<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-15131
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)
1740 MONROVIA AVENUE
COSTA MESA, CALIFORNIA
92627
(Address of principal executive offices)
(Zip Code)
(714) 645-1395
(Registrant's telephone number, including area code)
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 X NO
----- -----
The number of shares outstanding of issuer's Common Stock,
par value $0.01 per share, at
June 12, 1997 was
7,026,330
<PAGE> 2
QUIKSILVER, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
<S> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
April 30, 1997 and October 31, 1996.................................... 2
Condensed Consolidated Statements of Income
Three Months Ended April 30, 1997 and 1996............................. 3
Condensed Consolidated Statements of Income
Six Months Ended April 30, 1997 and 1996............................... 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended April 30, 1997 and 1996............................... 5
Notes to Condensed Consolidated Financial Statements....................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................... 7
Part II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders.................... 11
Item 6. Exhibits and Reports on Form 8K........................................ 12
SIGNATURE....................................................................... 13
</TABLE>
1
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
QUIKSILVER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................. $ 304,000 $ 3,429,000
Trade accounts receivable, less allowance
for doubtful accounts of $2,011,000 (1997)
and $2,873,000 (1996) .............................. 55,168,000 44,554,000
Other receivables .................................... 2,838,000 2,182,000
Inventories - Note 2 ................................. 36,891,000 35,668,000
Prepaid expenses and other current assets ............ 2,373,000 2,027,000
------------- -------------
Total current assets ............................ 97,574,000 87,860,000
Property and equipment, less accumulated depreciation and
amortization of $8,479,000 (1997) and $8,027,000 (1996) 11,484,000 9,655,000
Trademark, less accumulated amortization of
$1,562,000 (1997) and $1,486,000 (1996) ............... 1,476,000 1,532,000
Goodwill, less accumulated amortization of
$3,435,000 (1997) and $3,103,000 (1996) ............... 14,662,000 15,005,000
Other assets ............................................. 1,731,000 1,528,000
------------- -------------
Total assets .................................... $ 126,927,000 $ 115,580,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit ....................................... $ 20,413,000 $ 8,211,000
Accounts payable ...................................... 10,066,000 12,823,000
Accrued liabilities ................................... 6,154,000 10,212,000
Current portion of notes payable ...................... 217,000 240,000
Income taxes payable .................................. 1,833,000 727,000
------------- -------------
Total current liabilities ....................... 38,683,000 32,213,000
Notes payable ............................................ 2,701,000 2,640,000
------------- -------------
Total liabilities ............................... 41,384,000 34,853,000
------------- -------------
Stockholders' equity
Preferred stock, $.01 par value, authorized
shares - 5,000,000; issued and outstanding
shares - none ...................................... -- --
Common stock, $.01 par value, authorized
shares - 30,000,000; issued and outstanding
shares - 7,024,330 (1997) and 6,965,346 (1996) .... 70,000 70,000
Additional paid-in-capital ............................ 19,576,000 18,971,000
Retained earnings ..................................... 70,898,000 64,399,000
Treasury stock, 130,000 shares ........................ (3,054,000) (3,054,000)
Cumulative foreign currency translation adjustment .... (1,947,000) 341,000
------------- -------------
Total stockholders' equity ...................... 85,543,000 80,727,000
------------- -------------
Total liabilities and stockholders' equity ...... $ 126,927,000 $ 115,580,000
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
QUIKSILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net sales .................................... $ 60,781,000 $ 54,505,000
Cost of goods sold ........................... 36,620,000 32,492,000
------------ ------------
Gross profit .............................. 24,161,000 22,013,000
------------ ------------
Operating expenses:
Selling, general and administrative expense 15,497,000 13,918,000
Royalty income ............................ (350,000) (186,000)
Royalty expense ........................... 691,000 610,000
------------ ------------
Total operating expenses ............... 15,838,000 14,342,000
------------ ------------
Operating income ............................. 8,323,000 7,671,000
Interest expense ............................. 427,000 228,000
Foreign currency loss ........................ 8,000 25,000
Other expense ................................ 41,000 52,000
------------ ------------
Income before provision for income taxes ..... 7,847,000 7,366,000
Provision for income taxes ................... 3,097,000 2,947,000
------------ ------------
Net income ................................... $ 4,750,000 $ 4,419,000
============ ============
Net income per common share .................. $ 0.68 $ 0.61
============ ============
Weighted average common shares
and equivalents outstanding ............... 7,004,000 7,202,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
QUIKSILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
--------------------------------
1997 1996
------------- ------------
<S> <C> <C>
Net sales .................................... $ 106,725,000 $ 94,992,000
Cost of goods sold ........................... 64,956,000 57,384,000
------------- ------------
Gross profit .............................. 41,769,000 37,608,000
------------- ------------
Operating expenses:
Selling, general and administrative expense 29,467,000 25,254,000
Royalty income ............................ (710,000) (391,000)
Royalty expense ........................... 1,320,000 1,175,000
------------- ------------
Total operating expenses ............... 30,077,000 26,038,000
------------- ------------
Operating income ............................. 11,692,000 11,570,000
Interest expense ............................. 714,000 397,000
Foreign currency loss ........................ 80,000 48,000
Other expense ................................ 94,000 153,000
------------- ------------
Income before provision for income taxes ..... 10,804,000 10,972,000
Provision for income taxes ................... 4,305,000 4,428,000
------------- ------------
Net income ................................... $ 6,499,000 $ 6,544,000
============= ============
Net income per common share .................. $ 0.93 $ 0.91
============= ============
Weighted average common shares
and equivalents outstanding ............... 7,021,000 7,188,000
============= ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
QUIKSILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ...................................................... $ 6,499,000 $ 6,544,000
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization ............................. 1,664,000 1,226,000
Provision for doubtful accounts ........................... 329,000 483,000
Loss on sale of fixed assets .............................. 134,000 33,000
Changes in operating assets and liabilities:
Trade accounts receivable .............................. (13,266,000) (10,624,000)
Other receivables ...................................... 55,000 (647,000)
Inventories ............................................ (2,312,000) (773,000)
Prepaid expenses and other current assets .............. (405,000) 233,000
Other assets ........................................... 44,000 (108,000)
Accounts payable ....................................... (2,033,000) 301,000
Accrued liabilities .................................... (4,234,000) (449,000)
Income taxes payable ................................... 1,232,000 1,699,000
------------ ------------
Net cash used in operating activities ............... (12,293,000) (2,082,000)
Cash flows from investing activities:
Proceeds from sales of fixed assets ............................. 6,000 20,000
Capital expenditures ............................................ (4,018,000) (1,293,000)
Other ........................................................... -- --
------------ ------------
Net cash used in investing activities ............... (4,012,000) (1,273,000)
Cash flows from financing activities:
Borrowings on lines of credit ................................... 16,315,000 13,390,000
Payments on lines of credit ..................................... (4,085,000) (11,829,000)
Borrowings on long-term debt .................................... 650,000 127,000
Payments on long-term debt ...................................... (234,000) (131,000)
Proceeds from stock option exercises ............................ 605,000 2,524,000
------------ ------------
Net cash provided by financing activities ........... 13,251,000 4,081,000
Effect of exchange rate changes on cash ............................ (71,000) (393,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents ............... (3,125,000) 333,000
Cash and cash equivalents, beginning of period ..................... 3,429,000 3,461,000
------------ ------------
Cash and cash equivalents, end of period ........................... $ 304,000 $ 3,794,000
============ ============
Supplementary cash flow information -
Cash paid during the period for:
Interest ..................................................... $ 600,000 $ 382,000
============ ============
Income taxes ................................................. $ 2,322,000 $ 3,668,000
============ ============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 7
QUIKSILVER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statement
presentation.
The Company, in its opinion, has included all adjustments, consisting
only of normal recurring accruals, necessary for a fair presentation of
the results of operations for the three and six months ended April 30,
1997 and 1996. The condensed consolidated financial statements and
notes thereto should be read in conjunction with the audited financial
statements and notes for the year ended October 31, 1996 included in
the Company's Annual Report on Form 10-K. Interim results are not
necessarily indicative of results for the full year due to seasonal and
other factors.
2. Inventories consist of the following:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
---- ----
<S> <C> <C>
Raw Materials................. $11,639,000 $11,686,000
Work-In-Process............... 4,847,000 3,673,000
Finished Goods................ 20,405,000 20,309,000
----------- -----------
$36,891,000 $35,668,000
=========== ===========
</TABLE>
6
<PAGE> 8
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
THREE MONTHS ENDED APRIL 30, 1997 COMPARED TO THREE MONTHS ENDED APRIL 30, 1996
Net sales for the three months ended April 30, 1997 increased 11.5% to
$60,781,000 from $54,505,000 in the comparable period of the prior year.
Domestic net sales for the three months ended April 30, 1997 increased 12.4% to
$40,438,000 from $35,962,000 in the comparable period of the prior year, and
European net sales increased 9.7% to $20,343,000 from $18,543,000 for those same
periods. As measured in French Francs, Quiksilver Europe's functional currency,
net sales in the current year's quarter increased 23.5% compared to the prior
year. Domestic men's sales decreased 2% to $25,043,000 from $25,542,000 in the
comparable period of the prior year, while domestic women's sales increased
47.7% to $15,395,000 from $10,420,000. The domestic sales decrease in men's
resulted primarily from lower sales of Pirate Surf and Private label product.
Domestic women's sales increased in both the Raisins and Quiksilver Roxy
divisions. In Europe, men's sales increased 10.3% to $18,954,000 from
$17,189,000, while women's sales increased 2.6% to $1,389,000 from $1,354,000.
The gross profit margin for the three months ended April 30, 1997 decreased to
39.8% from 40.4% in the comparable period of the prior year. The domestic gross
profit margin decreased to 35.7% from 36.4% in the comparable period of the
prior year, and the European gross profit margin decreased somewhat to 47.8%
from 48.1% for those same periods. The decrease in the domestic gross profit
margin resulted primarily from markdowns taken in the current quarter to sell
Pirate Surf product, which has been removed from future season production plans.
In Europe, the gross profit margin was relatively stable in the current quarter
compared to the previous year.
Selling, general and administrative expense ("SG&A") for the three months ended
April 30, 1997 increased 11.3% to $15,497,000 from $13,918,000 in the comparable
period of the prior year. Domestic SG&A increased 13.2% to $9,683,000 from
$8,557,000 in the comparable period of the prior year, and European SG&A
increased 8.4% to $5,814,000 from $5,361,000 for those same periods. The
increase in domestic SG&A was primarily due to higher personnel costs related to
increased sales volume, along with increased marketing and computer system
expenses. The increase in European SG&A was primarily due to higher personnel
costs related to increased sales volume.
Net royalty expense for the three months ended April 30, 1997 decreased 19.6% to
$341,000 from $424,000 in the comparable period of the prior year. This decrease
was due primarily to increased domestic royalty income from increased sales by
licensees, which was partially offset by increased royalty expense related to
European sales. The Company receives domestic royalty income from its Mexico,
Japan, wetsuit, watch, sunglass, and outlet store licensees as well as Raisins
international licensees, and Quiksilver Europe pays royalties on European sales
under a trademark agreement with Quiksilver International.
Interest expense for the three months ended April 30, 1997 increased 87.3% to
$427,000 from $228,000 in the comparable period of the prior year. This increase
was primarily due to higher outstanding balances on the Company's lines of
credit that resulted from increased working capital needs and borrowings to
repurchase shares of the Company's stock in the three months ended October 31,
1996. There are no further stock repurchases planned.
The effective income tax rate for the three months ended April 30, 1997, which
is based on current estimates of the annual effective income tax rate, decreased
to 39.5% from 40.0% in the comparable period of the prior year.
As a result of the above factors, net income for the three months ended April
30, 1997 increased 7.5% to $4,750,000 or $0.68 per share from $4,419,000 or
$0.61 per share in the comparable period of the prior year.
7
<PAGE> 9
SIX MONTHS ENDED APRIL 30, 1997 COMPARED TO SIX MONTHS ENDED APRIL 30, 1996
Net sales for the six months ended April 30, 1997 increased 12.4% to
$106,725,000 from $94,992,000 in the comparable period of the prior year.
Domestic net sales for the six months ended April 30, 1997 increased 12.8% to
$68,599,000 from $60,814,000 in the comparable period of the prior year, and
European net sales increased 11.6% to $38,126,000 from $34,178,000 for those
same periods. As measured in French Francs, Quiksilver Europe's net sales in the
first six months of the current year increased 21.8% compared to the prior year.
Domestic men's sales increased 2.1% to $44,846,000 from $43,920,000 in the
comparable period of the prior year, while domestic women's sales increased
40.6% to $23,753,000 from $16,894,000. The domestic sales increases came
primarily from the Quiksilver Roxy and Raisins Divisions. In Europe, men's sales
increased 11.5% to $36,256,000 from $32,531,000, while women's sales increased
13.5% to $1,870,000 from $1,647,000.
The gross profit margin for the six months ended April 30, 1997 decreased to
39.1% from 39.6% in the comparable period of the prior year. The domestic gross
profit margin decreased to 35.4% from 36.1% in the comparable period of the
prior year, and the European gross profit margin increased somewhat to 45.9%
from 45.7% for those same periods. The decrease in the domestic gross profit
margin resulted primarily from the impact of selling excess raw materials during
the six months ended April 30, 1997 at margins that were less than normal
wholesale and from markdowns taken during the six months ended April 30, 1997 to
sell Pirate Surf product, which has been removed from future season production
plans. In Europe, the gross profit margin was relatively stable in the current
period compared to the previous year.
Selling, general and administrative expense ("SG&A") for the six months ended
April 30, 1997 increased 16.7% to $29,467,000 from $25,254,000 in the comparable
period of the prior year. Domestic SG&A increased 15.8% to $17,992,000 from
$15,533,000 in the comparable period of the prior year, and European SG&A
increased 18.0% to $11,475,000 from $9,721,000 for those same periods. The
increase in domestic SG&A was primarily due to higher personnel costs related to
increased sales volume, along with increased sales and marketing and computer
system expenses. The increase in European SG&A was primarily due to higher
personnel costs related to increased sales volume.
Net royalty expense for the six months ended April 30, 1997 decreased 22.2% to
$610,000 from $784,000 in the comparable period of the prior year. This increase
was due primarily to increased domestic royalty income from increased sales by
licensees, which was partially offset by increased royalty expense related to
European sales.
Interest expense for the six months ended April 30, 1997 increased 79.8% to
$714,000 from $397,000 in the comparable period of the prior year. This increase
was primarily due to higher outstanding balances on the Company's lines of
credit that resulted from increased working capital needs and borrowings to
repurchase shares of the Company's stock in the three months ended October 31,
1996. There are no further stock repurchases planned.
The effective income tax rate for the six months ended April 30, 1997, which is
based on current estimates of the annual effective income tax rate, decreased to
39.8% from 40.4% in the comparable period of the prior year.
As a result of the above factors, net income for the six months ended April 30,
1997 decreased 0.7% to $6,499,000 or $0.93 per share from $6,544,000 or $0.91
per share in the comparable period of the prior year.
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
The Company finances its capital investments and seasonal working capital
requirements with funds generated by operations and its bank revolving lines of
credit.
8
<PAGE> 10
Net cash used in operating activities for the six months ended April 30, 1997
was $12,293,000 compared to $2,082,000 in the comparable period of the prior
year. This $10,211,000 increase in cash used in operating activities was due to
three primary factors. Cash paid for inventories net of changes in accounts
payable increased by $3,873,000 to support higher planned sales levels in
current and future seasons both domestically and in Europe. Accrued liabilities
decreased $3,785,000 more in the six months ended April 30, 1997 compared to the
six months ended April 30, 1996 primarily as a result of increased payments
during the current year for employee benefit programs and sales taxes in
Quiksilver Europe. Also, accounts receivable increased $2,642,000 more in the
six months ended April 30, 1997 compared to the six months ended April 30, 1996
as a result of a relatively higher percentage of sales occurring in the latter
portion of the fiscal 1997 period.
The Company uses independent contractors for cutting, sewing and other
manufacturing functions and intends to continue to use independent contractors
in the foreseeable future. Accordingly, the Company has avoided capital
expenditures for these manufacturing functions. For the six months ended April
30, 1997, capital expenditures increased 210.8% to $4,018,000 from $1,293,000 in
the comparable period of the prior year primarily from increased investment in
computer systems both domestically and in Europe.
The Company has available a revolving line of credit with a U.S. bank that is
unsecured and provides for maximum financing of $34,000,000. This line of credit
expires on April 30, 1998. The Company also has available lines of credit, both
secured and unsecured, with banks in Europe that provide for maximum financing
of approximately $23,000,000.
During the six months ended April 30, 1997, net cash provided by financing
activities totaled $13,251,000 compared to $4,081,000 in the comparable period
of the prior year. These additional borrowings during the first six months of
fiscal 1997 were used to fund the increase in inventories, accounts receivable
and capital expenditures and the decrease in accrued liabilities as discussed
above.
The net decrease in cash and cash equivalents for the six months ended April 30,
1997 was $3,125,000 compared to an increase of $333,000 in the comparable period
of the prior year. Cash and cash equivalents decreased $3,125,000 or 91.1% to
$304,000 at April 30, 1997 from $3,429,000 at October 31, 1996, while working
capital increased $3,244,000 or 5.8% to $58,891,000 from $55,647,000 for that
same period. The Company believes its current lines of credit are adequate to
cover its seasonal working capital and other requirements for the foreseeable
future and that increases in its lines of credit can be obtained as needed to
fund future growth.
Accounts receivable increased to $55,168,000 at April 30, 1997 from $44,554,000
at October 31, 1996. Domestic accounts receivable increased 35.2% to $38,246,000
at April 30, 1997 from $28,292,000 at October 31, 1996, and European accounts
receivable increased 4.1% to $16,922,000 from $16,262,000 for that same period.
These increases in accounts receivable resulted from a relatively higher
percentage of sales occurring in the latter portion of the six months ended
April 30, 1997 and from seasonal factors.
Consolidated inventories increased 3.4% to $36,891,000 at April 30, 1997 from
$35,668,000 at October 31, 1996. Domestic inventories increased 9.2% to
$29,055,000 from $26,611,000 at October 31, 1996, and European inventories
decreased 13.5% to $7,836,000 from $9,057,000 for that same period. Inventories
increased domestically primarily due to seasonal factors and to support higher
planned sales levels in current and future seasons. Inventories decreased in the
case of Quiksilver Europe primarily due to the devaluation of the French Franc
compared to the U.S. dollar during the six months ended April 30, 1997.
In recent years, certain customers of the Company have experienced financial
difficulties, including the filing of reorganization proceedings under
bankruptcy laws. The Company has not incurred significant losses outside the
normal course of business as a result of the financial difficulties of these
customers.
9
<PAGE> 11
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY (CONTINUED)
While management believes that allowances for doubtful accounts at April 30,
1997 are adequate, the Company carefully monitors developments regarding its
major customers. Additional material financial difficulties encountered by these
or other significant customers could have an adverse impact on the Company's
financial position or results of operations.
FOREIGN CURRENCY
The functional currency of Quiksilver Europe is the French Franc. However,
Quiksilver Europe sells in various European countries and collects at future
dates in the customers' local currencies and purchases certain raw materials or
product in currencies other than the French Franc. Accordingly, the Company is
exposed to transaction gains and losses that could result from changes in
foreign currency exchange rates. When considered appropriate, management
purchases financial instruments, primarily forward exchange contracts, to reduce
its exposure to these exchange rate fluctuations.
For financial reporting purposes, Quiksilver Europe's statements of income are
translated from French Francs into U.S. Dollars at average exchange rates in
effect during the reporting period. When the French Franc strengthens compared
to the U.S. Dollar there is a positive effect on Quiksilver Europe's results as
reported in the Company's Consolidated Financial Statements. Conversely, when
the U.S. Dollar strengthens, there is a negative effect.
10
<PAGE> 12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Company's Annual Meeting of Stockholders was held on March 21, 1997. At the
Annual Meeting, the following directors were elected to serve on the Company's
Board of Directors until the next Annual Meeting and until their respective
successors are elected and qualified:
<TABLE>
<CAPTION>
Votes Votes
For Withheld
--------- ------
<S> <C> <C>
Robert B. McKnight, Jr. 6,528,645 45,144
William M. Barnum, Jr. 6,528,645 45,144
Charles E. Crowe 6,528,445 45,344
Michael H. Gray 6,528,645 45,144
Harry Hodge 6,525,845 47,944
Robert G. Kirby 6,528,645 45,144
Tom Roach 6,528,645 45,144
</TABLE>
No other matters were voted on at the Annual Meeting.
11
<PAGE> 13
PART II - OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8K.
(a) Exhibits
10.1 Fourth Amendment to Loan Agreement dated as of April 1, 1997
27.0 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended April 30,
1997
12
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUIKSILVER, INC., a Delaware Corporation
June 12, 1997 /s/ Steven L. Brink
----------------------------------------
Steven L. Brink
Chief Financial Officer, Secretary and
Treasurer (Principal Accounting Officer)
13
<PAGE> 1
EXHIBIT 10.1
FOURTH AMENDMENT TO
LOAN AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AGREEMENT (this "Fourth Amendment") dated as of
April 1, 1997, is made and entered into by and between QUIKSILVER, INC., a
Delaware Corporation ("Borrower"), and UNION BANK OF CALIFORNIA, N.A.
("Bank").
RECITALS:
A. Borrower and Bank are parties to that certain Loan Agreement dated April
30, 1996 (the "Agreement"), pursuant to which Bank agreed to extend credit to
Borrower and amendments thereto dated September 5, 1996, October 22, 1996 and
November 29, 1996.
B. Borrower and Bank desire to amend the Agreement subject to the terms and
conditions of this Fourth Amendment.
AGREEMENT:
In consideration of the above recitals and of the mutual covenants and
conditions contained herein, Borrower and Bank agree as follows:
1. DEFINED TERMS. Initially capitalized terms used herein which are not
otherwise defined shall have the meanings assigned thereto in the Agreement.
2. AMENDMENTS TO THE AGREEMENT.
(a) Section 1.1.2 of the Agreement is hereby added in its entirety as
follows:
"1.1.2 THE REVOLVING LOAN B. Bank will loan to Borrower an amount not to exceed
Four Million Dollars ($4,000,000) outstanding in the aggregate at any one time
(the "Revolving Loan B"). Borrower may borrow, repay and reborrow all or part of
the Revolving Loan B in amounts of not less than Fifty Thousand Dollars
($50,000) in accordance with the terms of the Revolving Note B. All borrowings
of the revolving Loan B must be made before July 1, 1997 at which time all
unpaid principal and interest of the Revolving Loan B shall be due and payable.
The Revolving Loan B shall be evidenced by a promissory note (the "Revolving
Note B") on the standard form used by Bank for commercial loans. Bank shall
enter each amount borrowed and repaid in Bank's records and such entries shall
be deemed to be the amount of the Revolving Loan B outstanding. Omission of Bank
to make any such entries shall not discharge Borrower of its obligation to repay
in full with interest all amounts borrowed."
1
<PAGE> 2
3. EFFECTIVENESS OF THE FOURTH AMENDMENT. This Fourth Amendment shall become
effective as of the date hereof when, and only when, Bank shall have received
all of the following, in form and substance satisfactory to Bank:
(a) This Fourth Amendment, duly executed by Borrower;
(b) The Promissory Note, duly executed by Borrower;
(c) Such other documents, instruments or agreements as Bank may
reasonably deem necessary.
4. RATIFICATION. Except as specifically amended herein above, the Agreement
shall remain in full force and effect and is hereby ratified and confirmed.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants as follows:
(a) Each of the representations and warranties contained in the
Agreement, as may be amended hereby, is hereby reaffirmed as of the date hereof,
each as if set forth herein;
(b) The execution, delivery and performance of the Fourth Amendment and
any other instruments or documents in connection herewith are within Borrower's
power, have been duly authorized, are legal, valid and binding obligations of
Borrower, and are not in conflict with the terms of any charter, bylaw, or other
organization papers of Borrower or with any law, indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is bound or
affected;
(c) No event has occurred and is continuing or would result from this
Fourth Amendment which constitutes or would constitute an Event of Default under
the Agreement.
6. GOVERNING LAW. This Fourth Amendment and all other instruments or documents
in connection herewith shall be governed by and construed according to the laws
of the State of California.
7. COUNTERPARTS. This Fourth Amendment may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
2
<PAGE> 3
WITNESS the due execution hereof as of the date first above written.
QUIKSILVER, INC. UNION BANK OF CALIFORNIA, N.A.
/s/ Robert B. McKnight, Jr. /s/ Rita Dailey
- ----------------------- ------------------------
Robert B. McKnight, Jr. Rita Dailey
Chief Executive Officer Vice President
/s/ Steven L. Brink s/s John A. Utz
- ----------------------- ------------------------
Steven L. Brink John A. Utz
Chief Financial Officer Assistant Vice President
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
Quiksilver, Inc. April 30, 1997 Form 10-Q and is qualified in its entirety by
reference to such Form 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> 304,000
<SECURITIES> 0
<RECEIVABLES> 57,179,000
<ALLOWANCES> 2,011,000
<INVENTORY> 36,891,000
<CURRENT-ASSETS> 97,574,000
<PP&E> 19,963,000
<DEPRECIATION> 8,479,000
<TOTAL-ASSETS> 126,927,000
<CURRENT-LIABILITIES> 38,683,000
<BONDS> 2,701,000
0
0
<COMMON> 70,000
<OTHER-SE> 85,473,000
<TOTAL-LIABILITY-AND-EQUITY> 126,927,000
<SALES> 60,781,000
<TOTAL-REVENUES> 60,781,000
<CGS> 36,620,000
<TOTAL-COSTS> 36,620,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 329,000
<INTEREST-EXPENSE> 427,000
<INCOME-PRETAX> 7,847,000
<INCOME-TAX> 3,097,000
<INCOME-CONTINUING> 4,750,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,750,000
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.68
</TABLE>
