UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended April 30, 2002
	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 Avenue
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 þ  No 

The number of shares outstanding of issuer’s Common Stock,
par value $0.01 per share, at
June 7, 2002 was
23,450,937

QUIKSILVER, INC.

FORM 10-Q

INDEX

PART I - FINANCIAL INFORMATION		Page No.
Item 1. Financial Statements:
	Condensed Consolidated Balance Sheets April 30, 2002 and October 31, 2001		2
	Condensed Consolidated Statements of Income Three Months Ended April 30, 2002 and 2001		3
	Condensed Consolidated Statements of Income Six Months Ended April 30, 2002 and 2001		4
	Condensed Consolidated Statements of Comprehensive Income Six Months Ended April 30, 2002 and 2001		4
	Condensed Consolidated Statements of Cash Flows Six Months Ended April 30, 2002 and 2001		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			9
Part II — OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders			14
Item 6. Exhibits and Reports on Form 8K			14
SIGNATURE			14

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION Item 1. Financial Statements
	CONDENSED CONSOLIDATED BALANCE SHEETS
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management’s Discussion and Analysis of Financial Condition                      and Results of Operations
PART II — OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders
Item 6. Exhibits and Reports on Form 8K.
SIGNATURE

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements

QUIKSILVER, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

					April 30,			October 31,
					2002			2001
				ASSETS
Current assets:
	Cash and cash equivalents				$	6,916,000		$	5,002,000
	Trade accounts receivable, less allowance for doubtful accounts of $6,372,000 (2002) and $6,280,000 (2001)					171,669,000			155,879,000
		Other receivables				7,023,000			6,427,000
		Inventories				76,313,000			107,562,000
		Prepaid expenses and other current assets				14,942,000			13,379,000
			Total current assets			276,863,000			288,249,000
Property and equipment, less accumulated depreciation and amortization of $40,390,000 (2002) and $34,469,000 (2001)						64,580,000			61,453,000
Trademarks						45,827,000			45,911,000
Goodwill						18,932,000			18,929,000
Other assets						4,593,000			4,196,000
			Total assets		$	410,795,000		$	418,738,000
				LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Lines of credit				$	46,201,000		$	66,228,000
	Accounts payable					29,356,000			40,554,000
	Accrued liabilities					24,653,000			24,898,000
	Current portion of long-term debt					24,810,000			24,153,000
	Income taxes payable					4,185,000			—
			Total current liabilities			129,205,000			155,833,000
Long-term debt						44,187,000			46,311,000
			Total liabilities			173,392,000			202,144,000
Stockholders’ equity
	Preferred stock, $.01 par value, authorized shares - 5,000,000; issued and outstanding shares — none					—			—
	Common stock, $.01 par value, authorized shares - 45,000,000; issued and outstanding shares - 24,165,071 (2002) and 23,890,283 (2001)					242,000			239,000
	Additional paid-in capital					56,458,000			52,706,000
	Treasury stock, 721,300 shares					(6,778,000	)		(6,778,000	)
	Retained earnings					197,996,000			181,447,000
	Accumulated other comprehensive loss					(10,515,000	)		(11,020,000	)
			Total stockholders’ equity			237,403,000			216,594,000
			Total liabilities and stockholders’ equity		$	410,795,000		$	418,738,000

See notes to condensed consolidated financial statements.

2

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

			Three months ended April 30,
			2002			2001
Net sales			$	185,969,000		$	168,198,000
Cost of goods sold				111,684,000			100,736,000
	Gross profit			74,285,000			67,462,000
Operating expenses:
	Selling, general and administrative expense			51,569,000			44,238,000
	Royalty income			(1,454,000	)		(1,348,000	)
		Total operating expenses		50,115,000			42,890,000
Operating income				24,170,000			24,572,000
Interest expense				2,287,000			2,648,000
Foreign currency loss (gain)				356,000			(1,052,000	)
Other expense				55,000			132,000
Income before provision for income taxes				21,472,000			22,844,000
Provision for income taxes				8,009,000			8,863,000
Net income			$	13,463,000		$	13,981,000
Net income per share			$	0.58		$	0.61
Net income per share, assuming dilution			$	0.55		$	0.58
Weighted average common shares outstanding				23,304,000			22,957,000
Weighted average common shares outstanding, assuming dilution				24,413,000			24,224,000

See notes to condensed consolidated financial statements.

3

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

		Six months ended April 30,
		2002			2001
Net sales		$	331,775,000		$	290,031,000
Cost of goods sold			203,863,000			175,134,000
	Gross profit		127,912,000			114,897,000
Operating expenses:
	Selling, general and administrative expense		98,752,000			82,750,000
	Royalty income		(2,607,000	)		(2,474,000	)
Total operating expenses			96,145,000			80,276,000
Operating income			31,767,000			34,621,000
Interest expense			4,715,000			5,664,000
Foreign currency loss (gain)			362,000			(137,000	)
Other expense			215,000			233,000
Income before provision for income taxes			26,475,000			28,861,000
Provision for income taxes			9,926,000			11,174,000
Net income		$	16,549,000		$	17,687,000
Net income per share		$	0.71		$	0.78
Net income per share, assuming dilution		$	0.69		$	0.74
Weighted average shares outstanding			23,253,000			22,758,000
Weighted average shares outstanding, assuming dilution			24,154,000			23,985,000

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

		Six months ended April 30,
		2002		2001
Net income		$	16,549,000	$	17,687,000
Other comprehensive gain (loss):
	Foreign currency translation adjustment		484,000		1,619,000
	Net unrealized gain (loss) on derivative instruments, net of tax		21,000		(597,000	)
Comprehensive income		$	17,054,000	$	18,709,000

See notes to condensed consolidated financial statements.

4

QUIKSILVER, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

					Six months ended April 30,
					2002			2001
Cash flows from operating activities:
	Net income				$	16,549,000		$	17,687,000
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
			Depreciation and amortization			6,315,000			6,806,000
			Provision for doubtful accounts			2,344,000			1,983,000
			Loss on sale of fixed assets			—			37,000
			Foreign currency gain			(52,000	)		(55,000	)
			Interest accretion			1,041,000			778,000
			Changes in operating assets and liabilities:
				Trade accounts receivables		(17,686,000	)		(12,956,000	)
				Other receivables		(1,285,000	)		400,000
				Inventories		31,191,000			(7,507,000	)
				Prepaid expenses and other current assets		(1,458,000	)		(1,165,000	)
				Other assets		(605,000	)		(722,000	)
				Accounts payable		(9,959,000	)		(9,260,000	)
				Accrued liabilities		202,000			(3,847,000	)
				Income taxes payable		5,583,000			6,488,000
				Net cash provided by (used in) operating activities		32,180,000			(1,333,000	)
Cash flows from investing activities:
	Proceeds from sales of fixed assets					—			9,000
	Capital expenditures					(9,324,000	)		(9,105,000	)
				Net cash used in investing activities		(9,324,000	)		(9,096,000	)
Cash flows from financing activities:
	Borrowings on lines of credit					11,626,000			44,409,000
	Payments on lines of credit					(31,812,000	)		(30,807,000	)
	Borrowings on long-term debt					2,247,000			671,000
	Payments on long-term debt					(5,663,000	)		(5,444,000	)
	Proceeds from stock option exercises					2,404,000			5,582,000
				Net cash (used in) provided by financing activities		(21,198,000	)		14,411,000
Effect of exchange rate changes on cash						256,000			(606,000	)
Net increase in cash and cash equivalents						1,914,000			3,376,000
Cash and cash equivalents, beginning of period						5,002,000			2,298,000
Cash and cash equivalents, end of period					$	6,916,000		$	5,674,000
	Supplementary cash flow information —
		Cash paid during the period for:
		Interest			$	3,098,000		$	4,667,000
		Income taxes			$	4,682,000		$	4,259,000

See notes to condensed consolidated financial statements.

5

QUIKSILVER, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.                    Basis of Presentation

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, 2002 and 2001. 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, 2001 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

Inventories consist of the following:

	April 30,		October 31,
	2002		2001
Raw Materials	$	18,210,000	$	21,325,000
Work-In-Process		4,330,000		8,138,000
Finished Goods		53,773,000		78,099,000
	$	76,313,000	$	107,562,000

3.                    Segment Information

The Company operates exclusively in the consumer products industry in which the Company designs, produces and distributes clothing, accessories and related products. Operating results of the Company’s various product lines have been aggregated because of their common characteristics and their reliance on shared operating functions.

Information related to domestic and European operations is as follows:

			Three Months Ended April 30,
			2002		2001
Net sales to unaffiliated customers:
	Domestic		$	111,215,000	$	110,392,000
	Europe			74,754,000		57,806,000
		Consolidated	$	185,969,000	$	168,198,000
Gross profit:
	Domestic		$	40,371,000	$	41,275,000
	Europe			33,914,000		26,187,000
		Consolidated	$	74,285,000	$	67,462,000
Operating income:
	Domestic		$	12,246,000	$	15,581,000
	Europe			11,924,000		8,991,000
		Consolidated	$	24,170,000	$	24,572,000

6

			Six Months Ended April 30,
			2002		2001
Net sales to unaffiliated customers:
	Domestic		$	201,042,000	$	188,967,000
	Europe			130,733,000		101,064,000
		Consolidated	$	331,775,000	$	290,031,000
Gross profit:
	Domestic		$	68,831,000	$	70,021,000
	Europe			59,081,000		44,876,000
		Consolidated	$	127,912,000	$	114,897,000
Operating income:
	Domestic		$	14,734,000	$	21,931,000
	Europe			17,033,000		12,690,000
		Consolidated	$	31,767,000	$	34,621,000
Identifiable assets:
	Domestic		$	262,285,000	$	274,299,000
	Europe			148,510,000		114,958,000
		Consolidated	$	410,795,000	$	389,257,000

4.                    Derivatives

The Company is exposed to gains and losses resulting from fluctuations in foreign currency exchange rates relating to certain sales, royalty income, and product purchases of its international subsidiaries that are denominated in currencies other than their functional currencies. The Company is also exposed to foreign currency gains and losses resulting from domestic transactions that are not denominated in U.S. dollars, and to fluctuations in interest rates related to its variable rate debt. Furthermore, the Company is exposed to gains and losses resulting from the effect that fluctuations in foreign currency exchange rates have on the reported results in the Company’s consolidated financial statements due to the translation of the operating results and financial position of the Company’s international subsidiaries. As part of its overall strategy to manage the level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company uses various foreign currency exchange contracts and intercompany loans. In addition, interest rate swaps are used to manage the Company’s exposure to the risk of fluctuations in interest rates.

For all qualifying cash flow hedges, the changes in the fair value of the derivatives are recorded in other comprehensive income. Other derivatives, which do not qualify for hedge accounting but are used by management to mitigate exposure to currency risks, are marked to fair value with corresponding gains or losses recorded in earnings. As of April 30, 2002, the Company was hedging forecasted transactions expected to occur in the following seven months. Assuming exchange rates at April 30, 2002 remain constant, $65,000 of losses related to hedges of these transactions are expected to be reclassified into earnings over the next seven months. Also included in accumulated other comprehensive income for the six months ended April 30, 2002 is a charge related to cash flow hedges of the Company’s long-term debt that is denominated in Australian dollars, totaling $98,000, which will be amortized into earnings through fiscal 2005 as the debt matures, along with the fair value of interest rate swaps, totaling $1,146,000, related to the Company’s long-term debt that is denominated in US dollars and will mature through fiscal 2007.

On the date the Company enters into a derivative contract, management designates the derivative as a hedge of the identified exposure. The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for entering into various hedge transactions. In this documentation, the Company identifies the asset, liability, firm commitment, or forecasted transaction that has been designated as a hedged item and indicates how the hedging instrument is expected to hedge the risks related to the hedged item. The Company formally measures effectiveness of its hedging relationships

7

both at the hedge inception and on an ongoing basis in accordance with its risk management policy. The Company would discontinue hedge accounting prospectively (i) if it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item, (ii) when the derivative expires or is sold, terminated, or exercised, (iii) if it becomes probable that the forecasted transaction being hedged by the derivative will not occur, (iv) because a hedged firm commitment no longer meets the definition of a firm commitment, or (v) if management determines that designation of the derivative as a hedge instrument is no longer appropriate. During the six months ended April 30, 2002, the Company reclassified into earnings a net gain of $141,000 resulting from the expiration, sale, termination, or exercise of derivative contracts. Additionally, a loss of $157,000 was recognized during the six months ended April 30, 2002 for changes in the value of derivatives that were marked to market value.

The Company enters into forward exchange and other derivative contracts with major banks and is exposed to credit losses in the event of nonperformance by these banks. The Company anticipates, however, that these banks will be able to fully satisfy their obligations under the contracts. Accordingly, the Company does not obtain collateral or other security to support the contracts.

A summary of derivative contracts is as follows:

	April 30, 2002
	Notional			Fair
	Amount		Maturity	Value
British pounds	$	16,050,000	May 2002 – Oct 2002	$	(5,000	)
U.S. dollars		30,000,000	May 2002 – Nov 2002		(60,000	)
Australian dollars		26,020,000	Sept 2002 – Sept 2005		(98,000	)
Interest rate swaps		45,465,000	Nov 2003 – Jan 2007		(1,146,000	)
	$	117,535,000		$	(1,309,000	)

5.                    Intangible Assets

Effective November 1, 2001, the Company adopted SFAS No. 142, “Goodwill and Intangible Assets”, which revises the accounting for purchased goodwill and intangible assets. Under SFAS No. 142, goodwill and intangible assets with indefinite lives are no longer amortized, but are tested for impairment annually and also in the event of an impairment indicator. The Company completed the required transitional impairment test and determined that no impairment loss was necessary. Any subsequent impairment losses will be reflected in operating income. With the adoption of SFAS No. 142, the Company discontinued amortization of goodwill and certain trademarks that were determined to have an indefinite life. Had amortization of goodwill and these trademarks not been recorded in the three and six months ended April 30, 2001, net income would have increased by $625,000 and $1,255,000, respectively, net of taxes, and diluted earnings per share would have increased by and $.02 and $.05, respectively.

	April 30, 2002					October 31, 2001
	Gross Carrying		Accumulated			Gross Carrying		Accumulated
	Amount		Amortization			Amount		Amortization
Goodwill	$	25,856,000	$	(6,924,000	)	$	25,817,000	$	(6,888,000	)
Non-amortizable trademarks		48,824,000		(4,663,000	)		48,821,000		(4,619,000	)
Amortizable trademarks		1,940,000		(274,000	)		1,920,000		(211,000	)
Total	$	76,620,000	$	(11,861,000	)	$	76,558,000	$	(11,718,000	)

Certain intangible assets will continue to be amortized by the Company using estimated useful lives of 10 to 25 years and no residual values. Intangible amortization expense for the three and six month periods ended April 30, 2002 was $31,000 and $63,000, respectively and is estimated to be, based on amortizable intangible assets at April 30, 2002, approximately $127,000 for fiscal 2002. Annual amortization expense, based on the Company’s amortizable intangible assets at April 30, 2002, is estimated to be approximately $127,000 in each of the fiscal years ending October 31, 2003 through 2007.

8

PART I — FINANCIAL INFORMATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Company operates exclusively in the consumer products industry in which the Company designs, produces and distributes clothing, accessories and related products. These markets are highly competitive, and the Company’s ability to evaluate and respond to changing consumer demands and tastes is critical to its success. Shifts in consumer preferences could have a negative affect on companies that misjudge these preferences. The Company’s historical success is due, in part, to the development of an experienced team of designers, artists, sponsored athletes, merchandisers, pattern makers, and cutting and sewing contractors that it believes has helped it remain in the forefront of design in the areas in which it competes. The Company’s future success will depend, in part, on its continued ability to design products that are acceptable to the marketplace, and there can be no assurance of the Company’s ability to do so. The consumer products industry is fragmented, and in order to retain and/or grow it’s market share, the Company must continue to be competitive in the areas of quality, brand image, distribution methods, price, customer service, and intellectual property protection.

Critical Accounting Policies

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In doing so, the Company must make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the balance sheet dates and the reported amounts of revenue and expense during the reporting periods. Actual results could be significantly different from these estimates. The Company believes that the following discussion addresses the Company’s most significant accounting policies, which are the most critical to aid in fully understanding and evaluating the Company’s reported financial results.

Revenue Recognition

Sales are recognized upon the transfer of title and risk of ownership to customers. Generally, the Company extends credit to its customers and does not require collateral. The Company’s payment terms range from net-30 to net-90, depending on the country or whether the Company sells directly to retailers in the country or to a distributor. None of the Company’s sales agreements with any of its customers provide for any rights of return by the customer. However, returns are approved on a case-by-case basis at the Company’s sole discretion to protect its image. Allowances for estimated returns are provided when sales are recorded, and related losses have historically been within management’s expectations.

Accounts Receivable

It is not uncommon for the some of the Company’s customers to have financial difficulties from time to time. This is normal given the wide variety of the Company’s account base, which includes small surf shops, medium-sized retail chains, and some large department store chains. Throughout the year, the Company performs credit evaluations of its customers and adjusts credit limits based on payment history and the customer’s current creditworthiness. The Company continuously monitors its collections and maintains a reserve for estimated credit losses based upon the Company’s historical experience and any specific customer collection issues that have been identified. Historically, the Company’s losses have been consistent with its estimates, but there can be no assurance that the Company will continue to experience the same credit loss rates that it has experienced in the past. Unforeseen, material financial difficulties of the Company’s customers could have an adverse impact on the Company’s profits.

Inventories

Inventories are valued at the cost to purchase and/or manufacture the product or the current estimated market value of the inventory, whichever is lower. The Company regularly reviews its inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on the Company’s estimated forecast of product demand and market value. Demand for the Company’s products could fluctuate significantly, which was evident in the aftermath of September 11th. The factors that could negatively affect demand for the Company’s product include weakening economic conditions, further terrorist acts or threats, unanticipated changes in consumer preferences, reduced customer confidence in the retail market, and unseasonable weather, among other things. Certain of these factors could also interrupt the production and/or importation of the Company’s products or otherwise increase the cost of

9

products. As a result, the Company’s operations and financial performance could be negatively affected. Additionally, management’s estimates of product demand and/or market value could be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory.

Foreign Currency Translation

A significant portion of the Company’s sales are generated by Quiksilver Europe, which operates with the euro as its functional currency. Quiksilver Europe generates sales in the United Kingdom that are denominated in British Pounds and sources product in U.S. dollars, both of which result in exposure to gains and losses that could occur from fluctuations in foreign exchange rates. The Company also has other foreign currency obligations related to its acquisition of Quiksilver International. Assets and liabilities of the Company denominated in foreign currencies are translated at the rate of exchange on the balance sheet date. Revenues and expenses are translated using the average exchange rate for the period. Gains and losses from translation of foreign subsidiary financial statements are included in accumulated other comprehensive loss.

As part of the Company’s overall strategy to manage its level of exposure to the risk of fluctuations in foreign currency exchange rates, the Company and its subsidiaries enter into various foreign exchange contracts generally in the form of forward contracts. For all contracts that qualify as cash flow hedges, the changes in the fair value of the derivatives are recorded in other comprehensive income. Other derivatives, which do not qualify for hedge accounting but are used by management to mitigate exposure to currency risks, are marked to fair value with corresponding gains or losses recorded in earnings.

Three Months Ended April 30, 2002 Compared to Three Months Ended April 30, 2001

Net sales for the three months ended April 30, 2002 increased 10.6% to $185,969,000 from $168,198,000 in the comparable period of the prior year. Domestic net sales for the three months ended April 30, 2002 increased 0.7% to $111,215,000 from $110,392,000 in the comparable period of the prior year, and European net sales increased 29.3% to $74,754,000 from $57,806,000 for those same periods. As measured in euros, Quiksilver Europe’s functional currency, net sales in the current year’s quarter increased 33.6% compared to the prior year. Domestic men’s sales decreased 0.8% to $55,167,000 from $55,637,000 in the comparable period of the prior year, while domestic women’s sales increased 3.5% to $55,515,000 from $53,654,000. In the domestic division, sales of snowboards, boots and bindings amounted to $533,000 in the current year’s quarter compared to $1,101,000 in the prior year. The slight decrease in domestic men’s sales came from the Quiksilver Young Mens, Boys and Hawk divisions, offset by an increase in the Fidra division. The domestic women’s sales increase came from the Roxy and Raisins divisions. In Europe, men’s sales increased 34.5% to $58,485,000 from $43,471,000, while women’s sales increased 13.5% to $16,269,000 from $14,335,000. The European men’s sales increase came from the Quiksilver Young Mens, Boys and Gotcha divisions. The European women’s sales increase came from the Roxy division. These comparisons of sales in Europe were impacted somewhat by the strong dollar in comparison to the prior year. As measured in euros, men’s sales increased 39.0% and women’s sales increased 17.2%.

The gross profit margin for the three months ended April 30, 2002 decreased to 39.9% from 40.1% in the comparable period of the prior year. The domestic gross profit margin decreased to 36.3% from 37.4% in the comparable period of the prior year, while the European gross profit margin increased slightly to 45.4% from 45.3% for those same periods. The decrease in the domestic gross profit margin resulted primarily from lower profit margins on sales of the Company’s end-of-season inventories compared to the prior year. In Europe, the gross profit margin increased slightly as the benefit from a higher level of sales through company-owned retail stores in comparison to the prior year was offset by lower wholesale margins. Gross profit margins are higher for sales in company-owned retail stores compared to the Company’s normal wholesale business.

Selling, general and administrative expense (“SG&A”) for the three months ended April 30, 2002 increased 16.6% to $51,569,000 from $44,238,000 in the comparable period of the prior year. Domestic SG&A increased 10.3% to $31,679,000 from $28,725,000 in the comparable period of the prior year, and European SG&A increased 28.2% to $19,890,000 from $15,513,000 for those same periods. SG&A increased as a percentage of sales domestically due primarily to the operating costs of additional Company-owned retail stores. The increase in European SG&A was primarily due to higher personnel and other costs related to increased sales volume. SG&A decreased as a percentage of sales as the

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operating costs of additional company-owned retail stores were more than offset by general leverage on growth.

Royalty income for the three months ended April 30, 2002 totaled $1,454,000 compared to royalty income of $1,348,000 in the comparable period of the prior year. Strength from the Company’s domestic and Australian licensees offset weakness from licensees in other smaller territories that have been affected by lower tourism.

Interest expense for the three months ended April 30, 2002 decreased 13.6% to $2,287,000 from $2,648,000 in the comparable period of the prior year. This decrease was due primarily to lower average balances on the Company’s domestic debt.

The effective income tax rate for the three months ended April 30, 2002, which is based on current estimates of the annual effective income tax rate, decreased to 37.3% from 38.8% in the comparable period of the prior year. This improvement resulted primarily from the effect of adopting SFAS 142 and discontinuing the amortization of goodwill and certain trademarks having indefinite lives.

As a result of the above factors, net income for the three months ended April 30, 2002 decreased 3.7% to $13,463,000 or $0.55 per share on a diluted basis from $13,981,000 or $0.58 per share on a diluted basis in the comparable period of the prior year. Basic net income per share decreased to $0.58 for the three months ended April 30, 2002 from $0.61 in the comparable period of the prior year.

Six Months Ended April 30, 2002 Compared to Six Months Ended April 30, 2001

Net sales for the six months ended April 30, 2002 increased 14.4% to $331,775,000 from $290,031,000 in the comparable period of the prior year. Domestic net sales for the six months ended April 30, 2002 increased 6.4% to $201,042,000 from $188,967,000 in the comparable period of the prior year, and European net sales increased 29.4% to $130,733,000 from $101,064,000 for those same periods. As measured in euros, Quiksilver Europe’s net sales in the first six months of the current year increased 32.5% compared to the prior year. Domestic men’s sales increased 7.1% to $102,976,000 from $96,145,000 in the comparable period of the prior year, while domestic women’s sales increased 6.7% to $96,320,000 from $90,244,000. In the domestic division, sales of snowboards, boots and bindings amounted to $1,746,000 in the current year’s six-month period compared to $2,578,000 in the prior year. The domestic men’s sales increase came from the Quiksilver Young Mens and Fidra divisions. The domestic women’s sales increase came from both the Roxy and Raisins divisions. In Europe, men’s sales increased 21.8% to $97,869,000 from $80,333,000, while women’s sales increased 58.5% to $32,864,000 from $20,731,000. The European men’s sales increase came from the Quiksilver Young Mens, Boys and Gotcha divisions. The European women’s sales increase came from the Roxy division. These comparisons of sales in Europe were negatively impacted somewhat by the strong dollar in comparison to the prior year. As measured in euros, men’s sales increased 24.8%, and women’s sales increased 62.3%.

The gross profit margin for the six months ended April 30, 2002 decreased to 38.6% from 39.6% in the comparable period of the prior year. The domestic gross profit margin decreased to 34.2% from 37.1%, while the European gross profit margin increased to 45.2% from 44.4% for those same periods. The decrease in the domestic gross profit margin resulted primarily from lower profit margins on sales of the Company’s end-of-season inventories compared to the prior year. In Europe, the gross profit margin increased primarily due to lower production costs and a higher level of sales through company-owned retail stores in comparison to the prior year.

SG&A for the six months ended April 30, 2002 increased 19.3% to $98,752,000 from $82,750,000 in the comparable period of the prior year. Domestic SG&A increased 12.9% to $60,461,000 from $53,556,000 in the comparable period of the prior year, and European SG&A increased 31.2% to $38,291,000 from $29,194,000 for those same periods. The increase in both domestic and European SG&A was primarily due to higher personnel and other costs related to increased sales volume. SG&A increased as a percentage of sales domestically due primarily to the operating costs of additional company-owned retail stores. In Europe, SG&A increased as a percentage of sales primarily as a result of additional retail stores, offset by general leverage on growth.

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Royalty income for the six months ended April 30, 2002 totaled $2,607,000 compared to royalty income of $2,474,000 in the comparable period of the prior year. Strength from the Company’s domestic and Australian licensees offset weakness from licensees in other smaller territories that have been affected by lower tourism.

Interest expense for the six months ended April 30, 2002 decreased 16.8% to $4,715,000 from $5,664,000 in the comparable period of the prior year. This decrease was due primarily to lower average balances on the Company’s domestic debt and lower domestic interest rates compared to the previous year.

The effective income tax rate for the six months ended April 30, 2002, which is based on current estimates of the annual effective income tax rate, decreased to 37.5% from 38.7% in the comparable period of the prior year. This improvement resulted primarily from the effect of adopting SFAS 142 and discontinuing the amortization of goodwill and certain trademarks having indefinite lives.

As a result of the above factors, net income for the six months ended April 30, 2002 decreased 6.4% to $16,549,000 or $0.69 per share on a diluted basis from $17,687,000 or $0.74 per share on a diluted basis in the comparable period of the prior year. Basic net income per share decreased to $0.71 for the six months ended April 30, 2002 from $0.78 in the comparable period of the prior year.

Financial Position, Capital Resources and Liquidity

The Company finances its capital investments and seasonal working capital requirements with funds generated by operations and its bank revolving lines of credit.

Net cash provided by operating activities for the six months ended April 30, 2002 was $32,180,000 compared to net cash used in operating activities of $1,333,000 in the comparable period of the prior year. This $33,513,000 increase in cash provided by operating activities was primarily due to the cash provided by a $21,232,000 decrease in inventories net of changes in accounts payable for the six months ended April 30, 2002. In the comparable period of the prior year, an increase in inventories net of changes in accounts payable used $16,767,000 of cash.

For the six months ended April 30, 2002, capital expenditures totaled $9,324,000, which is generally consistent with the $9,105,000 in the comparable period of the prior year. These investments include company-owned Boardriders Clubs and ongoing investments in computer and warehouse equipment.

During the six months ended April 30, 2002, net cash used in financing activities totaled $21,198,000, down significantly from the $14,411,000 provided in the comparable period of the prior year. The Company’s borrowings were reduced as a result of the increase in cash provided by operating activities during the six months ended April 30, 2002.

Cash and cash equivalents increased to $6,916,000 at April 30, 2002 from $5,002,000 at October 31, 2001, while working capital increased $15,242,000 or 11.5% to $147,658,000 from $132,416,000 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 10.1% to $171,669,000 at April 30, 2002 from $155,879,000 at October 31, 2001. Domestic accounts receivable increased 3.8% to $90,758,000 at April 30, 2002 from $87,398,000 at October 31, 2001, and European accounts receivable increased 18.2% to $80,911,000 from $68,481,000 for that same period. Domestic accounts receivable increased 0.7% compared to April 30, 2001, while European accounts receivable increased 36.5% compared to April 30, 2001. These increases in accounts receivable are generally consistent with the increases in net sales but fluctuate somewhat due to differences in the timing of shipments in comparison to previous periods.

Consolidated inventories decreased 29.1% to $76,313,000 at April 30, 2002 from $107,562,000 at October 31, 2001. Domestic inventories decreased 33.2% to $56,074,000 from $83,887,000 at October 31, 2001, and European inventories decreased 14.5% to $20,239,000 from $23,675,000 for that same period. The Company decreased domestic and European inventories while increasing sales primarily as a result of buying less product in advance of the current and upcoming selling seasons. Domestic

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inventories decreased 27.3% compared to April 30, 2001, while European inventories decreased 4.0% compared to April 30, 2001.

New Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, which supersedes previous guidance on financial accounting and reporting for the impairment or disposal of long-lived assets and for segments of a business to be disposed of. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Company does not expect the adoption of SFAS No. 144 to have a significant impact on the Company’s financial position or results of operations. However, future impairment reviews may result in charges against earnings to write down the value of long-lived assets.

See Note 5 to the Company’s financial statements for the impact of the adoption of SFAS No. 142.

Foreign Currency Translation Effects

The Company’s foreign currency risks are discussed in the Company’s Annual Report on Form 10-K for the year ended October 31, 2001 in Item 7a.

Quiksilver Europe’s statements of income are translated from euros into U.S. dollars at average exchange rates in effect during the reporting period. When the euro 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.

European net sales increased 33.6% in euros during the three months ended April 30, 2002 compared to the three months ended April 30, 2001. As measured in U.S. dollars and reported in the Company’s financial statements, European net sales increased only 29.3% as a result of a stronger U.S. dollar versus the euro in comparison to the prior year. Thus far in the Company’s third quarter, the dollar has weakened and is currently weaker relative to the euro in comparison to the prior year.

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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 26, 2002. 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.		16,185,837		5,885,583
William M. Barnum, Jr.		21,660,115		411,305
Charles E. Crowe		21,609,300		162,120
Michael H. Gray		21,660,115		411,305
Harry Hodge		16,174,057		5,897,363
Robert G. Kirby		21,656,915		414,505
Tom Roach		21,660,115		411,305
Bernard Mariette		16,184,337		5,887,083

In addition, the amendment of the Company’s 2000 Stock Incentive Plan was approved by the stockholders with 19,793,507 votes for, 2,186,211 votes against, and 91,702 votes abstained, and the amendment of the Company’s Certificate of Incorporation was approved by the stockholders with 21,477,086 votes for, 499,680 votes against, and 94,654 votes abstained.

Item 6. Exhibits and Reports on Form 8K.

         (a)  Exhibits

                  None

         (b)  Reports on Form 8-K

                  No reports on Form 8-K were filed during the quarter ended April 30, 2002.

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 13, 2002	/s/ Steven L. Brink
	Steven L. Brink
	Chief Financial Officer and Treasurer
	(Principal Accounting Officer)

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