-----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, Gu2Wyi30rQoOMGp2876LTZXVreVZpniJ0+I8/H/qV/mg7/bzE5GD+JQUWqu+s5Yj s9yUY+5dCW1wNIqEykq+Dw== 0000892569-96-000235.txt : 19960314 0000892569-96-000235.hdr.sgml : 19960314 ACCESSION NUMBER: 0000892569-96-000235 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960131 FILED AS OF DATE: 19960313 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: 1934 Act SEC FILE NUMBER: 000-15131 FILM NUMBER: 96534242 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 QUIKSILVER, INC. - FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q (MARK ONE) [X] REPORT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1996 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) Registrant's telephone number, including area code: (714) 645-1395 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Name of each exchange each class on which registered ---------- --------------------- NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: COMMON STOCK ------------ (TITLE OF CLASS) 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 REGISTRANT'S COMMON STOCK, PAR VALUE $.01 PER SHARE, AT JANUARY 31, 1996 WAS 6,804,604. 2 QUIKSILVER, INC. FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION Page No. - ------------------------------ -------- Item 1. Consolidated Financial Statements: Consolidated Balance Sheets January 31, 1996 (Unaudited) and October 31, 1995 ........ 2 Consolidated Statements of Income (Unaudited) Three Months ended January 31, 1996 and 1995 ............. 3 Consolidated Statements of Cash Flows (Unaudited) Three Months ended January 31, 1996 and 1995 ............. 4 Notes to Consolidated Financial Statements ............... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............. 6 Part II - OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K ....................... 8 SIGNATURES ....................................................... 8 - ----------
3 PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements QUIKSILVER, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED)
January 31, October 31, (Amounts in thousands except share data) 1996 1995 - ------------------------------------------------- ----------- ----------- ASSETS Current assets Cash and cash equivalents .................... $ 1,217 $ 3,461 Trade accounts receivable, less allowance for doubtful accounts of $2,895 (1996) and $2,717 (1995) ......................... 38,325 38,308 Other receivables ............................ 1,998 1,471 Inventories - Note 3 ......................... 32,862 28,355 Prepaid expenses ............................. 1,090 2,240 -------- ------- Total current assets ...................... 75,492 73,835 Equipment, less accumulated depreciation and amortization of $7,236 (1996) and $6,982 (1995) ................................ 7,326 7,032 Trademark and consulting agreement, less accumulated amortization of $1,373 (1996) and $1,336 (1995) ............................ 1,645 1,682 Goodwill, less accumulated amortization of $2,651 (1996) and $2,501 (1995) ........... 15,457 15,611 Other assets .................................... 1,972 1,008 -------- ------- $101,892 $99,168 ======== ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Lines of credit .............................. $ 5,826 $ 8,031 Accounts payable ............................. 12,845 9,257 Accrued liabilities .......................... 7,379 8,834 Current portion of notes payable ............. 228 233 Income taxes payable ...................... 1,412 578 -------- ------- Total current liabilities .............. 27,690 26,933 Notes payable ................................... 3,127 3,297 -------- ------- Total liabilities ...................... 30,817 30,230 Stockholders' equity Preferred stock, $.01 par value, authorized shares 5,000,000; issued and outstanding shares - none ............................. -- -- Common stock, $.01 par value, authorized shares 10,000,000; issued and outstanding shares 6,804,604 (1996) and 6,775,605 (1995)........................... 68 68 Additional paid-in-capital ................... 15,440 15,118 Retained earnings ............................ 54,867 52,739 Cumulative foreign currency translation gain . 700 1,013 -------- ------- Total stockholders' equity ............. 71,075 68,938 -------- ------- $101,892 $99,168 ======== =======
See notes to consolidated financial statements. 2 4 QUIKSILVER, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended January 31, ------------------------------ (Amounts in thousands except share data) 1996 1995 - ------------------------------------------ ---------- ---------- Net sales ................................ $ 40,487 $ 33,658 Cost of goods sold ....................... 24,892 20,769 ---------- ---------- Gross profit .......................... 15,595 12,889 ---------- ---------- Operating expenses Selling, general and administrative expenses ............ 11,336 9,965 Royalty income ........................ (205) (208) Royalty expense ....................... 565 422 ---------- ---------- Total operating expenses ........... 11,696 10,179 ---------- ---------- Operating income ......................... 3,899 2,710 Interest income .......................... (1) (6) Interest expense ......................... 170 170 Gain on foreign currency exchange ........ (117) (235) Loss on foreign currency exchange ........ 140 138 Other expense ............................ 101 78 ---------- ---------- Income before provision for income taxes . 3,606 2,565 Provision for income taxes ............... 1,481 1,034 ---------- ---------- Net income ............................... $ 2,125 $ 1,531 ========== ========== Primary net income per common share ...... $ .30 $ .23 ========== ========== Fully diluted net income per common share. $ .30 $ .23 ========== ========== Primary weighted average common shares and equivalents outstanding - Note 2 .. 7,134,000 6,744,000 ========== ========== Fully diluted weighted average common shares and equivalents outstanding - Note 2 .................. 7,134,000 6,744,000 ========== ==========
See notes to consolidated financial statements. 3 5 QUIKSILVER, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three months ended January 31, ------------------------------ (Amounts in thousands) 1996 1995 - ------------------------------------------------------ ------- -------- Cash flows from operating activities: Net income ........................................ $ 2,125 $ 1,531 Items in income not affecting cash: Depreciation and amortization .................. 628 565 Provision for losses on accounts receivable .... 183 243 Net loss (gain) on sale of fixed assets ........ 23 (4) Change in operating assets and liabilities: Trade accounts receivable ...................... (200) 205 Other receivables .............................. (527) (563) Inventories .................................... (4,507) (7,329) Prepaid expenses ............................... 61 34 Other assets ................................... 125 (12) Accounts payable ............................... 3,588 5,539 Accrued liabilities ............................ (1,455) 1,201 Income taxes payable ........................... 834 (1,081) ------- ------- Net change in cash related to operating activities ... 878 329 Cash flows from investing activities: Proceeds from sales of fixed assets ............... 20 25 Capital expenditures .............................. (774) (897) Goodwill .......................................... -- -- ------- ------- Net change in cash related to investing activities ... (754) (872) Cash flows from financing activities: Borrowings on lines of credit ..................... 3,565 6,012 Payments on lines of credit ....................... (5,775) (4,300) Borrowings on long-term debt ...................... 40 112 Payments on long-term debt ........................ (210) (183) Proceeds from stock issued in connection with exercise of stock options ...................... 325 189 ------- ------- Net change in cash related to financing activities ... (2,055) 1,830 Effect of exchange rate changes on cash .............. (313) (92) ------- ------- Net change in cash ................................... (2,244) 1,195 Cash at beginning of period .......................... 3,461 682 ------- ------- Cash at end of period ................................ $ 1,217 $ 1,877 ======= ======= Supplementary Cash Flow Information: Cash paid during the period for: Interest .......................................... $ 185 $ 241 ======= ======= Income taxes ...................................... $ 549 $ 1,085 ======= =======
See notes to consolidated financial statements. 4 6 QUIKSILVER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited 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 consolidated financial statements include the accounts of the parent company and subsidiaries, which are wholly-owned. 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 quarter ended January 31, 1996 and 1995. The financial statements and notes thereto should be read in conjunction with the audited financial statements and notes for the years ended October 31, 1995 and 1994. Interim results are not necessarily indicative of results for the full year due to seasonality and other factors. For foreign operations, local currencies are considered the functional currencies. Assets and liabilities are translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using the average exchange rates prevailing throughout the period. Translation effects are accumulated as part of the cumulative foreign currency translation gain section in stockholders' equity. Gains and losses from foreign currency transactions are included in operating results. 2. Net income per common share was computed based on the weighted average number of shares actually outstanding plus the shares that would be outstanding, using the treasury stock method, assuming the exercise of all outstanding options and warrants which were considered to be common stock equivalents. 3. Inventories consist of the following:
January 31, October 31, 1996 1995 ----------- ----------- Raw Materials $11,765,000 $10,875,000 Work-In-Process 4,142,000 4,104,000 Finished Goods 16,955,000 13,376,000 ----------- ----------- $32,862,000 $28,355,000 =========== ===========
Inventories are valued at the lower of cost (first in, first out) or market. 5 7 PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS - Three Months Ended January 31, 1996 as Compared to - -------------------------------------------------------------------------- Three Months Ended January 31, 1995 - ----------------------------------- Fiscal 1996 first quarter consolidated net sales increased 20.3% to $40,487,000 as compared to $33,658,000 in the same period of the prior year. Fiscal 1996 first quarter net sales, excluding European operations, increased 11.8% to $24,852,000 as compared to $22,239,000 in the same period of the prior year. This increase was primarily due to a greater acceptance of the Company's product lines. Fiscal 1996 first quarter net sales for European operations increased 36.9% to $15,635,000 as compared to $11,419,000 in the same period of the prior year. This increase was a result of a greater acceptance of the Company's product lines in Europe and a decrease in the French franc exchange rate. Fiscal 1996 first quarter consolidated gross profit margin increased to 38.5% as compared to 38.3% in the same period of the prior year. Fiscal 1996 first quarter gross profit margin, excluding European operations, increased to 35.8% as compared to 35.5% in the same period of the prior year. This increase was primarily due to cost reduction measures and improved product forecasting resulting in a reduction in closing out selected finished goods inventory at below wholesale prices. Fiscal 1996 first quarter gross profit margin for European operations decreased to 42.8% as compared to 43.8% in the same quarter of the prior year. This decrease was primarily due to higher levels of markdowns and a different mix of sales. Fiscal 1996 first quarter consolidated selling, general and administrative expense ("SG&A") increased 13.8% to $11,336,000 as compared to $9,965,000 in the same period of the prior year. Fiscal 1996 first quarter SG&A, excluding European operations, increased 10.4% to $6,977,000 as compared to $6,320,000 in the same period of the prior year. This increase was primarily due to increased sales volume. Fiscal 1996 first quarter SG&A expense for European operations increased 19.6% to $4,359,000 as compared to $3,645,000 in the same period of the prior year. This increase was primarily a result of increased sales volume and a decrease in the French franc exchange rate. Fiscal 1996 first quarter consolidated royalty income decreased 1.4% to $205,000 as compared to $208,000 in the same period of the prior year. This decrease was due to decreased sales of internationally licensed products. The Company receives royalty income from its Mexico, wetsuit, watch, sunglass, and outlet store licensees as well as Raisins international licensees. Fiscal 1996 first quarter consolidated royalty expense increased 33.9% to $565,000 as compared to $422,000 in the same period of the prior year. This increase was primarily due to increased sales by Quiksilver Europe, which, as a licensee of Quiksilver International, pay royalties pursuant to a license agreement, and due to a decrease in the French franc exchange rate. Fiscal 1996 first quarter consolidated interest income decreased to $1,000 as compared to $6,000 in the same period of the prior year. Fiscal 1996 first quarter consolidated interest expense remained stable at $170,000 as compared to $170,000 in the same period of the prior year. Fiscal 1996 first quarter consolidated net income increased 38.8% to $2,125,000 or $0.30 per fully diluted common share as compared to $1,531,000 or $0.23 per fully diluted common share in the same period of the prior year. This increase was primarily due to increased sales and gross profit margin, partially offset by increased SG&A and royalty expense. 6 8 FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY - --------------------------------------------------- The Company finances its capital investments and seasonal working capital requirements from funds generated by its operations and bank revolving lines of credit. Working capital increased to $47,802,000 at January 31, 1996 as compared to $46,902,000 at October 31, 1995. The increase is primarily due to increased operating income. Consolidated trade accounts receivable as of January 31, 1996 remained relatively stable at $38,325,000 from $38,308,000 at October 31, 1995. Trade accounts receivable, excluding European operations, decreased 5.2% to $24,201,000 as compared to $25,519,000 at October 31, 1995. European operations trade accounts receivable increased 10.4% to $14,124,000 as compared to $12,789,000 at October 31, 1995. These changes are in line when compared to the same period last year, the increase in bookings and the 20.3% increase in sales for the quarter over the same period of the prior year. Consolidated inventories as of January 31, 1996 increased 15.9% to $32,862,000 from $28,355,000 at October 31, 1995. Inventories, excluding European operations, increased 13.5% to $25,532,000 as compared to $22,496,000 at October 31, 1995. European operations inventories increased 25.1% to $7,330,000 from $5,859,000 at October 31, 1995. These increases are primarily due to increased bookings for its lines as well as seasonal factors. As the Company uses independent contractors for cutting, sewing and all other manufacturing of the Company's products, and intends to continue to use independent contractors in the future, the Company has avoided significant capital expenditures. Fiscal 1996 first quarter capital expenditures were $774,000 as compared to $897,000 for the same period of the prior year. Goodwill on the Company's balance sheets as of January 31, 1996 and October 31, 1995 consists primarily of the costs in excess over net assets acquired in the Quiksilver Europe and Raisins acquisitions. To finance the Company's seasonal working capital needs, the Company has available a revolving line of credit with a U.S. bank which is unsecured and which provides for a maximum financing of $20,000,000. The line of credit bears interest at 0.5% below the bank's reference rate for the first $16,000,000 drawn and at the bank's reference rate on all amounts drawn over $16,000,000. The line of credit expires April 30, 1996. Quiksilver Europe also has available lines of credit, both secured and unsecured, with banks which provide for maximum financing of approximately $16,600,000. The lines of credit bear interest at 0.7% to 1.0% above the banks reference rates. The Company believes its current cash balance and current lines of credit are adequate to cover its seasonal working capital requirements for the forseeable future. 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 January 31, 1996 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. However, in management's opinion, there are adequate alternative retail customers such that the loss of any customer known to have financial difficulties will not have a significant long-term negative impact on the Company's future operations. 7 9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8K - --------------------------------------- (a) Exhibits -------- Exhibit 27 (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the quarter ended January 31, 1996 SIGNATURES 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 March 8, 1996 Randall L. Herrel, Sr. ---------------------------------------- Randall L. Herrel, Sr. President, Chief Operating Officer and Secretary March 8, 1996 Bert G. Fenenga ---------------------------------------- Bert G. Fenenga Senior Vice President, Chief Financial Officer and Treasurer 8 EX-27 2 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUIKSILVER, INC.'S JANUARY 31, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 3-MOS OCT-31-1996 JAN-31-1996 1,217,000 0 38,325,000 2,895,000 32,862,000 75,492,000 7,326,000 7,236,000 101,892,000 27,690,000 3,355,000 68,000 0 0 71,007,000 101,892,000 40,487,000 40,487,000 24,892,000 24,892,000 11,696,000 2,895,000 170,000 3,606,000 1,481,000 2,125,000 0 0 0 2,125,000 .30 .30
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