-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TNE/ztU0MohAGc4KjOvX94Sf9+BJahbw8LQSVHmV/Rl1pvE0xJvmPbjQpASPbMmu tewLV0bsClc9kWk3vlBlKQ== 0000892569-98-001749.txt : 19980611 0000892569-98-001749.hdr.sgml : 19980611 ACCESSION NUMBER: 0000892569-98-001749 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980610 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUIKSILVER INC CENTRAL INDEX KEY: 0000805305 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 330199426 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15131 FILM NUMBER: 98645655 BUSINESS ADDRESS: STREET 1: 1740 MONROVIA AVE CITY: COSTA MESA STATE: CA ZIP: 92627 BUSINESS PHONE: 7146451395 MAIL ADDRESS: STREET 1: 1740 MONROVIA AVE CITY: COSTA MESA STATE: CA ZIP: 92627 10-Q 1 FORM 10-Q 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, 1998 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 5, 1998 was 14,056,804 2 QUIKSILVER, INC. FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION Page No. - ------------------------------ -------- Item 1. Financial Statements: Condensed Consolidated Balance Sheets April 30, 1998 and October 31, 1997............................. 2 Condensed Consolidated Statements of Income Three Months Ended April 30, 1998 and 1997...................... 3 Condensed Consolidated Statements of Income Six Months Ended April 30, 1998 and 1997........................ 4 Condensed Consolidated Statements of Cash Flows Six Months Ended April 30, 1998 and 1997........................ 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
1 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements QUIKSILVER, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
APRIL 30, OCTOBER 31, 1998 1997 ------------ ------------ ASSETS Current assets: Cash and cash equivalents............................ $ 1,958,000 $ 4,103,000 Trade accounts receivable, less allowance for doubtful accounts of $2,792,000 (1998) and $2,725,000 (1997)............................. 67,036,000 54,668,000 Other receivables................................... 2,976,000 1,773,000 Inventories - Note 2................................ 54,792,000 48,372,000 Prepaid expenses and other current assets........... 3,223,000 2,841,000 ------------ ------------ Total current assets........................... 129,985,000 111,757,000 Property and equipment, less accumulated depreciation and amortization of $12,045,000 (1998) and $10,033,000 (1997) 17,997,000 16,436,000 Trademark, less accumulated amortization of $1,745,000 (1998) and $1,646,000 (1997) 1,688,000 1,778,000 Goodwill, less accumulated amortization of $4,104,000 (1998) and $3,807,000 (1997).............. 17,785,000 18,141,000 Other assets............................................ 5,148,000 1,538,000 ------------ ------------ Total assets................................... $172,603,000 $149,650,000 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Lines of credit...................................... $ 29,861,000 $ 18,671,000 Accounts payable..................................... 13,945,000 13,079,000 Accrued liabilities.................................. 8,880,000 10,725,000 Current portion of notes payable..................... 2,040,000 1,474,000 Income taxes payable................................. 2,695,000 515,000 ------------ ------------ Total current liabilities...................... 57,421,000 44,464,000 Notes payable........................................... 13,057,000 10,178,000 ------------ ------------ Total liabilities.............................. 70,478,000 54,642,000 ------------ ------------ 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 - 14,316,804 (1998) and 14,278,940 (1997). 72,000 71,000 Additional paid-in-capital........................... 23,024,000 22,657,000 Retained earnings.................................... 84,614,000 77,043,000 Treasury stock, 260,000 shares....................... (3,054,000) (3,054,000) Cumulative foreign currency translation adjustment... (2,531,000) (1,709,000) ------------ ------------ Total stockholders' equity..................... 102,125,000 95,008,000 ------------ ------------ Total liabilities and stockholders' equity..... $172,603,000 $149,650,000 ============ ============
See notes to condensed consolidated financial statements. 2 4 QUIKSILVER, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED APRIL 30, 1998 1997 ------------ ------------ Net sales............................................... $ 78,192,000 $ 60,781,000 Cost of goods sold...................................... 46,136,000 36,620,000 ------------ ------------ Gross profit......................................... 32,056,000 24,161,000 ------------ ------------ Operating expenses: Selling, general and administrative expense.......... 21,392,000 15,497,000 Royalty income....................................... (314,000) (350,000) Royalty expense...................................... 973,000 691,000 ------------ ------------ Total operating expenses.......................... 22,051,000 15,838,000 ------------ ------------ Operating income........................................ 10,005,000 8,323,000 Interest expense........................................ 691,000 427,000 Foreign currency (gain)/loss............................ (19,000) 8,000 Other expense........................................... 71,000 41,000 ------------ ------------ Income before provision for income taxes................ 9,262,000 7,847,000 Provision for income taxes.............................. 3,806,000 3,097,000 ------------ ------------ Net income.............................................. $ 5,456,000 $ 4,750,000 ============ ============ Basic net income per share.............................. $0.39 $0.34 ============ ============ Diluted net income per share............................ $0.38 $0.34 ============ ============ Weighted average shares outstanding..................... 14,036,000 13,790,000 ============ ============ Diluted weighted average shares outstanding............. 14,507,000 14,008,000 ============ ============
3 5 QUIKSILVER, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 1998 1997 ------------ ------------ Net sales............................................... $133,443,000 $106,725,000 Cost of goods sold...................................... 79,459,000 64,956,000 ------------ ------------ Gross profit......................................... 53,984,000 41,769,000 ------------ ------------ Operating expenses: Selling, general and administrative expense.......... 38,787,000 29,467,000 Royalty income....................................... (771,000) (710,000) Royalty expense...................................... 1,747,000 1,320,000 ------------ ------------ Total operating expenses.......................... 39,763,000 30,077,000 ------------ ------------ Operating income........................................ 14,221,000 11,692,000 Interest expense........................................ 1,263,000 714,000 Foreign currency (gain) loss............................ (35,000) 80,000 Other expense........................................... 144,000 94,000 ------------ ------------ Income before provision for income taxes................ 12,849,000 10,804,000 Provision for income taxes.............................. 5,278,000 4,305,000 ------------ ------------ Net income.............................................. $ 7,571,000 $ 6,499,000 ============ ============ Basic net income per share.............................. $0.54 $0.47 ============ ============ Diluted net income per share............................ $0.53 $0.46 ============ ============ Weighted average shares outstanding..................... 14,027,000 13,850,000 ============ ============ Diluted weighted average shares outstanding............. 14,396,000 14,043,000 ============ ============
See notes to condensed consolidated financial statements. 4 6 QUIKSILVER, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED APRIL 30, 1998 1997 ------------ ------------ Cash flows from operating activities: Net income........................................... $ 7,571,000 $ 6,499,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization.................. 2,734,000 1,664,000 Provision for doubtful accounts................ 1,139,000 329,000 Loss on sale of fixed assets................... 12,000 134,000 Changes in operating assets and liabilities: Trade accounts receivable................... (14,190,000) (13,266,000) Other receivables........................... (1,277,000) 55,000 Inventories................................. (6,793,000) (2,312,000) Prepaid expenses and other current assets... (480,000) (405,000) Other assets................................ (268,000) 44,000 Accounts payable............................ 1,212,000 (2,033,000) Accrued liabilities......................... (1,109,000) (4,234,000) Income taxes payable........................ 2,205,000 1,232,000 ------------ ------------ Net cash used in operating activities.... (9,244,000) (12,293,000) Cash flows from investing activities: Proceeds from sales of fixed assets.................. 45,000 6,000 Capital expenditures................................. (7,456,000) (4,018,000) Acquisition of Mervin Manufacturing, Inc............. (500,000) -- ------------- ------------ Net cash used in investing activities...... (7,911,000) (4,012,000) Cash flows from financing activities: Borrowings on lines of credit........................ 26,270,000 16,315,000 Payments on lines of credit.......................... (14,956,000) (4,085,000) Borrowings on long-term debt......................... 4,529,000 650,000 Payments on long-term debt........................... (976,000) (234,000) Proceeds from stock option exercises................. 367,000 605,000 ------------ ------------ Net cash provided by financing activities.. 15,234,000 13,251,000 Effect of exchange rate changes on cash................. (224,000) (71,000) ------------- ------------- Net increase (decrease) in cash and cash equivalents.... (2,145,000) (3,125,000) Cash and cash equivalents, beginning of period.......... 4,103,000 3,429,000 ------------ ------------ Cash and cash equivalents, end of period................ $ 1,958,000 $ 304,000 ============ ============ Supplementary cash flow information Cash paid during the period for: Interest.......................................... $ 1,221,000 $ 600,000 ============ ============ Income taxes...................................... $ 3,163,000 $ 2,322,000 ============ ============
See notes to condensed consolidated financial statements. 5 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, 1998 and 1997. 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, 1997 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:
APRIL 30, OCTOBER 31, 1998 1997 ------------ ------------ Raw Materials........................ $ 15,664,000 $ 16,754,000 Work-In-Process...................... 6,665,000 5,693,000 Finished Goods....................... 32,463,000 25,925,000 ------------ ------------ $ 54,792,000 $ 48,372,000 ============ ============
3. Net income per share - During the three months ended January 31, 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share", which requires the Company to report basic and diluted earnings per share ("EPS"). Basic EPS is based on the weighted average number of shares outstanding during the periods, while diluted EPS additionally includes the dilutive effect of the Company's outstanding stock options computed using the treasury stock method. Prior period net income per share data were restated for consistency. 4. On March 10, 1998, the Company's Board of Directors approved a two-for-one split of the Company's Common Stock. The split was effected in the form of a dividend on April 24, 1998 to shareholders of record on April 16, 1998. All share and per-share information has been restated to reflect the stock dividend. 6 8 PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations THREE MONTHS ENDED APRIL 30, 1998 COMPARED TO THREE MONTHS ENDED APRIL 30, 1997 Net sales for the three months ended April 30, 1998 increased 28.6% to $78,192,000 from $60,781,000 in the comparable period of the prior year. Domestic net sales for the three months ended April 30, 1998 increased to 22.7% to $49,608,000 from $40,438,000 in the comparable period of the prior year, and European net sales increased 40.5% to $28,584,000 from $20,343,000 for those same periods. As measured in French Francs, Quiksilver Europe's functional currency, net sales in the current year's quarter increased 50.1% compared to the prior year. Domestic men's sales increased 12.1% to $28,062,000 from $25,043,000 in the comparable period of the prior year, while domestic women's sales increased 29.0% to $19,856,000 from $15,395,000. Mervin net sales totaled $1,690,000 for the current quarter. The domestic mens sales increase came from the Quiksilver Young Mens, Boys and Accessories divisions. The domestic women's sales increase came from the Quiksilver Roxy division. In Europe, men's sales increased 35.5% to $25,687,000 from $18,954,000, while women's sales increased 108.6% to $2,897,000 from $1,389,000. The gross profit margin for the three months ended April 30, 1998 increased to 41.0% from 39.8% in the comparable period of the prior year. The domestic gross profit margin increased to 37.0% from 35.7% in the comparable period of the prior year, and the European gross profit margin increased somewhat to 48.0% from 47.8% for those same periods. The increase in the domestic gross profit margin resulted primarily from a change in product mix and the impact of markdowns taken in the prior year's quarter to sell Pirate Surf product, which was removed from production plans. In the current year's quarter, there were more sales of juniors product, which sells at higher average profit margins, and less sales of private label product, which sells at lower average profit margins. 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, 1998 increased 38.0% to $21,392,000 from $15,497,000 in the comparable period of the prior year. Domestic SG&A increased 34.4% to $13,014,000 from $9,683,000 in the comparable period of the prior year, and European SG&A increased 44.1% to $8,378,000 from $5,814,000 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 distribution center expenses. The increase in European SG&A was primarily due to higher personnel costs related to increased sales volume, along with increased sales and marketing expenses. Net royalty expense for the three months ended April 30, 1998 increased 93.3% to $659,000 from $341,000 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 Quiksilver Europe pays royalties on European sales under a trademark agreement with Quiksilver International. Interest expense for the three months ended April 30, 1998 increased 61.8% to $691,000 from $427,000 in the comparable period of the prior year. This increase was primarily due to higher average outstanding balances on the Company's domestic line of credit. In addition to borrowings that provided working capital to fund the Company's growth, funds were borrowed to acquire Mervin, upgrade the Company's computer systems and to equip the Company's new warehouse facility in Huntington Beach, California. The effective income tax rate for the three months ended April 30, 1998, which is based on current estimates of the annual effective income tax rate, increased to 41.1% from 39.5% in the comparable period of the prior year. As a result of the above factors, net income for the three months ended April 30, 1998 increased 14.9% to $5,456,000 or $0.38 per share on a diluted basis from $4,750,000 or $0.34 per share on a diluted basis in 7 9 the comparable period of the prior year. Basic net income per share increased to $0.39 for the three months ended April 30, 1998 from $0.34 in the comparable period of the prior year. SIX MONTHS ENDED APRIL 30, 1998 COMPARED TO SIX MONTHS ENDED APRIL 30, 1997 Net sales for the six months ended April 30, 1997 increased 25.0% to $133,443,000 from $106,725,000 in the comparable period of the prior year. Domestic net sales for the six months ended April 30, 1998 increased 19.8% to $82,211,000 from $68,599,000 in the comparable period of the prior year, and European net sales increased 34.4% to $51,232,000 from $38,126,000 for those same periods. As measured in French Francs, Quiksilver Europe's net sales in the first six months of the current year increased 48.0% compared to the prior year. Domestic men's sales increased 9.2% to $48,965,000 from $44,846,000 in the comparable period of the prior year, while domestic women's sales increased 26.9% to $30,144,000 from $23,753,000. Mervin net sales totaled $3,102,000 for the six months ended April 30, 1998. The domestic mens sales increase came from all divisions except private label. The domestic womens sales increase came from the Quiksilver Roxy division. In Europe, men's sales increased 29.9% to $47,097,000 from $36,256,000, while women's sales increased 121.1% to $4,135,000 from $1,870,000. The gross profit margin for the six months ended April 30, 1998 increased to 40.5% from 39.1% in the comparable period of the prior year. The domestic gross profit margin increased to 37.1% from 35.4% in the comparable period of the prior year, and the European gross profit margin was consistent at 45.9% for those same periods. The increase in the domestic gross profit margin resulted primarily from a change in product mix and the impact of selling excess raw materials during the prior year's six months at margins that were less than normal wholesale and from markdowns taken during the prior year's six months to sell Pirate Surf product, which was removed from production plans. In the current year's six months, there were more sales of juniors product, which sells at higher average profit margins, and less sales of private label product, which sells at lower average profit margins. Selling, general and administrative expense ("SG&A") for the six months ended April 30, 1998 increased 31.6% to $38,787,000 from $29,467,000 in the comparable period of the prior year. Domestic SG&A increased 29.4% to $23,273,000 from $17,992,000 in the comparable period of the prior year, and European SG&A increased 35.2% to $15,514,000 from $11,475,000 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 distribution center expenses. The increase in European SG&A was primarily due to higher personnel costs related to increased sales volume, along with increased sales and marketing expenses. Net royalty expense for the six months ended April 30, 1998 increased 60.0% to $976,000 from $610,000 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 six months ended April 30, 1998 increased 76.9% to $1,263,000 from $714,000 in the comparable period of the prior year. This increase was primarily due to higher average outstanding balances on the Company's domestic line of credit. In addition to borrowings that provided working capital to fund the Company's growth, funds were borrowed to acquire Mervin, upgrade the Company's computer systems and to equip the Company's new warehouse facility in Huntington Beach, California. The effective income tax rate for the six months ended April 30, 1998, which is based on current estimates of the annual effective income tax rate, increased to 41.1% from 39.8% in the comparable period of the prior year. As a result of the above factors, net income for the six months ended April 30, 1998 increased 16.5% to $7,571,000 or $0.53 per share on a diluted basis from $6,499,000 or $0.46 per share on a diluted basis in the comparable period of the prior year. Basic net income per share increased to $0.54 for the six months ended April 30, 1998 from $0.47 in the comparable period of the prior year. 8 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 used in operating activities for the six months ended April 30, 1998 was $9,244,000 compared to $12,293,000 in the comparable period of the prior year. The $3,049,000 decrease in cash used in operating activities was due to a combination of factors. Net income and noncash expenses increased $2,830,000 during the six months ended April 30, 1998 compared to the six months ended April 30, 1997, and cash used to reduce accrued liabilities decreased $3,125,000 in the six months ended April 30, 1998 compared to the six months ended April 30, 1997, primarily as a result of lower payments during the current year for employee benefit programs and sales taxes in Quiksilver Europe. Offsetting these two factors was an increase of $1,236,000 in cash used for inventories, net of the increase in accounts payable, and an increase of $2,256,000 of cash used to support higher levels of trade and other accounts receivable. For the six months ended April 30, 1998, capital expenditures increased 85.6% to $7,456,000 from $4,018,000 in the comparable period of the prior year primarily due to investments during the six months ended April 30, 1998 in retail space in Paris and the domestic distribution center in Huntington Beach, California. During the six months ended April 30, 1998, net cash provided by financing activities totaled $15,234,000 compared to $13,251,000 in the comparable period of the prior year. Borrowings were higher during the first six months of fiscal 1998 primarily as a result of the increased investments discussed above. The net decrease in cash and cash equivalents for the six months ended April 30, 1998 was $2,145,000 compared to $3,125,000 in the comparable period of the prior year. Cash and cash equivalents decreased to $1,958,000 at April 30, 1998 from $4,103,000 at October 31, 1997, while working capital increased $5,271,000 or 7.8% to $72,564,000 from $67,293,000 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 22.6% to $67,036,000 at April 30, 1998 from $54,668,000 at October 31, 1997. Domestic accounts receivable increased 18.2% to $43,616,000 at April 30, 1998 from $36,887,000 at October 31, 1997, and European accounts receivable increased 31.7% to $23,420,000 from $17,781,000 for that same period. These increases in accounts receivable are generally consistent with the increase in net sales. Consolidated inventories increased 13.3% to $54,792,000 at April 30, 1998 from $48,372,000 at October 31, 1997. Domestic inventories increased 10.6% to $42,859,000 from $38,758,000 at October 31, 1997, and European inventories increased 24.1% to $11,933,000 from $9,614,000 for that same period. Inventories increased primarily due to seasonal factors and to support higher planned sales levels in current and future seasons. Customers of the Company have experienced financial difficulties, from time to time, 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 11 FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY (CONTINUED) While management believes that allowances for doubtful accounts at April 30, 1998 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. 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. European net sales increased 48.0% in French Francs during the six months ended April 30, 1998 compared to the six months ended April 30, 1997. As measured and reported in the Company's Condensed Consolidated Statements Income, European net sales increased 34.4%. 10 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 20, 1998. 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:
Votes Votes For Withheld --------- -------- Robert B. McKnight, Jr. 6,091,273 7,563 William M. Barnum, Jr. 6,091,173 7,663 Charles E. Crowe 6,091,273 7,563 Michael H. Gray 6,091,273 7,563 Harry Hodge 6,091,273 7,563 Robert G. Kirby 6,091,273 7,563 Tom Roach 6,091,272 7,564
Also, at the Annual Meeting, the Company's stockholders approved the 1998 Nonemployee Directors' Stock Option Plan and an amendment to the Company's 1996 Stock Option Plan. Voting results were as follows:
Votes Votes For Against Abstentions --------- --------- ----------- 1998 Nonemployee Directors' Stock Option Plan 3,304,882 1,526,181 11,806 Amendment to the Company's 1996 Stock Option Plan 2,525,677 2,275,401 19,077
No other matters were voted on at the Annual Meeting. 11 13 PART II - OTHER INFORMATION (continued) 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 April 30, 1998. 12 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 9, 1998 /s/ Steven L. Brink ------------------------------------ Steven L. Brink Chief Financial Officer, Secretary and Treasurer (Principal Accounting Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUIKSILVER, INC. APRIL 30, 1998 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 3-MOS OCT-31-1997 FEB-01-1998 APR-30-1998 1,958,000 0 69,828,000 2,792,000 54,792,000 129,985,000 30,042,000 12,045,000 172,603,000 57,421,000 13,057,000 0 0 72,000 102,053,000 172,603,000 133,443,000 133,443,000 79,459,000 79,459,000 0 1,139,000 1,263,000 12,849,000 5,278,000 12,849,000 0 0 0 7,571,000 0.54 0.53
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