<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 JULY 31, 1999
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)
15202 GRAHAM STREET
HUNTINGTON BEACH, CALIFORNIA
92649
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(714) 889-2200
- --------------------------------------------------------------------------------
(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
September 3, 1999 was
22,698,118
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QUIKSILVER, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
July 31, 1999 and October 31, 1998.................................... 2
Condensed Consolidated Statements of Income
Three Months Ended July 31, 1999 and 1998............................. 3
Condensed Consolidated Statements of Income
Nine Months Ended July 31, 1999 and 1998.............................. 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended July 31, 1999 and 1998.............................. 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 6. Exhibits and Reports on Form 8K......................................... 11
SIGNATURE....................................................................... 12
</TABLE>
1
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
QUIKSILVER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1999 1998
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................... $ 2,276,000 $ 3,029,000
Trade accounts receivable, less allowance
for doubtful accounts of $5,308,000 (1999)
and $3,738,000 (1998) ................................ 94,523,000 78,390,000
Other receivables....................................... 3,394,000 3,720,000
Inventories - Note 2 ................................... 73,212,000 70,575,000
Prepaid expenses and other current assets .............. 5,666,000 4,350,000
------------- -------------
Total current assets .............................. 179,071,000 160,064,000
Property and equipment, less accumulated depreciation and
amortization of $16,377,000 (1999) and $14,557,000 (1998) 44,554,000 31,996,000
Trademark, less accumulated amortization of
$1,990,000 (1999) and $1,845,000 (1998) ................. 1,443,000 1,589,000
Goodwill, less accumulated amortization of
$5,046,000 (1999) and $4,484,000 (1998) ................. 16,819,000 17,381,000
Other assets ............................................... 2,245,000 2,041,000
------------- -------------
Total assets ...................................... $ 244,132,000 $ 213,071,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit ......................................... $ 21,311,000 $ 17,465,000
Accounts payable ........................................ 30,570,000 26,340,000
Accrued liabilities ..................................... 20,043,000 17,269,000
Current portion of notes payable ........................ 3,577,000 3,293,000
Income taxes payable .................................... 2,273,000 3,376,000
------------- -------------
Total current liabilities ......................... 77,774,000 67,743,000
Notes payable .............................................. 25,657,000 27,669,000
------------- -------------
Total liabilities ................................. 103,431,000 95,412,000
------------- -------------
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 - 22,698,118 (1999) and 21,828,447 (1998) .... 224,000 219,000
Additional paid-in-capital .............................. 33,118,000 25,847,000
Retained earnings ....................................... 113,725,000 95,006,000
Treasury stock, 390,000 shares .......................... (3,054,000) (3,054,000)
Cumulative foreign currency translation adjustment ...... (3,312,000) (359,000)
------------- -------------
Total stockholders' equity ........................ 140,701,000 117,659,000
------------- -------------
Total liabilities and stockholders' equity ........ $ 244,132,000 $ 213,071,000
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
QUIKSILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31,
-----------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Net sales .................................... $ 105,160,000 $ 78,265,000
Cost of goods sold ........................... 64,193,000 48,438,000
------------- -------------
Gross profit .............................. 40,967,000 29,827,000
------------- -------------
Operating expenses:
Selling, general and administrative expense 29,727,000 21,904,000
Royalty income ............................ (538,000) (365,000)
Royalty expense ........................... 1,214,000 972,000
------------- -------------
Total operating expenses ............... 30,403,000 22,511,000
------------- -------------
Operating income ............................. 10,564,000 7,316,000
Interest expense ............................. 919,000 672,000
Foreign currency loss (gain) ................. 49,000 (280,000)
Other expense ................................ 110,000 69,000
------------- -------------
Income before provision for income taxes ..... 9,486,000 6,855,000
Provision for income taxes ................... 3,863,000 2,777,000
------------- -------------
Net income ................................... $ 5,623,000 $ 4,078,000
============= =============
Basic net income per share ................... $ 0.25 $ 0.19
============= =============
Diluted net income per share ................. $ 0.24 $ 0.18
============= =============
Weighted average shares outstanding .......... 22,279,000 21,141,000
============= =============
Diluted weighted average shares outstanding .. 23,614,000 22,074,000
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
QUIKSILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JULY 31,
-----------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Net sales .................................... $ 319,235,000 $ 211,708,000
Cost of goods sold ........................... 192,508,000 127,897,000
------------- -------------
Gross profit .............................. 126,727,000 83,811,000
------------- -------------
Operating expenses:
Selling, general and administrative expense 89,675,000 60,691,000
Royalty income ............................ (1,508,000) (1,136,000)
Royalty expense ........................... 3,834,000 2,719,000
------------- -------------
Total operating expenses ............... 92,001,000 62,274,000
------------- -------------
Operating income ............................. 34,726,000 21,537,000
Interest expense ............................. 2,675,000 1,935,000
Foreign currency gain ........................ (226,000) (315,000)
Other expense ................................ 351,000 213,000
------------- -------------
Income before provision for income taxes ..... 31,926,000 19,704,000
Provision for income taxes ................... 13,207,000 8,055,000
------------- -------------
Net income ................................... $ 18,719,000 $ 11,649,000
============= =============
Basic net income per share ................... $ 0.85 $ 0.55
============= =============
Diluted net income per share ................. $ 0.80 $ 0.54
============= =============
Weighted average shares outstanding .......... 22,022,000 21,075,000
============= =============
Diluted weighted average shares outstanding .. 23,343,000 21,744,000
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
QUIKSILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JULY 31,
---------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income ...................................................... $ 18,719,000 $ 11,649,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................. 5,580,000 4,273,000
Provision for doubtful accounts ........................... 2,092,000 1,774,000
(Gain) loss on sale of fixed assets ....................... (143,000) 35,000
Changes in operating assets and liabilities:
Trade accounts receivable .............................. (18,726,000) (8,299,000)
Other receivables ...................................... 105,000 (970,000)
Inventories ............................................ (6,362,000) (17,614,000)
Prepaid expenses and other current assets .............. (1,386,000) (790,000)
Other assets ........................................... (137,000) (365,000)
Accounts payable ....................................... 5,606,000 13,713,000
Accrued liabilities .................................... 3,472,000 2,858,000
Income taxes payable ................................... (983,000) 1,513,000
------------ ------------
Net cash provided by operating activities ........... 7,837,000 7,777,000
Cash flows from investing activities:
Proceeds from sales of fixed assets ............................. 303,000 47,000
Capital expenditures ............................................ (19,631,000) (12,825,000)
Acquisition of Mervin Manufacturing, Inc. ....................... -- (500,000)
------------ ------------
Net cash used in investing activities ................. (19,328,000) (13,278,000)
Cash flows from financing activities:
Borrowings on lines of credit ................................... 45,530,000 26,881,000
Payments on lines of credit ..................................... (41,684,000) (29,664,000)
Borrowings on long-term debt .................................... 4,083,000 7,419,000
Payments on long-term debt ...................................... (4,324,000) (1,540,000)
Proceeds from stock option exercises ............................ 7,276,000 1,502,000
------------ ------------
Net cash provided by financing activities ............. 10,881,000 4,598,000
Effect of exchange rate changes on cash ............................ (143,000) (145,000)
------------ ------------
Net decrease in cash and cash equivalents .......................... (753,000) (1,048,000)
Cash and cash equivalents, beginning of period ..................... 3,029,000 4,103,000
------------ ------------
Cash and cash equivalents, end of period ........................... $ 2,276,000 $ 3,055,000
============ ============
Supplementary cash flow information--
Cash paid during the period for:
Interest ..................................................... $ 2,292,000 $ 1,636,000
============ ============
Income taxes ................................................. $ 14,104,000 $ 6,524,000
============ ============
</TABLE>
See notes to condensed 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 nine months ended July 31,
1999 and 1998. 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, 1998 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>
JULY 31, OCTOBER 31,
1999 1998
----------- -----------
<S> <C> <C>
Raw Materials..................................... $15,669,000 $18,531,000
Work-In-Process................................... 6,237,000 9,323,000
Finished Goods.................................... 51,306,000 42,721,000
----------- -----------
$73,212,000 $70,575,000
=========== ===========
</TABLE>
3. During the three months ended April 30, 1999, the Company's Board of
Directors approved a three-for-two split of the Company's Common Stock.
The split was effected in the form of a dividend on April 23, 1999 to
shareholders of record on April 15, 1999. All share and per-share
information has been restated to reflect the stock split.
6
<PAGE> 8
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
THREE MONTHS ENDED JULY 31, 1999 COMPARED TO THREE MONTHS ENDED JULY 31, 1998
Net sales for the three months ended July 31, 1999 increased 34.4% to
$105,160,000 from $78,265,000 in the comparable period of the prior year.
Domestic net sales for the three months ended July 31, 1999 increased 38.9% to
$69,411,000 from $49,981,000 in the comparable period of the prior year, and
European net sales increased 26.4% to $35,749,000 from $28,284,000 for those
same periods. As measured in French Francs, Quiksilver Europe's functional
currency, net sales in the current year's quarter increased 32.5% compared to
the prior year. Domestic men's sales increased 37.2% to $43,312,000 from
$31,560,000 in the comparable period of the prior year, while domestic women's
sales increased 47.5% to $23,569,000 from $15,979,000. In the domestic division,
sales of snowboards, boots and bindings amounted to $2,530,000 in the current
year's quarter compared to $2,442,000 in the prior year. The domestic men's
sales increase came from the Quiksilver Young Men's, Boys and Accessories
divisions and QS Silver Edition. The domestic women's sales increase came from
both the Quiksilver Roxy and Raisins divisions. In Europe, men's sales increased
24.4% to $32,172,000 from $25,864,000, while women's sales increased 47.8% to
$3,577,000 from $2,420,000. The European sales increase came from all divisions.
The gross profit margin for the three months ended July 31, 1999 increased to
39.0% from 38.1% in the comparable period of the prior year. The domestic gross
profit margin increased to 37.1% from 35.8% in the comparable period of the
prior year, and the European gross profit margin increased to 42.6% from 42.2%
for those same periods. The domestic gross profit margin increased primarily
from improved utilization of overhead and, to a lesser extent, from an
improvement in product mix. In the three months ended July 31, 1998, there was
residual private label business at lower than average gross profit margins that
did not continue in the current year. In Europe, the gross profit margin
increased as higher sampling costs were more than offset by the gross margin
benefit from a higher level of retail business in comparison to the previous
year.
Selling, general and administrative expense ("SG&A") for the three months ended
July 31, 1999 increased 35.7% to $29,727,000 from $21,904,000 in the comparable
period of the prior year. Domestic SG&A increased 43.8% to $18,623,000 from
$12,949,000 in the comparable period of the prior year, and European SG&A
increased 24.0% to $11,104,000 from $8,955,000 for those same periods. The
increase in both domestic and European SG&A was primarily due to higher
personnel costs related to increased sales volume. In addition, domestic SG&A
increased as a percentage of sales as a result of higher labor costs associated
with the implementation and learning curve of a new warehouse inventory
management system. The use of the new system was discontinued during the three
months ended July 31, 1999 pending further testing and review. In Europe,
leverage on fixed costs was partially offset by increased advertising expenses
as a percentage of sales.
Net royalty expense for the three months ended July 31, 1999 increased 11.4% to
$676,000 from $607,000 in the comparable period of the prior year. This increase
was due primarily to increased royalty expense related to European sales. The
Company receives domestic royalty income from its Mexico, wetsuit, watch,
sunglass, and outlet store licensees as well as Raisins international licensees,
and the Company pays royalties on European sales and certain domestic exports
under trademark agreements with Quiksilver International.
Interest expense for the three months ended July 31, 1999 increased 36.8% to
$919,000 from $672,000 in the comparable period of the prior year. This increase
was primarily due to (i) higher outstanding balances on the Company's domestic
line of credit to provide working capital to support the Company's growth, and
(ii) borrowings to fund the build-out of the Company's new domestic headquarters
building in Huntington Beach.
The effective income tax rate for the three months ended July 31, 1999, which is
based on current estimates of the annual effective income tax rate, increased to
40.7% from 40.5% in the comparable period of the prior year.
7
<PAGE> 9
As a result of the above factors, net income for the three months ended July 31,
1999 increased 37.9% to $5,623,000 or $0.24 per share on a diluted basis from
$4,078,000 or $0.18 per share on a diluted basis in the comparable period of the
prior year. Basic net income per share increased to $0.25 for the three months
ended July 31, 1999 from $0.19 in the comparable period of the prior year.
NINE MONTHS ENDED JULY 31, 1999 COMPARED TO NINE MONTHS ENDED JULY 31, 1998
Net sales for the nine months ended July 31, 1999 increased 50.8% to
$319,235,000 from $211,708,000 in the comparable period of the prior year.
Domestic net sales for the nine months ended July 31, 1999 increased 54.8% to
$204,649,000 from $132,192,000 in the comparable period of the prior year, and
European net sales increased 44.1% to $114,586,000 from $79,516,000 for those
same periods. As measured in French Francs, Quiksilver Europe's net sales in the
first nine months of the current year increased 43.2% compared to the prior
year. Domestic men's sales increased 42.2% to $114,543,000 from $80,525,000 in
the comparable period of the prior year, while domestic women's sales increased
82.8% to $84,333,000 from $46,123,000. In the domestic division, sales of
snowboards, boots and bindings amounted to $5,773,000 in the current year's nine
month period compared to $5,544,000 in the prior year. The domestic men's sales
increase came from Quiksilver young men's, boys' and accessories and QS Silver
Edition divisions. The domestic women's sales increase came from both the
Quiksilver Roxy and Raisins divisions. In Europe, men's sales increased 38.8% to
$101,296,000 from $72,961,000, while women's sales increased 102.7% to
$13,290,000 from $6,555,000. The European sales increase came from all
divisions.
The gross profit margin for the nine months ended July 31, 1999 increased
slightly to 39.7% from 39.6% in the comparable period of the prior year. The
domestic gross profit margin increased somewhat to 37.0% from 36.6% in the
comparable period of the prior year, while the European gross profit margin was
unchanged at 44.6% for those same periods. The increase in the domestic gross
profit margin resulted primarily from a higher gross profit margin in the three
months ended July 31, 1999 as discussed above offset somewhat by an increase in
the sale of clearance goods in the first quarter of the current fiscal year. In
Europe, the gross profit margin increase in the three months ended July 31, 1999
as discussed above offset a decrease in the first half of the current fiscal
year.
Selling, general and administrative expense ("SG&A") for the nine months ended
July 31, 1999 increased 47.8% to $89,675,000 from $60,691,000 in the comparable
period of the prior year. Domestic SG&A increased 52.8% to $55,354,000 from
$36,223,000 in the comparable period of the prior year, and European SG&A
increased 40.3% to $34,321,000 from $24,468,000 for those same periods. The
increase in both domestic and European SG&A was primarily due to higher
personnel costs related to increased sales volume. Primarily as a result of
sales growth in excess of plans in the first six months of fiscal 1999 that was
supported without additional infrastructure growth, SG&A decreased as a
percentage of sales to 28.1% from 28.7%.
Net royalty expense for the nine months ended July 31, 1999 increased 46.9% to
$2,326,000 from $1,583,000 in the comparable period of the prior year. This
increase was due primarily to increased royalty expense related to European
sales.
Interest expense for the nine months ended July 31, 1999 increased 38.2% to
$2,675,000 from $1,935,000 in the comparable period of the prior year. This
increase was primarily due to (i) higher outstanding balances on the Company's
domestic line of credit to provide working capital to support the Company's
growth, (ii) borrowings to fund the build-out of the Company's new domestic
headquarters building in Huntington Beach, and (iii) increased long-term debt in
Europe to fund the opening of two company-owned Boardriders Club stores in
Paris.
The effective income tax rate for the nine months ended July 31, 1999, which is
based on current estimates of the annual effective income tax rate, increased to
41.4% from 40.9% in the comparable period of the prior year.
As a result of the above factors, net income for the nine months ended July 31,
1999 increased 60.7% to $18,719,000 or $0.80 per share on a diluted basis from
$11,649,000 or $0.54 per share on a diluted basis in the comparable period of
the prior year. Basic net income per share increased to $0.85 for the nine
months ended July 31, 1999 from $0.55 in the comparable period of the prior
year.
8
<PAGE> 10
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.
Net cash provided by operating activities for the nine months ended July 31,
1999 was $7,837,000, which was basically unchanged compared to $7,777,000 in the
comparable period of the prior year. The $8,517,000 increase in net income and
non-cash expenses was offset by the increase in the change in trade accounts
receivable. In addition, the increase in inventories in the nine months ended
July 31, 1999 was substantially offset by the increase in accounts payable for
that same period.
For the nine months ended July 31, 1999, capital expenditures increased 53.1% to
$19,631,000 from $12,825,000 in the comparable period of the prior year. This
increase resulted from spending on leasehold improvements for the new domestic
headquarters and to a lesser extent, increased investments in Quiksvilles and
company-owned Boardriders clubs in comparison to the prior year.
During the nine months ended July 31, 1999, net cash provided by financing
activities totaled $10,881,000 compared to $4,598,000 in the comparable period
of the prior year. The increase in net cash used in investing activities
discussed above was financed primarily by an increase in proceeds from stock
option exercises.
The net decrease in cash and cash equivalents for the nine months ended July 31,
1999 was $753,000 compared to $1,048,000 in the comparable period of the prior
year. Cash and cash equivalents decreased to $2,276,000 at July 31, 1999 from
$3,029,000 at October 31, 1998, while working capital increased $8,976,000 or
9.7% to $101,297,000 from $92,321,000 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 20.6% to $94,523,000 at July 31, 1999 from
$78,390,000 at October 31, 1998. Domestic accounts receivable increased 11.8% to
$60,762,000 at July 31, 1999 from $54,327,000 at October 31, 1998, and European
accounts receivable increased 40.3% to $33,761,000 from $24,063,000 for that
same period. These increases in accounts receivable are due primarily to higher
sales in comparison to the previous year, and to a lesser extent, a higher
proportion of shipments ocurring in the latter half of the quarter.
Consolidated inventories increased 3.7% to $73,212,000 at July 31, 1999 from
$70,575,000 at October 31, 1998. Domestic inventories increased 4.5% to
$55,706,000 from $53,295,000 at October 31, 1998, and European inventories
increased 1.3% to $17,506,000 from $17,280,000 for that same period.
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.
While management believes that allowances for doubtful accounts at July 31, 1999
are adequate, the Company carefully monitors developments regarding its major
customers. 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.
9
<PAGE> 11
FOREIGN CURRENCY
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 French Francs. 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.
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 affect.
Because the average exchange rate between the French Franc and the U.S. Dollar
was relatively consistent during the nine months ended July 31, 1999 compared to
the nine months ended July 31, 1998, there was minimal affect from the exchange
rate fluctuations on the comparisons between the periods. European net sales
increased 43.2% in French Francs during the nine months ended July 31, 1999
compared to the nine months ended July 31, 1998. As measured and reported in the
Company's Condensed Consolidated Statements Income, European net sales increased
44.1%.
YEAR 2000 READINESS DISCLOSURE
The Company is continuing with its Year 2000 Compliance Project ("Y2K Project")
as outlined in the Company's Annual Report on Form 10-K for the year ended
October 31, 1998. Original estimates were that the Company's accounts payable
and general ledger systems would be upgraded by the third quarter of fiscal
1999. Likewise, it was originally estimated that the Company's evaluation of
business processes that are not related to information systems, and the
development of contingency plans where such evaluation identifies a high risk of
a Y2K problem would be completed by the third quarter of fiscal 1999. Currently,
it is estimated that these phases of the Y2K Project will be completed in the
fourth quarter of fiscal 1999. Other estimates regarding time of completion and
the total cost of the Y2K Project generally remain unchanged.
10
<PAGE> 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8K.
(a) Exhibits
27.0 -- Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended July 31,
1999.
11
<PAGE> 13
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
September 10, 1999 /s/ Steven L. Brink
-----------------------------------
Steven L. Brink
Chief Financial Officer, Secretary
and Treasurer (Principal Accounting
Officer)
12
<PAGE> 14
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUIKSILVER, INC. JULY 31, 1999 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 2,276,000
<SECURITIES> 0
<RECEIVABLES> 99,831,000
<ALLOWANCES> 5,308,000
<INVENTORY> 73,212,000
<CURRENT-ASSETS> 179,071,000
<PP&E> 60,931,000
<DEPRECIATION> 16,377,000
<TOTAL-ASSETS> 244,132,000
<CURRENT-LIABILITIES> 77,774,000
<BONDS> 25,657,000
0
0
<COMMON> 224,000
<OTHER-SE> 140,477,000
<TOTAL-LIABILITY-AND-EQUITY> 244,132,000
<SALES> 319,235,000
<TOTAL-REVENUES> 319,235,000
<CGS> 192,508,000
<TOTAL-COSTS> 192,508,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,092,000
<INTEREST-EXPENSE> 2,675,000
<INCOME-PRETAX> 31,926,000
<INCOME-TAX> 13,207,000
<INCOME-CONTINUING> 18,719,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,719,000
<EPS-BASIC> 0.85
<EPS-DILUTED> 0.80
</TABLE>
