sponsor, committed a significant level of internal and external professional resources to the process and engaged in a deep level of due diligence with management in multiple Company offices worldwide, as discussed in more detail below.

With respect to expanding the Prepetition ABL Facility, PJSC evaluated structures to provide the Company with incremental liquidity under the existing borrowing base. The alternatives included seeking a first-in-last-out (“FILO”) loan structure as well as a second or subordinated lien on the existing borrowing base. PJSC engaged in more detailed discussions and negotiations with 2 leading FILO lenders who executed confidentiality agreements. Ultimately, the two lenders declined to continue in the process due to their view of the insufficient loan to value ratio. PJSC continued efforts to develop this liquidity source up to and including incorporating such a potential structure into the proposed DIP Facilities.

Beginning in July 2015, the SRC engaged with management and PJSC with respect to these strategic alternatives on a more frequent basis, as the due date for semi-annual payments on the Secured Notes and Unsecured Notes was approaching on August 3, 2015. PJSC provided regular updates on potential refinancing opportunities, and management provided similar updates regarding liquidity forecasts. Also in July, the Company retained FTI Consulting (“FTI”) to provide support for management with respect to liquidity enhancement and forecasting, and to assist the Company in working with the existing ABL Lenders with respect to borrowing base adjustments and reserve negotiations. Finally, in July, the SRC requested that the firm’s longstanding counsel, Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), advise the Company, including the SRC and the full board, with respect to contingency planning.

At the end of July, management and certain of the Company’s advisors met with the Prepetition ABL Lenders regarding liquidity, the status of refinancing efforts and the Company’s upcoming August 3, 2015 interest payment obligations, including the availability of a 30-day grace period with respect to those obligations. The Prepetition ABL Lenders confirmed that sufficient liquidity was available to make the required interest payments, and management believed that it would have sufficient liquidity to allow PJSC to continue its efforts to seek adequate refinancing for the Company in the near term. The Company had also identified other sources of potential liquidity, in the form of unencumbered assets in EMEA, that might be available to support limited new financing.

The Company’s management and advisors reported the outcome of such meeting to the SRC, and provided an update on refinancing efforts. Management reported its view that while failure to make the August interest payments would preserve short-term liquidity, the market impact of the announcement of the missed payment would have a significant negative impact on vendor and customer confidence during a critical period of building the Company’s 2016 spring wholesale order book. In addition, PJSC and the Company believed that such an announcement would impair the Company’s ability to execute on its ongoing refinancing efforts. After careful consideration of these and related factors, including evaluation of other strategic alternative possibilities that existed, management and the SRC recommended that the Company make the interest payments due on August 3, 2015, and the board approved that recommendation unanimously.

In August, the Company, in consultation with its advisors, including FTI, determined that it was necessary to accelerate and potentially expand the Store Closing Plan in the context of a Chapter 11 filing. In particular, the Debtors decided to close 27 unprofitable stores (collectively, the “Closing Locations”) and liquidate the inventory and other assets (the “Store Closing Sales” and together with the Pop Up Sales, the “Sales”) of the Closing Locations. To maximize the benefit to the Debtors’ estates from the Store Closing Sales, the Debtors and FTI obtained five bids from national liquidation firms that specialize in, among other things, the large-scale liquidation of assets of the type and scale of that owned by the Debtors. The Debtors, together with their advisors, determined that the bid presented by the Agent, who was conducting the Pop Up Sales, represented

the highest and best offer and that entering into the Letter Agreement Governing Inventory Disposition, dated September 4, 2015 between QS Retail and the Agent (the “Store Closing Agreement,” and together with the Pop Up Store Agreement, the “Agency Agreements”) would minimize costs and maximize value.

In mid-August, Oaktree advised the Company that it was prepared to execute a refinancing transaction but only if all of the Company’s global intellectual property and brands (the “IP”) was among the collateral securing such financing. Unfortunately, the covenants underlying the Company’s existing indebtedness made such a refinancing impracticable, absent the ability to restructure such indebtedness available in Chapter 11. As a consequence, the Company immediately engaged with Oaktree regarding the possibility of executing the refinancing and restructuring transaction in the context of a Chapter 11 case, as a continuation of the parallel contingency planning efforts that the Company had begun in July 2015. Those negotiations culminated in the DIP Term Loan Facility and PSA, each as described below.

The Plan Sponsor Agreement

During late August and early September, the Company and Oaktree, through their respective advisors, negotiated the terms of a potential plan of reorganization. The features of the Proposed Plan were set forth in the Plan Sponsor Agreement and are summarized below (with amendments and revisions as appropriate to reflect the terms of the Proposed Plan):


(a)	The Debtors’ Prepetition ABL Facility will be replaced with postpetition financing, and ultimately refinanced through an exit ABL revolver facility;


(b)	The Secured Notes will be converted into equity;


(c)	Additional consideration valued at not less than $12.5 million will be offered to the Debtors’ unsecured creditors, subject to settlement of any intercreditor disputes;


(d)	The Debtors’ guaranties of the Euro Notes will be reinstated;


(e)	Existing equity will be cancelled; and


(f)	Oaktree will backstop the Rights Offerings in accordance with the Plan Sponsor Agreement and the Backstop Commitment Letter.

Oaktree also cooperated with the Debtors in negotiating and obtaining consents from a majority of its Euro Notes holders to waive certain defaults that would otherwise arise from the Debtors’ Chapter 11 cases. Such waiver is an important component of the Debtors’ efforts to preserve value in EMEA and APAC for the benefit of United States creditors during the Chapter 11 process.

The DIP Facilities

As a part of its contingency planning process, the Debtors, through their investment bankers at PJSC, solicited proposals for bankruptcy financing from a number of parties, including the Prepetition ABL Lenders, Oaktree and other parties that had participated in discussions with the Debtors in potential refinancing of the Euro Notes, and other financial institutions. An important consideration for the Debtors for any postpetition financing was to have sufficient funding for a plan of reorganization, as the Debtors had determined that preserving its EMEA operations (and the Euro Notes) would maximize the value of its global enterprise.

The Debtors’ Prepetition ABL Facility is comparable to a traditional asset-based revolver where borrowings are subject to a borrowing base, limited by specific advance rates which vary by collateral type. Given the Debtors’ liquidity profile, however, it quickly became evident that a postpetition ABL would be insufficient for its needs for financing to support an entire Chapter 11 plan process.

As noted above, Oaktree was willing to provide sufficient financing for the plan process, but the initial pricing offered by Oaktree was near the high end of the range of market for comparable DIP proposals, as explained in the Declaration of Durc A. Savini of PJSC in support of the DIP Motion (the “Savini Declaration”) [Docket No. 19]. Accordingly, PJSC and the Debtors negotiated with Oaktree and other market participants to develop a more competitive cost of financing.

After much dialogue, the Debtors and PJSC were successful in forging a collaborative debtor-in-possession financing proposal by both Bank of America, one of the Prepetition ABL Lenders, and Oaktree, in a transaction whereby the Debtors would enjoy a lower blended cost of funds. On September 10, 2015, QS Wholesale, as lead borrower, Quiksilver, Inc. as parent, and Bank of America, as administrative agent and collateral agent, inter alia, entered into the SDIP ABL Credit Agreement. Additionally, concurrently therewith, QS Wholesale, as borrower, Quiksilver, Inc. as parent, and OCM FIE, LLC, an affiliate of Oaktree, as administrative agent, inter alia, entered into the Senior Secured Super-Priority Debtor-in-Possession Credit Agreement DIP Term Loan Credit Agreement.

Known or Anticipated Trends

Based on our recent operating results and current perspective on our operating environment, we anticipate certain trends continuing to impact our operating results over the next few quarters, including:


•	Year-over-year net revenue and gross margin comparisons continuing to be unfavorable due primarily to the impact of currency exchange rates and licensing. We also expect our net revenues and margins to be unfavorably impacted by late deliveries in the short-term and an evolving distribution channel strategy, particularly in North America.


•	Year-over-year SG&A reductions continuing due to expense reduction initiatives implemented in fiscal 2014 and 2015, as well as the impact of foreign currency exchange rates; and


•	Capital expenditures continuing below prior year capital investment levels.

Discontinued Operations

In order to improve our focus on the operations and development of our three core brands (Quiksilver, Roxy and DC), we have divested certain non-core businesses. In the first quarter of fiscal 2014, we completed the sale of our Mervin business for $58 million. In the second quarter of fiscal 2014, we completed the sale of substantially all of the assets of our Hawk business for $19 million. The sale of these businesses generated a net after-tax gain of approximately $30 million, which is included in income from discontinued operations for fiscal 2014. Our sale of the Mervin and Hawk businesses generated income tax expense of approximately $19 million during fiscal 2014. However, as we do not expect to pay income tax on these sales after application of available loss carry-forwards, an offsetting income tax benefit was recognized within continuing operations.

In December 2014, the first quarter of fiscal 2015, we sold our 51% ownership stake in Surfdome Shop Ltd., a multi-brand e-commerce business ("Surfdome"). At the completion of the sale, we received net proceeds of approximately $16 million, which included payments to us from Surfdome for all outstanding loans and trade receivables. The transaction resulted in an after-tax gain of $7 million in the first quarter of fiscal 2015, which is included in income from discontinued operations.

The Mervin, Hawk and Surfdome businesses are presented as discontinued operations in our consolidated financial statements for all periods presented. See Note 19 — Discontinued Operations to our consolidated financial statements for further discussion of the operating results of our discontinued businesses.

Results of Operations

The following table sets forth selected statement of operations data and other data from continuing operations expressed as a percentage of net revenues for the fiscal years indicated. The discussion of our operating results from continuing operations that follows should be read in conjunction with the table.



	Year Ended October 31,
	2015		2014		2013
Statements of Operations Data
Revenues, net	100.0	%	100.0	%	100.0	%
Gross profit	46.2	%	48.6	%	48.1	%
Selling, general and administrative expense	51.5	%	52.6	%	47.1	%
Goodwill impairment	5.9	%	11.3	%	—	%
Asset impairments	2.9	%	0.7	%	0.7	%
Operating (loss)/income	(14.1	)%	(16.1	)%	0.3	%
Interest expense, net	5.0	%	4.8	%	3.9	%
Foreign currency loss	0.5	%	0.2	%	0.3	%
Reorganization items	2.6	%	—	%	—	%
Loss before provision/(benefit) for income taxes	(22.1	)%	(21.1	)%	(3.8	)%

Reconciliation of GAAP Results to Non-GAAP Measures

In order to provide additional information regarding comparable growth rates in our regional operating segments, brands, distribution channels and product groups, we make reference to net revenues on a "constant currency continuing category" basis, which is a non-GAAP measure. Our use of this non-GAAP measure is not intended to be a replacement of net revenues reported on a GAAP basis and readers should not ignore our GAAP-based net revenue results. We believe constant currency

continuing category reporting provides additional perspective into the changes in our net revenues, as it adjusts for the effect of changing foreign currency exchange rates from period to period and the net revenue impact from product categories that have been transitioned to a third-party licensing model. Constant currency is calculated by taking the average foreign currency exchange rate for the current period and applying that same rate to the comparable prior year period. Continuing category impacts are determined by removing the comparable prior period wholesale channel net revenues generated from product categories which are now licensed, as well as the current period licensing net revenues generated from those same product categories.

The following tables present net revenues from continuing operations by segment, brand, channel and product group on an as reported (GAAP) basis, and on a constant currency continuing category (non-GAAP) basis.

Fiscal 2015 Compared to Fiscal 2014

Revenues, net by Segment

Net revenues by segment, in both historical and on a constant currency continuing category basis, for fiscal 2015 and 2014 were as follows:



In $millions	Americas			EMEA			APAC			Corporate			Total
Fiscal 2015
Net revenues as reported	$	619		$	477		$	245		$	5		$	1,346
Less licensing revenue from licensed product categories	(5		)	—			—			—			(5		)
Constant currency continuing category net revenues	$	614		$	477		$	245		$	5		$	1,341

Fiscal 2014
Net revenues as reported	$	724		$	584		$	262		$	1		$	1,571
Impact of fiscal 2015 foreign exchange rates	(30		)	(99		)	(33		)	—			(162		)
Less wholesale net revenues from licensed product categories	(57		)	—			(1		)	—			(58		)
Constant currency continuing category net revenues	$	637		$	484		$	229		$	1		$	1,351

Change in net revenues as reported ($)	$	(106	)	$	(106	)	$	(17	)	$	4		$	(226	)
Change in net revenues as reported (%)	(15		)%	(18		)%	(6		)%	450		%	(14		)%
Change in constant currency continuing category net revenues ($)	$	(23	)	$	(7	)	$	16		$	4		$	(10	)
Change in constant currency continuing category net revenues (%)	(4		)%	(1		)%	7		%	547		%	(1		)%

Net revenues in our Americas segment decreased $106 million, or 15%, on an as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates contributed $30 million of this decrease. In addition, our licensing of peripheral product categories contributed $57 million of this decrease. Net revenues on a constant currency continuing category basis decreased by $23 million, or 4%, primarily due to a reduction in Roxy and DC brand apparel net revenues in the Americas wholesale channel of $14 million and $6 million, respectively. Net revenues in the emerging market of Mexico increased by 15% on an as reported basis (35% in constant currency). Net revenues in the emerging market of Brazil decreased by 22% on an as reported basis reflecting the combination of economic slowdown in Brazil in fiscal 2015 and the negative impact of logistics issues, but remained flat in constant currency. Net revenues in the Americas e-commerce channel decreased 9% on a constant currency continuing category basis in fiscal 2015, primarily due to a reduction in discounting.

Net revenues in our EMEA segment decreased $106 million, or 18%, on an as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates contributed $99 million of this decrease. Our licensing of peripheral product categories did not materially affect the EMEA region. Net revenues on a constant currency continuing category basis decreased by $7 million, or 1%, primarily due to lower apparel net revenues in the wholesale channel. EMEA wholesale apparel net revenues decreased across all three core brands, but more significantly in the Quiksilver brand. Net revenues in the e-commerce channel increased 44% on a constant currency continuing category basis in fiscal 2015. Net revenues in the emerging market of Russia decreased 18% on an as reported basis, but increased 34% on a constant currency basis, reflecting the significant adverse impact of currency exchange rate movements.

Net revenues in our APAC segment decreased $17 million, or 6%, on an as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates had a negative impact of $33 million. In addition, our licensing of peripheral product categories contributed $1 million of this decrease. Net revenues on a constant currency continuing category basis increased by $16 million, or 7%, primarily due to retail and e-commerce channel net revenue growth. Net revenues in the emerging markets of China, South Korea, Taiwan and Indonesia increased by a combined 12% on an as reported basis (21% in constant currency).

Aggregate net revenues in our emerging markets, which include Brazil, Mexico, Russia, Indonesia, South Korea, China, and Taiwan, decreased 5% versus the comparable prior year period on an as reported basis, but increased 20% in constant currency, reflecting the significant adverse impact of the stronger U.S. dollar on local currency results. These markets are reported within their respective regional segments above.

Revenues, net By Brand

Net revenues by brand, in both historical and on a constant currency continuing category basis, for fiscal 2015 and 2014 were as follows:



In $millions	Quiksilver			Roxy			DC			Other			Total
Fiscal 2015
Net revenues as reported	$	537		$	404		$	367		$	39		$	1,346
Less licensing revenue from licensed product categories	(1		)	(4		)	(1		)	—			(5		)
Constant currency continuing category net revenues	$	536		$	400		$	367		$	39		$	1,341

Fiscal 2014
Net revenues as reported	$	628		$	480		$	427		$	36		$	1,571
Impact of fiscal 2015 foreign exchange rates	(70		)	(45		)	(42		)	(5		)	(162		)
Less wholesale net revenues from licensed product categories	(20		)	(20		)	(18		)	—			(58		)
Constant currency continuing category net revenues	$	538		$	416		$	366		$	31		$	1,351

Change in net revenues as reported ($)	$	(92	)	$	(77	)	$	(60	)	$	3		$	(226	)
Change in net revenues as reported (%)	(15		)%	(16		)%	(14		)%	8		%	(14		)%
Change in constant currency continuing category net revenues ($)	$	(2	)	$	(16	)	$	—		$	8		$	(10	)
Change in constant currency continuing category net revenues (%)	—		%	(4		)%	—		%	25		%	(1		)%

Quiksilver brand net revenues decreased $92 million, or 15%, on an as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates contributed $70 million of this decrease. Our licensing of peripheral product categories contributed $20 million of this decrease. Net revenues on a constant currency continuing category basis decreased by $2 million, or 0.4%, primarily due to lower apparel net revenues in the EMEA wholesale channel.

Roxy brand net revenues decreased $77 million, or 16%, on an as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates contributed $45 million of this decrease. Our licensing of peripheral product categories contributed $20 million of this decrease. Net revenues on a constant currency continuing category basis decreased $16 million, or 4%, primarily due to lower apparel net revenues in the Americas wholesale channel.

DC brand net revenues decreased $60 million, or 14%, on an as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates contributed $42 million of this decrease. Our licensing of peripheral product categories contributed $18 million of this decrease. Net revenues on a constant currency continuing category basis remained unchanged.

Revenues, net By Channel

Net revenues by channel, in both historical and on a constant currency continuing category basis, for fiscal 2015 and 2014 were as follows:



In $millions	Wholesale			Retail			E-com			Licensing			Total
Fiscal 2015
Net revenues as reported	$	840		$	408		$	82		$	16		$	1,346
Less licensing revenue from licensed product categories	—			—			—			(5		)	(5		)
Constant currency continuing category net revenues	$	840		$	408		$	82		$	11		$	1,341

Fiscal 2014
Net revenues as reported	$	1,039		$	445		$	77		$	10		$	1,571
Impact of fiscal 2015 foreign exchange rates	(107		)	(50		)	(6		)	—			(162		)
Less wholesale net revenues from licensed product categories	(58		)	—			—			—			(58		)
Constant currency continuing category net revenues	$	874		$	395		$	72		$	10		$	1,351

Change in net revenues as reported ($)	$	(199	)	$	(37	)	$	5		$	5		$	(226	)
Change in net revenues as reported (%)	(19		)%	(8		)%	6		%	54		%	(14		)%
Change in constant currency continuing category net revenues ($)	$	(34	)	$	13		$	11		$	1		$	(10	)
Change in constant currency continuing category net revenues (%)	(4		)%	3		%	15		%	5		%	(1		)%

Wholesale net revenues decreased $199 million, or 19%, on an as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates contributed $107 million of this decrease. Our licensing of peripheral product categories contributed $58 million to this decrease. On a constant currency continuing category basis, wholesale net revenues decreased $34 million, or 4%, primarily due to lower apparel net revenues in our Americas and EMEA wholesale channels. Wholesale channel apparel net revenues decreased in each core brand.

Retail net revenues decreased $37 million, or 8%, on as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates contributed $50 million towards this decrease. Our licensing of peripheral product categories did not affect our retail channel. On a constant currency continuing category basis, retail net revenues increased $13 million, or 3%, versus the prior year. Global retail same-store sales were down 2.7% in fiscal 2015, the effect of which was more than offset by 41 net new store openings during the previous twelve months.

E-commerce net revenues increased $5 million, or 6%, on as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates had a negative impact of $6 million. Our licensing of peripheral product categories did not affect our e-commerce channel. On a constant currency continuing category basis, e-commerce net revenues increased $11 million, or 15%, versus the prior year. E-commerce net revenues increased significantly in our EMEA and APAC segments as we expanded our online service area, while Americas e-commerce net revenues decreased 9% as a result of a reduction in discounting. On a constant currency continuing category basis, e-commerce net revenues increased 16%, 3% and 25% in the Quiksilver, Roxy and DC brands, respectively.

Revenues, net By Product Group

Net revenues by product group, in both historical and on a constant currency continuing category basis, for fiscal 2015 and 2014 were as follows:



	Apparel and Accessories
In $millions	Apparel and Accessories			Footwear			Total
Fiscal 2015
Net revenues as reported	$	963		$	383		$	1,346
Less licensing revenue from licensed product categories	(5		)	—			(5		)
Constant currency continuing category net revenues	$	958		$	383		$	1,341

Fiscal 2014
Net revenues as reported	$	1,174		$	397		$	1,571
Impact of fiscal 2015 foreign exchange rates	(125		)	(37		)	(162		)
Less wholesale net revenues from licensed product categories	(58		)	—			(58		)
Constant currency continuing category net revenues	$	991		$	360		$	1,351

Change in net revenues as reported ($)	$	(211	)	$	(15	)	$	(226	)
Change in net revenues as reported (%)	(18		)%	(4		)%	(14		)%
Change in constant currency continuing category net revenues ($)	$	(32	)	$	22		$	(10	)
Change in constant currency continuing category net revenues (%)	(3		)%	6		%	(1		)%

Apparel and accessories net revenues decreased $211 million, or 18%, on an as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates contributed $125 million of this decrease. Our licensing of peripheral product categories contributed $58 million of this decrease. On a constant currency continuing category basis, net revenues decreased $32 million, or 3%, primarily due to net revenue declines in the Americas and EMEA wholesale channels across all three core brands.

Footwear net revenues decreased $15 million, or 4%, on an as reported basis in fiscal 2015 versus the prior year. Changes in foreign currency exchange rates contributed $37 million of this decrease. Our licensing of peripheral product categories did not affect our footwear product group. On a constant currency continuing category basis, net revenues increased $22 million, or 6%, primarily due to increased net revenue in the Quiksilver wholesale channel.

Gross Profit

Gross profit decreased to $621 million in fiscal 2015 from $763 million in fiscal 2014. Gross margin, or gross profit as a percentage of net revenues, declined to 46.2% in fiscal 2015 from 48.6% in the prior fiscal year. This 240 basis point decrease in gross margin was primarily due to increased discounting in the Americas and EMEA wholesale channels (approximately 300 basis points), the negative impact of the foreign currency variation on cost of goods sold (approximately 180 basis points), and increased inventory reserves (approximately 80 basis points), partially offset by net revenue growth from our higher margin direct-to-consumer channels (approximately 310 basis points).

Gross margin by segment for fiscal 2015 and 2014 was as follows:



					Basis Point (bp) Change Increase (Decrease)
	Year Ended October 31,
	2015		2014
Americas	40.6	%	41.3	%	(70) bp
EMEA	52.6	%	55.6	%	(300) bp
APAC	53.0	%	54.6	%	(160) bp
Consolidated	46.2	%	48.6	%	(240) bp

Selling, General and Administrative Expense ("SG&A")

SG&A from continuing operations decreased $134 million, or 16%, to $693 million in fiscal 2015 from $827 million in fiscal 2014. Changes in foreign currency exchange rates contributed approximately $82 million of this decrease. Of the remaining $52 million decrease, $41 million was attributable to reductions in employee compensation and $11 million was attributable to reduced bad debt expenses.

SG&A by segment as reported for fiscal 2015 and 2014 was as follows:



	Year Ended October 31,								$ Change Increase (Decrease)			Basis Point (bp) Change Increase (Decrease)
	2015				2014
In millions			% of Net Revenues				% of Net Revenues
Americas	$	288	46.5	%	$	335	46.2	%	$	(47	)	30	bp
EMEA	255		53.4	%	311		53.3	%	(56		)	10	bp
APAC	142		57.8	%	156		59.3	%	(14		)	(150	) bp
Corporate Operations	8				26				(18		)
Consolidated	$	693	51.5	%	$	827	52.6	%	$	(134	)	(110	) bp

SG&A by segment for fiscal 2014 has been reclassified to conform to the current year presentation as a result of the Company's centralization of certain global business functions. The decrease in Americas segment SG&A was primarily due to reductions in employee compensation, bad debt expenses, and early lease termination costs, as well as changes in foreign currency exchange rates. The decrease in EMEA and APAC segment SG&A was almost entirely due to changes in foreign currency exchange rates. The decrease in Corporate Operations segment SG&A was primarily due to reductions in employee compensation.

Goodwill Impairments

Goodwill impairment charges were $80 million in fiscal 2015 compared to $178 million in fiscal 2014. In the third quarter of fiscal 2015, goodwill impairment charges of $74 million and $6 million were recorded in our Americas and APAC reporting units, respectively. In the third quarter of fiscal 2014, a goodwill impairment charge of $178 million was recorded in our EMEA reporting unit.

Asset Impairments

Asset impairment charges were $39 million in fiscal 2015 compared to $11 million in fiscal 2014. Impairment charges in fiscal 2015 included $21 million and $3 million to write-down the carrying value of the Quiksilver trademark within the EMEA and APAC reporting units, respectively and $11 million and $5 million related to under-performing retail stores in the Americas and EMEA reporting units, respectively. Impairment charges in fiscal 2014 were due to impairments associated with planned restructuring of our e-commerce and other information technology systems of $7 million, and impairments of certain under-performing retail stores of $4 million.

Non-operating Expenses

Interest expense was $67 million in fiscal 2015 compared to $76 million in fiscal 2014. This decrease was primarily due to lower interest on the 2018 Notes and 2020 Notes and changes in foreign currency exchange rates on our euro-denominated interest expense. On the Petition Date, we ceased recording interest expense on the 2018 Notes and 2020 Notes, and as a result, $6 million of contractual additional interest expense was not recorded in fiscal 2015.

Foreign currency loss was $6 million in fiscal 2015 compared to $3 million in fiscal 2014.

Reorganization items include direct and incremental costs related to the Bankruptcy Proceedings. Such costs include professional fees related to the Bankruptcy Proceedings and debtor-in-possession financing of $15 million, the write-off of unamortized deferred debt financing costs on pre-petition debt of $13 million, the write-off of petition-related debt discounts of $7 million, and losses on rejected executory contracts of $1 million.

Income tax expense for fiscal 2015 was $16 million compared to an income tax benefit of $4 million in fiscal 2014. Income tax expense for fiscal 2015 includes a $7 million non-cash valuation allowance recorded during the fourth quarter against deferred tax assets of certain business units within our APAC segment. The sale of the Mervin and Hawk businesses resulted in aggregate income tax expense of approximately $19 million during fiscal 2014. However, as we do not expect to pay income tax on these sales after application of available loss carry-forwards, an offsetting income tax benefit was recognized within continuing operations. The operations of Surfdome generated a tax benefit of approximately $3 million in fiscal 2014.

Excluding this income tax benefit, we generated income tax expense in both fiscal 2015 and 2014 as we recorded tax expense in certain tax jurisdictions but were unable to record tax benefits against the losses in those jurisdictions where we have previously recorded valuation allowances.

Net Loss from Continuing Operations Attributable to Quiksilver, Inc.

Our net loss from continuing operations attributable to Quiksilver, Inc. in fiscal 2015 was $314 million, or $1.83 per share, compared to $327 million, or $1.92 per share, for fiscal 2014. The increased net loss was primarily attributable to the lower gross profit in fiscal 2015 as noted above.

Fiscal 2014 Compared to Fiscal 2013

Revenues, net By Segment

Net revenues by segment, in both historical and on a constant currency continuing category basis, for fiscal 2014 and 2013 were as follows:



In $millions	Americas			EMEA			APAC			Corporate			Total
Fiscal 2014
Net revenues as reported	$	724		584			262			1			$	1,571
Less licensing revenue from licensed product categories	(5		)	—			—			—			(5		)
Constant currency continuing category net revenues	$	719		$	584		$	262		$	1		$	1,566

Fiscal 2013
Net revenues as reported	$	902		632			282			4			$	1,820
Impact of fiscal 2014 foreign exchange rates	(13		)	5			(21		)	—			(29		)
Less wholesale net revenues from licensed product categories	(27		)	—			—			—			(27		)
Constant currency continuing category net revenues	$	862		$	637		$	261		$	4		$	1,764

Change in net revenues as reported ($)	$	(178	)	$	(48	)	$	(20	)	$	(3	)	$	(248	)
Change in net revenues as reported (%)	(20		)%	(8		)%	(7		)%	(77		)%	(14		)%
Change in constant currency continuing category net revenues ($)	$	(143	)	$	(53	)	$	1		$	(3	)	$	(197	)
Change in constant currency continuing category net revenues (%)	(17		)%	(8		)%	1		%	(77		)%	(11		)%

Net revenues in our Americas segment decreased $178 million, or 20%, on an as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $13 million of this decrease. In addition, our licensing of peripheral product categories contributed $27 million of this decrease. Net revenues on a constant currency continuing category basis decreased by $143 million, or 17%, primarily due to a decrease of $126 million in the wholesale channel, most significantly in the DC brand, with our Quiksilver and Roxy brands also generating decreased sales. These declines were focused in North America. On a constant currency continuing category basis, net revenues in the emerging markets of Brazil and Mexico increased by a combined 6% on an as reported basis (13% in constant currency).

Net revenues in our EMEA segment decreased $48 million, or 8%, on an as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $5 million of this decrease. Our licensing of peripheral product categories did not affect the EMEA region. Net revenues on a constant currency continuing category basis decreased by $53 million, or 8%, primarily due to a decrease of $57 million in the wholesale channel, primarily in the Quiksilver and DC brands, with our Roxy brand also generating decreased sales. On a constant currency continuing category basis, net revenues decreased most significantly in Germany and France where net revenues declined 23% and 7%, respectively, on an as reported basis. These declines were partially offset by growth of 5% in Russia (18% in constant currency).

Net revenues in our APAC segment decreased $20 million, or 7%, on an as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $21 million of this decrease. Our licensing of peripheral product categories did not affect the APAC region. Net revenues on a constant currency continuing category basis increased by $1 million, or 1%, due to increased sales in the retail ($10 million) and e-commerce ($4 million) channels, partially offset by a decrease of $12 million in the wholesale channel across all three brands. Net revenues decreased 12% in Australia on an as reported basis (6% in constant currency), but net revenues in our APAC emerging markets, which include Indonesia, South Korea, Taiwan and China, grew 5% collectively (14% in constant currency).

Net revenues in our emerging markets as a whole, which include Brazil, Russia, Indonesia, Mexico, South Korea, Taiwan and China increased 5% during fiscal 2014 compared to fiscal 2013 (14% on a constant currency continuing category basis). These markets are reported within their respective regional segments above.

Revenues, net By Brand

Net revenues by brand, in both historical and on a constant currency continuing category basis, for fiscal 2014 and 2013 were as follows:



In $millions	Quiksilver			Roxy			DC			Other			Total
Fiscal 2014
Net revenues as reported	$	628		$	480		$	427		$	36		$	1,571
Less licensing revenue from licensed product categories	(3		)	—			(2		)	—			(5		)
Constant currency continuing category net revenues	$	625		$	480		$	425		$	36		$	1,566

Fiscal 2013
Net revenues as reported	$	724		$	514		$	545		$	36		$	1,820
Impact of fiscal 2014 foreign exchange rates	(12		)	(9		)	(8		)	—			(29		)
Less wholesale net revenues from licensed product categories	(16		)	—			(11		)	—			(27		)
Constant currency continuing category net revenues	$	696		$	505		$	526		$	36		$	1,764

Change in net revenues as reported ($)	$	(96	)	$	(33	)	$	(118	)	$	(1	)	$	(248	)
Change in net revenues as reported (%)	(13		)%	(6		)%	(22		)%	(2		)%	(14		)%
Change in constant currency continuing category net revenues ($)	$	(70	)	$	(24	)	$	(101	)	$	(1	)	$	(197	)
Change in constant currency continuing category net revenues (%)	(10		)%	(5		)%	(19		)%	(2		)%	(11		)%

Quiksilver brand net revenues decreased $96 million, or 13%, on an as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $12 million of this decrease. Our licensing of peripheral product categories contributed $16 million of this decrease. Net revenues on a constant currency continuing category basis decreased by $70 million, or 10%, primarily due to lower net revenues in the EMEA and Americas wholesale channels of $34 million and $25 million, respectively. Wholesale channel net revenues in both the EMEA and Americas segments decreased primarily due to lower customer orders driven by poor prior seasons' sell through, and less effective order fulfillment compared to the prior year.

Roxy brand net revenues decreased $33 million, or 6%, on an as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $9 million of this decrease. Our licensing of peripheral product categories did not affect the Roxy brand. Net revenues on a constant currency continuing category basis decreased $24 million, or 5%, primarily due to lower net revenues in the Americas and EMEA wholesale channels of $16 million and $6 million, respectively. Wholesale channel net revenues in both the Americas and EMEA segments decreased primarily due to lower customer orders driven by poor prior seasons' sell through, and less effective order fulfillment compared to the prior year. The decrease in wholesale channel net revenues was partially offset by increased net revenues from our retail and e-commerce channels.

DC brand net revenues decreased $118 million, or 22%, on an as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $8 million of this decrease. Our licensing of peripheral product categories contributed $11 million of this decrease. Net revenues on a constant currency continuing category basis decreased $101 million, or 19%, primarily due to a $85 million decline in the Americas wholesale channel driven by decreased clearance sales, narrowed product distribution to mid-tier wholesale customers, and lower customer orders driven by poor prior seasons' sell through.

Revenues, net By Channel

Net revenues by channel, in both historical and on a constant currency continuing category basis, for fiscal 2014 and 2013 were as follows:



In $millions	Wholesale			Retail			E-com			Licensing			Total
Fiscal 2014
Net revenues as reported	$	1,039		$	445		$	77		$	10		$	1,571
Less licensing revenue from licensed product categories	—			—			—			(5		)	(5		)
Constant currency continuing category net revenues	$	1,039		$	445		$	77		$	5		$	1,566

Fiscal 2013
Net revenues as reported	$	1,295		$	447		$	69		$	8		$	1,820
Impact of fiscal 2014 foreign exchange rates	(22		)	(7		)	—			—			(29		)
Less wholesale net revenues from licensed product categories	(27		)	—			—			—			(27		)
Constant currency continuing category net revenues	$	1,246		$	440		$	69		$	8		$	1,764

Change in net revenues as reported ($)	$	(256	)	$	(2	)	$	8		$	2		$	(248	)
Change in net revenues as reported (%)	(20		)%	—		%	12		%	29		%	(14		)%
Change in constant currency continuing category net revenues ($)	$	(207	)	$	5		$	8		$	(3	)	$	(197	)
Change in constant currency continuing category net revenues (%)	(17		)%	1		%	12		%	(35		)%	(11		)%

Wholesale net revenues decreased $256 million, or 20%, on an as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $22 million of this decrease. Our licensing of peripheral product categories contributed $27 million to this decrease. On a constant currency continuing category basis, wholesale net revenues decreased $207 million, or 17%, primarily due to lower net revenues in our Americas and EMEA segments of $126 million and $57 million, respectively, of which $85 million was from our DC brand, $25 million was from our Quiksilver brand, and $16 million was from our Roxy brand. Both the Americas and EMEA wholesale channels were unfavorably impacted by lower customer orders driven by poor prior season’s sell through, and less effective order fulfillment compared to the prior year.

Retail net revenues decreased $2 million, or less than 1%, on as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $7 million towards this decrease. Our licensing of peripheral product categories did not affect the retail channel. On a constant currency continuing category basis, retail net revenues increased $5 million, or 1%. Global retail same-store sales were flat for fiscal 2014. We ended fiscal 2014 with 683 total retail stores compared to 631 at the end of fiscal 2013.

E-commerce net revenues increased $8 million, or 12%, on both an as reported basis and a constant currency basis, during fiscal 2014 versus the prior year. Our licensing of peripheral product categories did not affect the e-commerce channel. E-commerce net revenues increased in our EMEA and APAC segments by $6 million and $3 million, respectively, as we expanded our online business across all three core brands.

Revenues, net By Product Group

Net revenues by product group, in both historical and on a constant currency continuing category basis, for fiscal 2014 and 2013 were as follows:



	Apparel and Accessories
In $millions	Apparel and Accessories			Footwear			Total
Fiscal 2014
Net revenues as reported	$	1,174		$	397		$	1,571
Less licensing revenue from licensed product categories	(58		)	—			(58		)
Constant currency continuing category net revenues	$	1,116		$	397		$	1,513

Fiscal 2013
Net revenues as reported	$	1,363		$	457		$	1,820
Impact of fiscal 2014 foreign exchange rates	(24		)	(5		)	(29		)
Less wholesale net revenues from licensed product categories	(27		)	—			(27		)
Constant currency continuing category net revenues	$	1,312		$	452		$	1,764

Change in net revenues as reported ($)	$	(188	)	$	(60	)	$	(248	)
Change in net revenues as reported (%)	(14		)%	(13		)%	(14		)%
Change in constant currency continuing category net revenues ($)	$	(196	)	$	(55	)	$	(251	)
Change in constant currency continuing category net revenues (%)	(15		)%	(12		)%	(14		)%

Apparel and accessories net revenues decreased $188 million, or 14%, on an as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $24 million of this decrease. Our licensing of peripheral product categories contributed $27 million of this decrease. On a constant currency continuing category basis, net revenues decreased $196 million, or 15%, primarily due to net revenue declines in the DC brand and wholesale channel.

Footwear net revenues decreased $60 million, or 13%, on an as reported basis in fiscal 2014 versus the prior year. Changes in foreign currency exchange rates contributed $5 million of this decrease. Our licensing of peripheral product categories did not affect our footwear product group. On a constant currency continuing category basis, net revenues decreased $55 million, or 12%, primarily due to net revenue declines in the DC brand and wholesale channel.

Gross Profit

Gross profit decreased to $763 million in fiscal 2014 from $876 million in fiscal 2013. Gross margin, or gross profit as a percentage of net revenues, increased 50 basis points to 48.6% in fiscal 2014 from 48.1% in the prior year. This 50 basis point improvement in gross margin was primarily due to the segment and channel net revenue shifts toward our higher margin APAC segments, and retail and e-commerce channels versus our Americas and EMEA segments and wholesale channel.

Gross margin by regional segment for fiscal 2014 and 2013 was as follows:



					Basis Point (bp) Change Increase (Decrease)
	Year Ended October 31,
	2014		2013
Americas	41.3	%	41.4	%	(10) bp
EMEA	55.6	%	56.7	%	(110) bp
APAC	54.6	%	51.0	%	360 bp
Consolidated	48.6	%	48.1	%	50 bp

Selling, General and Administrative Expense ("SG&A")

SG&A decreased $30 million, or 4%, to $827 million in fiscal 2014 compared to $858 million in fiscal 2013. The decrease in SG&A was primarily attributable to reductions in employee compensation of $18 million (including a $13 million reduction in ongoing employee compensation), athlete and event sponsorship of $15 million, facility expenses of $10 million, and related consulting expenses of $6 million. These decreases were partially offset by increased bad debt expense of $15 million within

the Americas segment due to increased reserves for doubtful accounts regarding certain independent distributor accounts. SG&A by segment for fiscal 2014 and 2013 was as follows:



	Year Ended October 31,								$ Change Increase (Decrease)			Basis Point (bp) Change Increase (Decrease)
	2014				2013
In millions			% of Net Revenues				% of Net Revenues
Americas	$	335	46.2	%	$	320	35.5	%	$	15		1,070	bp
EMEA	311		53.3	%	324		51.3	%	(13		)	200	bp
APAC	156		59.3	%	146		51.9	%	9			740	bp
Corporate Operations	26				67				(41		)
Consolidated	$	827	52.6	%	$	858	47.1	%	$	(30	)	550	bp

SG&A by segment for fiscal 2014 has been reclassified to conform to the current year presentation as a result of the Company's centralization of certain global business functions.

Goodwill Impairments

Goodwill impairment charges were $178 million in fiscal 2014 compared to zero in fiscal 2013. In the third quarter of fiscal 2014, a goodwill impairment charge of $178 million was recorded in our EMEA reporting unit.

Asset Impairments

Asset impairment charges were $11 million in fiscal 2014 compared to $12 million in fiscal 2013. Impairment charges in fiscal 2014 included impairments associated with planned restructuring of our e-commerce and other information technology systems of $7 million and impairments of certain under-performing retail stores of $4 million. Impairments charges in fiscal 2013 were primarily related to certain under-performing retail stores, discontinued brands, and trademarks associated with those brands.

Non-operating Expenses

Interest expense was $76 million in fiscal 2014 compared to $71 million in fiscal 2013. This increase was primarily due to higher average net borrowings, due to annualizing the refinancing of our U.S. senior notes in July 2013, and higher interest rates associated with that debt.

Our foreign currency loss was $3 million in fiscal 2014 compared to $5 million in fiscal 2013. The reduction in currency translation loss resulted primarily from the foreign currency exchange effect of certain non-euro denominated assets of our European subsidiaries.

Our income tax benefit for fiscal 2014 was $4 million compared to income tax expense of $166 million in fiscal 2013. Income tax expense for fiscal 2013 included a $157 million non-cash valuation allowance recorded against deferred tax assets primarily in our EMEA segment. Our sale of the Mervin and Hawk businesses resulted in aggregate income tax expense of approximately $19 million during fiscal 2014. However, as we do not expect to pay income tax on these sales after application of available loss carry-forwards, an offsetting income tax benefit was recognized within continuing operations. The operations of Surfdome generated a tax benefit of approximately $3 million. Excluding this income tax benefit, we generated income tax expense in both fiscal 2014 and 2013 as we recorded tax expense in certain tax jurisdictions but were unable to record tax benefits against the losses in those jurisdictions where we have previously recorded valuation allowances.

Net Loss Attributable to Quiksilver, Inc.

Our net loss from continuing operations attributable to Quiksilver, Inc. in fiscal 2014 was $327 million, or $1.92 per share, compared to $236 million, or $1.41 per share, for fiscal 2013. The increased net loss was primarily attributable to the lower gross profit in fiscal 2014 as noted above.

Financial Position, Capital Resources and Liquidity

The following table shows our cash, working capital and total indebtedness at October 31, 2015 and 2014:



In millions	October 31				$ Change Increase (Decrease)			% Change Increase (Decrease)
In millions	2015		2014		$ Change Increase (Decrease)			% Change Increase (Decrease)
Cash and cash equivalents	$	36	$	47	$	(11	)	(23	)%
Restricted cash	3		21		(18		)	(86	)%
Working capital	36		391		(355		)	(91	)%
Total indebtedness⁽¹⁾	841		829		12			1	%

___________


(1)	Includes 2018 Notes and 2020 Notes and other minor debt obligations which have been reclassified to liabilities subject to compromise on the Company's consolidated balance sheet at October 31, 2015.

At October 31, 2015, we had $36 million of cash on hand, $3 million in restricted cash, and $44 million available on our credit facilities. Taken together, this represents cash and credit facility availability of $83 million at October 31, 2015. Our primary credit facilities mature in February 2016 and October 2016. We have no principal payments due on our 2017 Notes, 2018 Notes or 2020 Notes before December 2017.

Certain of our debt agreements contain restrictions on the usage of funds. These restrictions generally require such cash to be used for either repayment of indebtedness, capital expenditures, or other investments in our business. Restricted cash at October 31, 2015 includes $1 million of the remaining proceeds from our sale of the Surfdome business during the first quarter of fiscal 2015. We expect to utilize the remaining proceeds during fiscal 2016. Restricted cash at October 31, 2014 primarily consists of the remaining proceeds of $16 million from the sale of our Mervin and Hawk businesses in the first quarter of 2014, which was subject to these restrictions.

The decrease in working capital was primarily due to the reclassification of the 2017 Notes to current liabilities of $221 million. As discussed in Note 9 — Debt, the Company's voluntary reorganization under Chapter 11 created defaults and cross defaults pursuant to the terms of the Company’s debt which accelerated the maturity date.

Voluntary Reorganization Under Chapter 11

During the pendency of the Bankruptcy Cases, we expect that our primary sources of liquidity will continue to be cash on hand, cash flows from operations, borrowings under the DIP Facilities, other sales of inventory and the proposed transactions under the PSA.

In addition to the cash requirements necessary to fund ongoing operations, we have incurred and continue to incur significant professional fees and other costs in connection with preparation and handling of the Bankruptcy Cases. We anticipate that we will continue to incur significant professional fees and costs during the pendency of the Bankruptcy Cases.

Although, we believe our cash on hand, cash flow from operating activities, borrowings under the DIP Facilities, and other facilities other sales of inventory and the proposed transactions under the PSA will be adequate to meet the short-term liquidity requirements of our existing business, we cannot assure that such amounts will be sufficient to fund our operations, including operations during the period until such time, if any, and to make the required payments associated with the Bankruptcy Cases, until our Proposed Plan as outlined in the PSA receives the requisite acceptance and is confirmed by the Bankruptcy Court. Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time and ultimately cannot be determined until after our Plan as outlined in the PSA or another plan of reorganization has been confirmed, if at all, by the Bankruptcy Court. If our future cash flows and capital resources are insufficient, we could face substantial liquidity problems and will likely be required to significantly reduce or delay capital expenditures, curtail, eliminate or dispose of substantial assets or operations, or undertake other significant restructuring measures, which could include reducing the size of our workforce or pursuing other alternatives to restructure or refinance our indebtedness. Such actions could increase the Company’s debt, negatively impact customer confidence in the Company’s ability to provide products, reduce the Company’s ability to raise additional capital, delay improvements in profitability, and adversely affect the Company’s ability to emerge from bankruptcy. There can be no assurance that any of these remedies could, if necessary, be effected on commercially reasonable terms, or at all, or that they would permit the Company to meet its scheduled debt service obligations. In addition, if the Company incurs additional debt, the risks associated with its substantial leverage, including the risk that it will be unable to service the Company’s debt or generate enough cash flow to fund its liquidity needs, could intensify.

For further discussion of liquidity risks and risks associated with the Bankruptcy Cases, see “Item 1A. Risk Factors.”

Our ability to continue as a going concern is dependent upon, among other things, (i) our ability to obtain timely confirmation of our Proposed Plan as outlined in the PSA under the Bankruptcy Code; (ii) the cost, duration and outcome of the reorganization process; (iii) our ability to achieve profitability as a company; (iv) our ability to maintain adequate cash on hand; and (v) our ability to generate cash from operations.

Cash Flows

Cash Flows from Operating Activities

Net cash used in operating activities was $43 million in fiscal 2015, an increase of $16 million compared to the prior year. The following table summarizes the major categories of changes in cash flows from operations between fiscal 2015 and 2014:



In millions	Fiscal 2015			Fiscal 2014			$ Change
Net loss	$	(307	)	$	(318	)	11
Net effect of non-cash reconciling adjustments	194			263			(69		)
Cash provided by operating assets and liabilities	66			46			20
Cash used in operating activities of continuing operations	(47		)	(9		)	(38		)
Cash provided by/(used in) operating activities of discontinued operations	5			(18		)	23
Net cash used in operating activities	$	(43	)	$	(27	)	$	(15	)

Net cash used in operating activities of continuing operations was $47 million in fiscal 2015, an increase of $38 million to fund our losses from operating activities, compared to the prior year. Net cash provided by our discontinued operations increased by $23 million for the same year.

Cash Flows from Investing Activities

Net cash used in investing activities was $4 million in fiscal 2015, an increase of $10 million compared to cash provided by investing activities of $6 million in the prior year. This increase was primarily attributable to a reduction in cash provided by investing activities of discontinued operations of $64 million, partially offset by an improvement in net restricted cash provided of $39 million and a decrease in capital expenditures in fiscal 2015 compared to the prior year. Capital expenditures were $33 million in fiscal 2015, a decrease of $20 million compared to the prior year. The investments made in 2015 were primarily focused on company-owned retail stores.

Cash Flows from Financing Activities

Net cash provided by financing activities was $46 million in fiscal 2015, an increase of $32 million compared to the prior year. This increase in cash provided was primarily attributable to increases in comparative net borrowings under our credit facilities of $38 million, partially offset by a reduction in proceeds from stock option exercises of $5 million.

Working Capital - Trade Accounts Receivable, net and Inventories

Two of the primary components of our working capital and near-term sources of cash at any point in time are trade accounts receivable, net and inventories. A comparison of the balances of these items as of October 31, 2015 and 2014 is as follows:



	October 31				Change
	2015		2014		Change
Trade accounts receivable, net	$	213	$	311	$	(98	)
Average days sales outstanding⁽¹⁾	82		90		(8		)
Inventories	$	295	$	285	$	10
Inventory days on hand⁽²⁾	131		120		11

___________


(1)	Computed as net accounts receivable as of the balance sheet date, excluding value added taxes, divided by the result obtained by dividing fiscal 2015 and fiscal 2014 fourth quarter net wholesale revenues by 90 days.


(2)	Computed as net inventory as of the balance sheet date divided by the result obtained by dividing fiscal 2015 and fiscal 2014 fourth quarter cost of goods sold by 90 days.

Net trade accounts receivable decreased $98 million to $213 million at October 31, 2015 compared to $311 million at October 31, 2014 primarily due to wholesale net revenue decline, and average days sales outstanding (“DSO”) improved by

8%, or 8 days. Total net inventory increased by $10 million as of October 31, 2015 compared to October 31, 2014 and inventory days on hand increased by 11 days year over year as a result.

Debt Structure

The filing of the Petitions on September 9, 2015 created defaults and cross defaults pursuant to the terms of the Company’s Indentures to its 10.000% Senior Notes due 2020 (the "2020 Notes"), 7.875% Senior Secured Notes due 2018 (the "2018 Notes"), 8.875% Notes due 2017 (the "2017 Notes"), and the ABL Credit Facility, which accelerated the due dates for the obligations. The filing of a petition under the Bankruptcy Code results in the automatic stay of virtually all actions of creditors to collect pre-petition debts, until such time the stay is modified or removed. With respect to the 2017 Notes, the Company has received waivers for the defaults and cross defaults and the rescission of the acceleration for a period of up to 210 days from September 9, 2015. The Company has presented its outstanding debt under the 2017 Notes in current liabilities not subject to compromise on its consolidated balance sheet as of October 31, 2015. The Company has presented its outstanding debt under the 2018 Notes and 2020 Notes in liabilities subject to compromise on its consolidated balance sheet as of October 31, 2015. Lastly, as discussed below in the DIP Financing section, the ABL Credit Facility was paid-off in September 2015.

Pursuant to the PSA and the Proposed Plan, the Company’s existing debt and accrued interest will be reduced by approximately $500 million, including the extinguishment of all of its 2018 Notes and 2020 Notes. Additionally, new debtor-in-possession financing of up to $175 million was provided, as more fully described below. The Company’s 2017 Notes would be reinstated upon the consummation of the transactions set forth in the plan of reorganization under the Petitions. For further information on the contemplated restructuring of the Company's capital and debt structure in conjunction with the Petitions, see Note

QUIKSILVER INC 10-K