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, 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 (I.R.S. Employer
(State or other jurisdiction of 33-0199426
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
September 10, 1997 was
7,068,764
2
QUIKSILVER, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
July 31, 1997 and October 31, 1996............................................. 2
Condensed Consolidated Statements of Income
Three Months Ended July 31, 1997 and 1996...................................... 3
Condensed Consolidated Statements of Income
Nine Months Ended July 31, 1997 and 1996....................................... 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended July 31, 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 6. Exhibits and Reports on Form 8K................................................ 11
SIGNATURE............................................................................... 12
1
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
QUIKSILVER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JULY 31, OCTOBER 31,
1997 1996
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents ............................. $ 2,299,000 $ 3,429,000
Trade accounts receivable, less allowance
for doubtful accounts of $2,913,000 (1997)
and $2,873,000 (1996) .............................. 51,151,000 44,554,000
Other receivables .................................... 2,554,000 2,182,000
Inventories - Note 2 ................................. 46,841,000 35,668,000
Prepaid expenses and other current assets ............ 2,183,000 2,027,000
------------- -------------
Total current assets ............................ 105,028,000 87,860,000
Property and equipment, less accumulated depreciation and
amortization of $9,012,000 (1997) and $8,027,000 (1996) 13,555,000 9,655,000
Trademark, less accumulated amortization of
$1,603,000 (1997) and $1,486,000 (1996) ............... 1,539,000 1,532,000
Goodwill, less accumulated amortization of
$3,608,000 (1997) and $3,103,000 (1996) ............... 17,965,000 15,005,000
Other assets ............................................. 1,180,000 1,528,000
------------- -------------
Total assets .................................... $ 139,267,000 $ 115,580,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit ....................................... $ 16,220,000 $ 8,211,000
Accounts payable ...................................... 15,621,000 12,823,000
Accrued liabilities ................................... 8,549,000 10,212,000
Current portion of long term debt ..................... 208,000 240,000
Income taxes payable .................................. 1,164,000 727,000
------------- -------------
Total current liabilities ....................... 41,762,000 32,213,000
Long term debt ........................................... 9,426,000 2,640,000
------------- -------------
Total liabilities ............................... 51,188,000 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 - 7,068,764 (1997) and 6,965,346 (1996) ..... 71,000 70,000
Additional paid-in-capital ............................ 20,247,000 18,971,000
Retained earnings ..................................... 73,870,000 64,399,000
Treasury stock, 130,000 shares ........................ (3,054,000) (3,054,000)
Cumulative foreign currency translation adjustment .... (3,055,000) 341,000
------------- -------------
Total stockholders' equity ...................... 88,079,000 80,727,000
------------- -------------
Total liabilities and stockholders' equity ...... $ 139,267,000 $ 115,580,000
============= =============
See notes to condensed consolidated financial statements.
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QUIKSILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED JULY 31,
1997 1996
------------ ------------
Net sales .................................... $ 58,541,000 $ 49,008,000
Cost of goods sold ........................... 36,432,000 30,837,000
------------ ------------
Gross profit .............................. 22,109,000 18,171,000
------------ ------------
Operating expenses:
Selling, general and administrative expense 16,100,000 13,445,000
Royalty income ............................ (393,000) (421,000)
Royalty expense ........................... 731,000 665,000
------------ ------------
Total operating expenses ............... 16,438,000 13,689,000
------------ ------------
Operating income ............................. 5,671,000 4,482,000
Interest expense ............................. 526,000 186,000
Foreign currency gain ........................ (5,000) (15,000)
Other expense ................................ 56,000 82,000
------------ ------------
Income before provision for income taxes ..... 5,094,000 4,229,000
Provision for income taxes ................... 2,122,000 1,690,000
------------ ------------
Net income ................................... $ 2,972,000 $ 2,539,000
============ ============
Net income per common share .................. $ 0.42 $ 0.35
============ ============
Weighted average common shares
and equivalents outstanding ............... 7,107,000 7,268,000
============ ============
See notes to condensed consolidated financial statements.
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QUIKSILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
NINE MONTHS ENDED JULY 31,
1997 1996
------------- -------------
Net sales .................................... $ 165,266,000 $ 144,000,000
Cost of goods sold ........................... 101,388,000 88,221,000
------------- -------------
Gross profit .............................. 63,878,000 55,779,000
------------- -------------
Operating expenses:
Selling, general and administrative expense 45,567,000 38,699,000
Royalty income ............................ (1,103,000) (812,000)
Royalty expense ........................... 2,051,000 1,840,000
------------- -------------
Total operating expenses ............... 46,515,000 39,727,000
------------- -------------
Operating income ............................. 17,363,000 16,052,000
Interest expense ............................. 1,240,000 583,000
Foreign currency loss ........................ 75,000 33,000
Other expense ................................ 150,000 235,000
------------- -------------
Income before provision for income taxes ..... 15,898,000 15,201,000
Provision for income taxes ................... 6,427,000 6,118,000
------------- -------------
Net income ................................... $ 9,471,000 $ 9,083,000
============= =============
Net income per common share .................. $ 1.34 $ 1.26
============= =============
Weighted average common shares
and equivalents outstanding ............... 7,063,000 7,216,000
============= =============
See notes to condensed consolidated financial statements.
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QUIKSILVER, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED JULY 31,
1997 1996
------------ ------------
Cash flows from operating activities:
Net income ....................................................... $ 9,471,000 $ 9,083,000
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization .............................. 2,709,000 1,924,000
Provision for doubtful accounts ............................ 1,104,000 1,904,000
Loss (gain) on sale of fixed assets ........................ 148,000 (15,000)
Changes in operating assets and liabilities, net of
effects of acquisition (Note 3):
Trade accounts receivable ............................... (11,337,000) (10,005,000)
Other receivables ....................................... 108,000 (831,000)
Inventories ............................................. (11,137,000) (6,314,000)
Prepaid expenses and other current assets ............... (180,000) 129,000
Other assets ............................................ 590,000 (425,000)
Accounts payable ........................................ 2,692,000 3,983,000
Accrued liabilities ..................................... (1,263,000) 928,000
Income taxes payable .................................... 627,000 2,652,000
------------ ------------
Net cash (used in) provided by operating activities .. (6,468,000) 3,013,000
Cash flows from investing activities:
Proceeds from sales of fixed assets .............................. 83,000 30,000
Capital expenditures ............................................. (6,962,000) (3,309,000)
Acquisition of business (Note 3) ................................. (1,750,000) --
------------ ------------
Net cash used in investing activities ................ (8,629,000) (3,279,000)
Cash flows from financing activities:
Borrowings on lines of credit .................................... 30,734,000 18,756,000
Payments on lines of credit ...................................... (25,126,000) (20,143,000)
Borrowings on long-term debt ..................................... 7,640,000 --
Payments on long-term debt ....................................... (351,000) (63,000)
Proceeds from stock option exercises ............................. 1,277,000 2,586,000
------------ ------------
Net cash provided by financing activities ........................... 14,174,000 1,136,000
Effect of exchange rate changes on cash ............................. (207,000) (27,000)
------------ ------------
Net (decrease) increase in cash and cash equivalents ................ (1,130,000) 843,000
Cash and cash equivalents, beginning of period ...................... 3,429,000 3,461,000
------------ ------------
Cash and cash equivalents, end of period ............................ $ 2,299,000 $ 4,304,000
============ ============
Supplementary cash flow information: Cash paid during the period for:
Interest ...................................................... $ 1,071,000 $ 569,000
============ ============
Income taxes .................................................. $ 5,930,000 $ 4,657,000
============ ============
Non-cash financing activity -
Bank debt assumed in acquisition (Note 3) ..................... $ 2,682,000 $ --
============ ============
See notes to condensed consolidated financial statements.
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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,
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:
JULY 31, OCTOBER 31,
1997 1996
----------- -----------
Raw Materials .............................. $13,266,000 $11,686,000
Work-In-Process ............................ 3,441,000 3,673,000
Finished Goods ............................. 30,134,000 20,309,000
----------- -----------
$46,841,000 $35,668,000
=========== ===========
3. Effective July 1, 1997, the Company acquired the operations of Mervin
Manufacturing, Inc., ("Mervin") the maker of two snowboard labels, Lib
Tech and Gnu, and Bent Metal bindings, a conventional snowboard binding
system. The initial purchase price was $4,582,000, which includes a
cash payment of $1,750,000, assumed bank debt of $2,682,000 and
transaction costs of $150,000. Under the terms of the purchase
agreement, additional consideration aggregating $2,600,000 will be paid
if Mervin achieves certain earnings goals in the remainder of fiscal
1997 and in each of the three years through fiscal 2000. The
acquisition has been recorded using the purchase method and resulted in
goodwill of $3,344,000, which is being amortized over 30 years.
4. Effective July 1, 1997, the Company's revolving line of credit with a
U.S. bank was amended and restated (the "Agreement"). The agreement
provides for (i) a revolving line of credit of up to $38,000,000,
including a $17,000,000 sublimit for letters of credit and (ii) a
$7,000,000 seven-year term loan. This revolving line of credit expires
on May 3, 1999 and bears interest at 0.5% below the bank's reference
rate or at 1.5% above LIBOR for borrowings committed to be outstanding
for 30 days or longer. The term loan expires on July 1, 2004 and bears
interest generally at 1.5% above LIBOR. The agreement contains
restrictive covenants, the most significant of which relates to the
maintenance of minimum tangible net worth, dividend restrictions and
debt to tangible net worth requirements. At July 31, 1997, the Company
was in compliance with such covenants.
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PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
THREE MONTHS ENDED JULY 31, 1997 COMPARED TO THREE MONTHS ENDED JULY 31, 1996
Net sales for the three months ended July 31, 1997 increased 19.5% to
$58,541,000 from $49,008,000 in the comparable period of the prior year.
Domestic net sales for the three months ended July 31, 1997 increased 24.5% to
$38,216,000 from $30,701,000 in the comparable period of the prior year, and
European net sales increased 11.0% to $20,325,000 from $18,307,000 for those
same periods. As measured in French Francs, Quiksilver Europe's functional
currency, net sales in the current year's quarter increased 27.4% compared to
the prior year. Domestic men's sales increased 16.7% to $27,608,000 from
$23,659,000 in the comparable period of the prior year, while domestic women's
sales increased 34.9% to $9,501,000 from $7,042,000. From the date of
acquisition, Mervin sales amounted to $1,107,000 for the current year's quarter.
The domestic sales increase in men's resulted primarily from increased sales of
Quiksilver Young Men's product. Domestic women's sales increases in the
Quiksilver Roxy division were offset somewhat by lower shipments in the Raisins
division. In Europe, men's sales increased 9.7% to $19,723,000 from $17,987,000,
while women's sales increased 88.1% to $602,000 from $320,000.
The gross profit margin for the three months ended July 31, 1997 increased to
37.8% from 37.1% in the comparable period of the prior year. The domestic gross
profit margin was unchanged at 35.3%, and the European gross profit margin
increased to 42.4% from 40.1% for those same periods. In Europe, the gross
profit margin increased primarily due to a lower level of markdowns in the
current quarter compared to last year to reduce remaining Spring and Summer
inventories.
Selling, general and administrative expense ("SG&A") for the three months ended
July 31, 1997 increased 19.7% to $16,100,000 from $13,445,000 in the comparable
period of the prior year. Domestic SG&A increased 12.1% to $9,729,000 from
$8,679,000 in the comparable period of the prior year, and European SG&A
increased 33.7% to $6,371,000 from $4,766,000 for those same periods. The
increase in domestic SG&A was primarily due to higher personnel and other costs
related to increased sales volume. The increase in European SG&A was primarily
due higher personnel and other costs related to increased sales volume, along
with increased advertising and sales management expenses.
Net royalty expense for the three months ended July 31, 1997 increased 38.5% to
$338,000 from $244,000 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, 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 July 31, 1997 increased 182.8% to
$526,000 from $186,000 in the comparable period of the prior year. This increase
was primarily due to higher outstanding balances on the Company's domestic line
of credit that resulted from increased working capital needs, borrowings to
repurchase shares of the Company's stock in the three months ended October 31,
1996, and borrowings for investments in computer equipment.
The effective income tax rate for the three months ended July 31, 1997, which is
based on current estimates of the annual effective income tax rate, increased to
41.7% from 40.0% in the comparable period of the prior year. Increased income
tax rates in France were substantially offset by the favorable results of an
income tax audit in France.
As a result of the above factors, net income for the three months ended July 31,
1997 increased 17.1% to $2,972,000 or $0.42 per share from $2,539,000 or $0.35
per share in the comparable period of the prior year.
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NINE MONTHS ENDED JULY 31, 1997 COMPARED TO NINE MONTHS ENDED JULY 31, 1996
Net sales for the nine months ended July 31, 1997 increased 14.8% to
$165,266,000 from $144,000,000 in the comparable period of the prior year.
Domestic net sales for the nine months ended July 31, 1997 increased 16.7% to
$106,815,000 from $91,515,000 in the comparable period of the prior year, and
European net sales increased 11.4% to $58,451,000 from $52,485,000 for those
same periods. As measured in French Francs, Quiksilver Europe's net sales in the
first nine months of the current year increased 23.8% compared to the prior
year. Domestic men's sales increased 7.2% to $72,454,000 from $67,579,000 in the
comparable period of the prior year, while domestic women's sales increased
38.9% to $33,254,000 from $23,936,000. The domestic sales increase in men's
resulted primarily from increased sales in the Quiksilver Young Men's and
Quiksilver Boys divisions, which were offset somewhat by lower sales of Pirate
Surf and private label product. Domestic women's sales increased in both the
Quiksilver Roxy and Raisins Divisions. In Europe, men's sales increased 10.8% to
$55,979,000 from $50,518,000, while women's sales increased 25.7% to $2,472,000
from $1,967,000.
The gross profit margin for the nine months ended July 31, 1997 was unchanged
from the comparable period of the prior year at 38.7%. The domestic gross profit
margin decreased to 35.3% from 35.9% in the comparable period of the prior year,
and the European gross profit margin increased to 44.7% from 43.7% for those
same periods. The decrease in the domestic gross profit margin resulted
primarily from the impact of selling excess raw materials during the three
months ended January 31, 1997 at margins that were less than normal wholesale
and from markdowns taken during the three 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 increased primarily due to a lower level of
markdowns in the three months ended July 31, 1997 in comparison to the prior
year.
Selling, general and administrative expense ("SG&A") for the nine months ended
July 31, 1997 increased 17.7% to $45,567,000 from $38,699,000 in the comparable
period of the prior year. Domestic SG&A increased 14.5% to $27,721,000 from
$24,212,000 in the comparable period of the prior year, and European SG&A
increased 23.2% to $17,846,000 from $14,487,000 for those same periods. The
increase in domestic SG&A was primarily due to higher personnel and other costs
related to increased sales volume. The increase in European SG&A was primarily
due to higher personnel and other costs related to increased sales volume, along
with increased advertising and sales management expenses in the three months
ended July 31, 1997.
Net royalty expense for the nine months ended July 31, 1997 decreased 7.8% to
$948,000 from $1,028,000 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.
Interest expense for the nine months ended July 31, 1997 increased 112.7% to
$1,240,000 from $583,000 in the comparable period of the prior year. This
increase was primarily due to higher outstanding balances on the Company's
domestic line of credit that resulted from increased working capital needs,
borrowings to repurchase shares of the Company's stock in the three months ended
October 31, 1996, and borrowings for investments in computer equipment.
The effective income tax rate for the nine months ended July 31, 1997, which is
based on current estimates of the annual effective income tax rate, increased to
40.4% from 40.2% in the comparable period of the prior year. Increased income
tax rates in France were substantially offset by the favorable results of an
income tax audit in France.
As a result of the above factors, net income for the nine months ended July 31,
1997 increased 4.3% to $9,471,000 or $1.34 per share from $9,083,000 or $1.26
per share in the comparable period of the prior year.
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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 used in operating activities for the nine months ended July 31, 1997
was $6,468,000 compared to net cash provided by operating activities of
$3,013,000 in the comparable period of the prior year. This $9,481,000 increase
in cash used in operating activities was due primarily to the increase in
inventories. Cash paid for inventories net of changes in accounts payable
increased by $6,114,000 to support increased sales for the Fall and Holiday
seasons of the current year, both domestically and in Europe, and from
accelerated raw material purchases and finished goods production.
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 nine months ended July
31, 1997, capital expenditures increased 110.4% to $6,962,000 from $3,309,000 in
the comparable period of the prior year primarily from increased investment in
computer systems both domestically and in Europe.
As described in Note 3 to the Condensed Consolidated Financial Statements,
effective July 1, 1997, the Company acquired the operations of Mervin
Manufacturing, Inc., ("Mervin") the maker of two snowboard labels, Lib Tech and
Gnu, and Bent Metal bindings, a conventional snowboard binding system. Cash paid
during the three months ended July 31, 1997, amounted to $1,750,000. The Company
also assumed bank debt of $2,682,000, which was repaid during the quarter with
proceeds from the Company's existing domestic line of credit. Additional
consideration of up to $2,600,000 will be paid if Mervin achieves certain
earnings goals in the remainder of fiscal 1997 and in each of the three years
through fiscal 2000.
Effective July 1, 1997, the Company's revolving line of credit with a U.S. bank
was amended and restated (the "Agreement"). The agreement provides for (i) a
revolving line of credit of up to $38,000,000, including a $17,000,000 sublimit
for letters of credit and (ii) a $7,000,000 seven-year term loan. This revolving
line of credit expires on May 3, 1999 and bears interest at 0.5% below the
bank's reference rate or at 1.5% above LIBOR for borrowings committed to be
outstanding for 30 days or longer. The term loan expires on July 1, 2004 and
bears interest generally at 1.5% above LIBOR. The agreement contains restrictive
covenants, the most significant of which relates to the maintenance of minimum
tangible net worth, dividend restrictions and debt to tangible net worth
requirements. At July 31, 1997, the Company was in compliance with such
covenants. The Company also has available lines of credit, both secured and
unsecured, with banks in Europe that provide for maximum financing of
approximately $22,000,000.
During the nine months ended July 31, 1997, net cash provided by financing
activities totaled $14,174,000 compared to $1,136,000 in the comparable period
of the prior year. These additional borrowings during the first nine months of
fiscal 1997 were used to fund the increase in inventories, capital expenditures
and the acquisition of Mervin as discussed above.
The net decrease in cash and cash equivalents for the nine months ended July 31,
1997 was $1,130,000 compared to an increase of $843,000 in the comparable period
of the prior year. Cash and cash equivalents decreased $1,130,000 or 33.0% to
$2,299,000 at July 31, 1997 from $3,429,000 at October 31, 1996, while working
capital increased $7,619,000 or 13.7% to $63,266,000 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 14.8% to $51,151,000 at July 31, 1997 from
$44,554,000 at October 31, 1996. Domestic accounts receivable increased 19.0% to
$33,654,000 at July 31, 1997 from $28,292,000 at October 31, 1996, and European
accounts receivable increased 7.6% to $17,497,000 from $16,262,000 for that same
period. These increases in accounts receivable are generally consistent with the
increases in sales.
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FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY (CONTINUED)
Consolidated inventories increased 31.3% to $46,841,000 at July 31, 1997 from
$35,668,000 at October 31, 1996. Domestic inventories increased 33.7% to
$35,587,000 from $26,611,000 at October 31, 1996, and European inventories
increased 24.3% to $11,254,000 from $9,057,000 for that same period. The
increase in inventories occurred primarily to support increased sales for the
Fall and Holiday seasons of the current year and from accelerated raw material
purchases and finished goods production.
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, 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.
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8K.
(a) Exhibits
10.1 Amended and Restated to Loan Agreement dated as of
July 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 July 31,
1997
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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 12, 1997 /s/ Steven L. Brink
-------------------------------------------------
Steven L. Brink
Chief Financial Officer, Secretary and Treasurer
(Principal Accounting Officer)
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EXHIBIT INDEX
10.1 Amended and Restated to Loan Agreement dated as of July 1,
1997
27.0 Financial Data Schedule