##### Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)


|    |                                                                                     
|--- | ------------------------------------------------------------------------------------
|[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended October 31, 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
(State or other jurisdiction of
incorporation or organization) |  | 33-0199426
(I.R.S. Employer
Identification Number)

|                                                                                          |  |                 
|----------------------------------------------------------------------------------------- |  | ----------------
|15202 Graham Street
Huntington Beach, California
(Address of principal executive offices) |  | 92649
(Zip Code)

(714) 889-2200
Registrants telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of
each class |  | Name of each exchange
on which registered
|                    |  |                                          
|Common Stock        |  | New York Stock Exchange                  

Securities registered pursuant to Section 12(g) of the Act:None
(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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [   ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b.2). Yes X   No

The aggregate market value of the Registrants Common Stock held by
non-affiliates of the Registrant as of January 21, 2003 was approximately $730
million.

As of January 21, 2003, there were 27,129,763 shares of the Registrants
Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants Proxy Statement for the Annual Meeting of
Stockholders to be held March 28, 2003 are incorporated by reference into Part
III of this Form 10-K.



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TABLE OF CONTENTS



|                                                                                                        |                                            |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  |  | 
|PART I                                                                                                 
|Item 1. BUSINESS                                                                                       
|                                                                                                        | Introduction                              
|                                                                                                        | Recent Developments                       
|                                                                                                        | Segment Information                       
|                                                                                                        | Products and Brands                       
|                                                                                                        | Product Categories                        
|                                                                                                        | Product Design                            
|                                                                                                        | Promotion and Advertising                 
|                                                                                                        | Customers and Sales                       
|                                                                                                        | Retail Concepts                           
|                                                                                                        | Seasonality                               
|                                                                                                        | Production and Raw Materials              
|                                                                                                        | Imports and Imports Restrictions          
|                                                                                                        | Trademarks and Licensing Agreements       
|                                                                                                        | Competition                               
|                                                                                                        | Future Season Orders                      
|                                                                                                        | Employees                                 
|                                                                                                        | Environmental Matters                     
|                                                                                                        | Forward-Looking Statements                
|                                                                                                        | Risk Factors                              
|Item 2. PROPERTIES                                                                                     
|Item 3. LEGAL PROCEEDINGS                                                                              
|Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            
|PART II                                                                                                
|Item 5.  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                         
|Item 6. SELECTED FINANCIAL DATA                                                                        
|Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS          
|Item 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS                                   
|Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    
|Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE           
|PART III                                                                                               
|Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                            
|Item 11. EXECUTIVE COMPENSATION                                                                        
|Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                
|Item 14. CONTROLS AND PROCEDURES                                                                       
|PART IV                                                                                                
|Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                               
|                                                                                                        | INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|SIGNATURES                                                                                             
|EXHIBIT 3.2                                                                                            
|EXHIBIT 10.13                                                                                          
|EXHIBIT 10.19                                                                                          
|EXHIBIT 21.1                                                                                           
|EXHIBIT 23.1                                                                                           
|EXHIBIT 99.1                                                                                           
|EXHIBIT 99.2                                                                                           



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##### Table of Contents



TABLE OF CONTENTS

|                                           |  |                                                                                                |  |     
|------------------------------------------ |  | ---------------------------------------------------------------------------------------------- |  | ----
|                                           |  |                                                                                                |  | Page
|                                           |  |                                                                                                |  |     
|PART I                                     |  |                                                                                                |  |     
|Item 1.                                    |  | BUSINESS                                                                                       |  |     
|                                           |  | Introduction                                                                                   |  | 1   
|                                           |  | Recent Developments                                                                            |  | 1   
|                                           |  | Segment Information                                                                            |  | 2   
|                                           |  | Products and Brands                                                                            |  | 2   
|                                           |  | Product Categories                                                                             |  | 3   
|                                           |  | Product Design                                                                                 |  | 3   
|                                           |  | Promotion and Advertising                                                                      |  | 4   
|                                           |  | Customers and Sales                                                                            |  | 4   
|                                           |  | Retail Concepts                                                                                |  | 6   
|                                           |  | Seasonality                                                                                    |  | 7   
|                                           |  | Production and Raw Materials                                                                   |  | 7   
|                                           |  | Imports and Import Restrictions                                                                |  | 7   
|                                           |  | Trademarks and Licensing Agreements                                                            |  | 8   
|                                           |  | Competition                                                                                    |  | 9   
|                                           |  | Future Season Orders                                                                           |  | 9   
|                                           |  | Employees                                                                                      |  | 9   
|                                           |  | Environmental Matters                                                                          |  | 9   
|                                           |  | Forward-Looking Statements                                                                     |  | 10  
|                                           |  | Risk Factors                                                                                   |  | 10  
|Item 2.                                    |  | PROPERTIES                                                                                     |  | 13  
|Item 3.                                    |  | LEGAL PROCEEDINGS                                                                              |  | 13  
|Item 4.                                    |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                            |  | 13  
|PART II                                    |  |                                                                                                |  |     
|Item 5.                                    |  | MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS                      |  | 14  
|Item 6.                                    |  | SELECTED FINANCIAL DATA                                                                        |  | 15  
|Item 7.                                    |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS          |  | 16  
|Item 7a.                                   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS                                    |  | 26  
|Item 8.                                    |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                    |  | 27  
|Item 9.                                    |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE           |  | 27  
|PART III                                   |  |                                                                                                |  |     
|Item 10.                                   |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                             |  | 28  
|Item 11.                                   |  | EXECUTIVE COMPENSATION                                                                         |  | 28  
|Item 12.                                   |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |  | 28  
|Item 13.                                   |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 |  | 28  
|Item 14.                                   |  | CONTROLS AND PROCEDURES                                                                        |  | 28  
|PART IV                                    |  |                                                                                                |  |     
|Item 15.                                   |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K                                |  | 29  
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |  | 30                                                                                            
|SIGNATURES                                 |  | 51                                                                                            





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PART I

Item 1.   BUSINESS

Unless the context indicates otherwise, when we refer to Quiksilver, we,
us, our, or the Company in this Form 10-K, we are referring to
Quiksilver, Inc. and its subsidiaries on a consolidated basis. Quiksilver,
Inc. was incorporated in 1976 and was reincorporated in Delaware in 1986. Our
fiscal year ends on October 31, and references to fiscal 2002, fiscal 2001 or
fiscal 2000 refer to the years ended October 31, 2002, 2001 or 2000,
respectively.

Introduction

We are a globally integrated company that designs, produces and distributes
branded clothing, accessories and related products for young-minded people. Our
brands represent a casual lifestyledriven from our authentic boardriding
heritage. Our primary focus is apparel for young men and young women under the
Quiksilver, Roxy, Raisins, Radio Fijiand Gotcha(Europe) labels. We also
manufacture apparel for boys (Quiksilver Boysand Hawk Clothing), girls (Roxy
Girl, Teenie Wahineand Raisins Girls), men (Quiksilvereditionand Fidra,our
golf line) and women (Leilaniswimwear), as well as snowboards, snowboard boots
and bindings under the Lib Technologies, Gnu, Supernatural Mfg.and Bent Metal
labels.

We generate revenues primarily in the United States, Europe and, since our
acquisition of Ug Manufacturing Co. Pty Ltd. (Australia) and Quiksilver Japan
KK, the Asia/Pacific markets. Our products are sold primarily in surf shops,
specialty stores, and our proprietary retail concept Boardriders Club stores
where we can best carry our authentic brand message to the consumer.

We believe our 34-year history of continuing commitment to board sports and our
development of innovative products that relate to and reflect this fast growing
 global lifestyle give our company and our brands a credibility and
authenticity that is truly unique in our industry. Our boardriding lifestyle
generates products and images that are recognized around the world as symbols
of fun, freedom and individual expression. As the unquestioned leader of the
boardriding outdoor active lifestyle, we are now poised to carry our products
and brand message to a diversity of markets worldwide.




Recent Developments

Since acquiring Quiksilver International Pty Ltd., an Australian company
(Quiksilver International), in July 2000, we have owned all international
rights to use the Quiksilverand Roxytrademarks. Before then, we owned these
intellectual property rights in the United States and Mexico only, and operated
under license agreements with Quiksilver International to use the Quiksilver
and Roxytrademarks in other countries and territories.

In December 2002, we took the next step in consolidating global control of
the Quiksilverand Roxybrands by acquiring Ug Manufacturing Co. Pty Ltd., and
Quiksilver Japan KK, our licensees (through Quiksilver International) in
Australia, Japan, New Zealand and other Southeast Asian territories. By
acquiring this group of companies, which we refer to as Quiksilver
Asia/Pacific, we have created a global operating platform consisting of our
domestic U.S., European and Asia/Pacific operations.

In addition, in September 2002, we acquired Beach Street, Inc., the owner
and operator of 26 Quiksilver outlet stores in the U.S. The operations of
these outlet stores will be integrated into our existing retail stores
division.

1



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Segment Information

We operate exclusively in the consumer products industry segment. For fiscal
2002, we had two geographic segments, domestic and Europe. As a result of our
recent acquisition, we will have a third geographic segment beginning in fiscal
2003, Asia/Pacific. The domestic segment includes revenues from the U.S.,
Canada and other exports from the U.S., as well as royalties earned from
various trademark licenses. The European segment
includes primarily Western Europe. The Asia/Pacific segment includes
Australia, Japan, New Zealand and other Southeast Asian territories.

Products and Brands

Our first product was the famous Quiksilverboardshort developed by two
Australian surfers who founded Quiksilver Australia in the late 1960s. The
Quiksilverboardshort, identified by its distinctive mountain and wave logo,
became known in the core surfing world as a technically innovative and stylish
product. The reputation and popularity of the Quiksilverboardshort grew,
having been brought to the beaches of California and Southwest France in the
1970s by the founders of the Company and Quiksilver Europe. Since the first
boardshort, our product lines have been greatly expanded, but our brands
continue to represent innovation and quality. In the 1990s we called on the
Quiksilverheritage to reach out to the girls market by creating the Roxybrand
for Juniors, which has become our fastest growing brand. In addition to
Quiksilverand Roxy, we have developed a stable of other brands to address a
wide variety of consumers and markets. We believe that this multi-brand
strategy will allow us to continue to grow across a diverse range of products
and distribution with broad appeal across gender, age groups and geographies.

Quiksilver

Our Quiksilverproduct line now includes shirts, walkshorts, t-shirts, fleece,
pants, jackets, snowboard-wear, footwear, hats, backpacks, footwear, wetsuits,
watches, eyewear and other accessories. Quiksilverhas also expanded
demographically and currently includes Young Mens, Boys and Toddlers.
Quiksilvereditionis our brand targeted at men. In 2002, the Quiksilverline
of products represented approximately 56% of our revenues.

Roxy

Our Roxybrand for young women is a surf-inspired collection that we introduced
in fiscal 1991. The Roxyline is branded with a heart logo composed of
back-to-back images of the Quiksilvermountain and wave logo and includes a
full range of sportswear, swimwear, footwear, backpacks, fragrance, beauty
care, bedroom furnishings and other accessories for young women. Through
fiscal 1997, Roxyincluded Juniors sizes only, but was then expanded as Teenie
Wahineand in 2001 as Roxy Girlinto the Girls categories. In 2002, the Roxy
product line accounted for approximately 31% of our revenues.

Other Brands

In 2002, our other brands were 13% of our revenues.



| |  | Raisins, Radio Fiji, Leilani- We added swimwear labels Raisins, Radio
Fijiand Leilaniin fiscal 1994 when we acquired the Raisin Company,
Inc. Raisinsand Radio Fijiare labels in the Juniors category while
Leilaniis a contemporary label. We also produce private label
swimwear.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Hawk- Tony Hawk, the world-famous skateboarder, is the inspiration
for our Hawk Clothingbrand which we added to our portfolio in fiscal
2000. Our target audience for the Hawkproduct line is boys who
recognize Tony from his broad media and video game exposure.                
| 
| |  | Gotcha- We have added Gotchato our European labels to give us
product to address European street fashion for young men.                                                                                                                                                            
| 
| |  | Fidra- We entered the golf apparel business in fiscal 2000 with a new
brand, Fidra, conceived and developed by golf industry pioneer, John
Ashworth, and endorsed by world famous golfer, Ernie Els.                                                                               

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| |  | Lib Tech, Gnu, Supernatural Mfg., Bent Metal -
We address the core snowboard
market through our Lib Technologies, Gnuand Supernatural Mfg.brands of
snowboards and accessories, including Bent Metalsnowboard bindings.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Product Categories

The following table shows the approximate percentage of
revenues attributable
to each of our major product categories during the last three fiscal years:

|                                                      |  |                        |     |      |  |      |     |   |  |  |     |  
|----------------------------------------------------- |  | ---------------------- | --- | ---- |  | ---- | --- | - |  |  | --- | -
|                                                      |  | Percentage of Revenues
|                                                      |  |                       
|                                                      |  | 2002                   |     | 2001 |  | 2000
|                                                      |  |                        |     |      |  |     
|T-Shirts                                              |  |                        | 20  | %    |  |      | 23  | % |  |  | 21  | %
|Accessories                                           |  |                        | 12  |      |  |      | 11  |   |  |  | 12  |  
|Pants                                                 |  |                        | 12  |      |  |      | 10  |   |  |  | 9   |  
|Shirts                                                |  |                        | 11  |      |  |      | 10  |   |  |  | 12  |  
|Jackets, sweaters and snowboardwear                   |  |                        | 9   |      |  |      | 11  |   |  |  | 9   |  
|Swimwear, excluding boardshorts                       |  |                        | 9   |      |  |      | 9   |   |  |  | 9   |  
|Fleece                                                |  |                        | 7   |      |  |      | 7   |   |  |  | 7   |  
|Shorts                                                |  |                        | 6   |      |  |      | 6   |   |  |  | 6   |  
|Footwear                                              |  |                        | 4   |      |  |      | 3   |   |  |  | 2   |  
|Boardshorts                                           |  |                        | 4   |      |  |      | 4   |   |  |  | 6   |  
|Tops and dresses                                      |  |                        | 4   |      |  |      | 4   |   |  |  | 4   |  
|Snowboards, snowboard boots, bindings and accessories |  |                        | 2   |      |  |      | 2   |   |  |  | 3   |  
|                                                      |  |                        |     |      |  |      |     |   |  |  |     |  
|                                                      |  |                        | 100 | %    |  |      | 100 | % |  |  | 100 | %
|                                                      |  |                        |     |      |  |      |     |   |  |  |     |  

Although our products are generally available throughout the year, demand for
different categories of product changes in the different seasons of the year.
Sales of shorts, short-sleeve shirts, t-shirts and swimwear are higher during
the spring and summer seasons, and sales of pants, long-sleeve shirts, fleece,
jackets, sweaters, snowboardwear and snowboards are higher during the fall and
holiday seasons.

We believe that the domestic retail prices for our apparel products range from
approximately $18 for a t-shirt and $40 to $50 for a typical short to $250
for a typical, mid-range snowboard jacket. For European products, retail
prices range from approximately $29 for a t-shirt and about $49 for a typical
short to $180 for a basic snowboard jacket. Asia/Pacific t-shirts sell for
approximately $24, while shorts range from approximately $29 to $54, and a
typical snowboard jacket sells for approximately $240.

Product Design

Our products are designed for active-minded people who live a casual lifestyle.
Innovative design, active fabrics and quality of workmanship are emphasized.
Our design and merchandising teams create seasonal product ranges for each of
our brands. These design groups constantly monitor local and global fashion
trends. We believe our most valuable input comes from our own managers,
employees, sponsored athletes and independent sales representatives who are
actively involved in surfing, snowboarding, skateboarding and other sports in
our core market. This connection with our core market continues to be the
inspiration for our product and is key to our reputation for distinct and
authentic design.

Our design centers in California, Europe, Australia and Japan develop and share
designs and merchandising themes and concepts that are globally consistent
while reflecting local adaptations for differences in geography, culture and
taste.

Our longtime informal global process of sharing and cross-pollinating
Quiksilverand Roxydesigns, art, fabrics, samples and patterns has now been
formalized by our purchase of Quiksilver International and the integration of
Quiksilver Asia/Pacific into our operations.

3



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Promotion and Advertising

Our three-decade commitment to core marketing at the grass-roots level in the
sport of surfing and other youth boardriding activities is the foundation of
the promotion and advertising of our brands and products.

An important marketing vehicle for us is our sponsorship of high profile
athletes in outdoor, individual sports, including surfing, snowboarding,
skateboarding, windsurfing and now golf. Many of these athletes such as Kelly
Slater, Lisa Anderson, Tony Hawk, Danny Kass and Ernie Els have achieved world
champion status in their respective sports and are featured in our promotional
content. We also operate a promotional fund that is used to sponsor our
international team of leading athletes, produce promotional movies and videos
featuring athletes wearing and/or using Quiksilverand Roxyproducts, and
organize surfing contests and other events that have international
significance.

Our core marketing is based on our sponsorship and support of surf, snowboard
and skateboard contests in markets where we distribute product. These events
reinforce our reputation as an authentic, core brand among surfers and
nonsurfers alike. The Quiksilver in Memory of Eddie Aikau Big Wave
Invitationalis held at Waimea Bay in Hawaii, the Quiksilver Prois held in the
Fijian Islands, and the Roxy Prois held annually at Sunset Beach in Hawaii.
In Europe, we produce the Quiksilver Masterssurfing event, the Bowlriders
skateboarding event in France, and are one of the sponsors of the Air & Style
snowboard event in Austria. We also sponsor other regional and local
events such as surf camps and skate park tours.

We sponsor the Quiksilver Crossing, a continuing voyage of the Indies Trader, a
surf exploration vessel whose mission is to explore new surfing regions around
the world and document the state of the environment under a team of marine
biologists. The Quiksilver Crossing,now in its fourth year, began its voyage
in the South Pacific, continued on to Europe in 2002 and plans to visit the
Americas in 2003.

As we have gained an international reputation for the authenticity and
compelling content of our boardriding lifestyle, we have entered into
co-branding arrangements used to promote our brands. For example, Peugeot and
Toyota have produced cars branded with Quiksilverand Roxy, and the Tony Hawk
Pro Skater 3video game is cross-promoted by both the Company and Activision.

We have also created Quiksilver Entertainment, a new division that will
transmit our boardriding lifestyle through television, movies, events, music
and publishing. For example, we developed 54321, a daily action sports news
magazine for Fox Sports, and with MTV we are producing a series about
competitive girls surfing.

Customers and Sales

Our distribution strategy is premised on our longstanding belief that the
integrity and success of our brands is dependent on responsible growth and
careful selection of the retail accounts where our products are merchandised
and sold.

Our policy is to sell to retailers who provide an outstanding in-store
experience for their customers and who merchandise our products in a manner
consistent with the image of our brands and the quality of our products. Our
customer base has for many years reflected our goal of diversification of
distribution to include surf shops, specialty stores, national specialty chains
and select department stores.

The foundation of our business is distribution of product through surf shops,
Boardriders Clubs and specialty stores where in-store shops, fixturing and
point-of-sale materials carry our brand message. (We refer to our in-store
shops as Quiksvilles.) This core distribution channel serves as a base of
legitimacy and long-term loyalty to us and our brands. Most of these stores
stand-alone or are part of small chains.

We also sell to independent specialty or active lifestyle stores and specialty
chains not specifically characterized as surf shops or Quiksvilles. This
category includes chains such as Pacific Sunwear, Nordstrom, Duty Free Shops,
Zumiez, Chicks Sporting Goods and the Buckle, as well as many independent
active lifestyle stores, snowboard shops and sports shops. We also sell to a
limited number

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of department stores, including Macys, Robinsons/May, Dillards, The Bon
Marche and Burdines in the U.S.; Le Printemps and Galeries Lafayette in France;
and Harrods and Lillywhites in Great Britain.

Many of our brands are sold through the same retail accounts, however,
distribution can be different depending on the brand and demographic group.
Our Quiksilverproducts are sold domestically to customers that have
approximately 6,900 store locations combined. Likewise, Roxyproducts are sold
domestically to customers with approximately 6,600 store locations. Many of
these Roxylocations also carry Quiksilverproduct. Our swimwear brands
(Raisins, Leilaniand Radio Fiji) are found in 9,600 stores, including many
small, specialty swim locations, while our wintersports hardgoods products are
found in approximately 600 stores, including primarily snowboard shops in the
U.S. and Canada. Fidrais carried in approximately 850 green grass stores
primarily in the U.S. In Europe, our products are found in approximately 5,900
store locations. We added 1,900 more retail locations
when we acquired Quiksilver Asia/Pacific.

Our European segment accounted for approximately 40% of our consolidated
revenues during fiscal 2002, which is up from 36% in fiscal 2001. Fiscal 2002
foreign sales from the U.S. (primarily to Canada, Central and South America)
were approximately 6% of consolidated net sales.

The following table summarizes the approximate percentages of our fiscal 2002
revenues by distribution channel:

|                                              |       |          |                        |        |   |              |    |     |   |  |     |     |  
|--------------------------------------------- | ----- | -------- | ---------------------- | ------ | - | ------------ | -- | --- | - |  | --- | --- | -
|                                              |       |          | Percentage of Revenues
|                                              |       |          |                       
|Distribution Channel                          |       | Domestic |                        | Europe |   | Consolidated
|                                              |       |          |                        |        |   |             
|Boardriders Clubs, surf shops and Quiksvilles |       |          | 25                     | %      |   |              | 39 | %   |   |  | 31  | %  
|Specialty stores                              |       |          | 50                     |        |   |              | 44 |     |   |  | 48  |    
|Department stores                             |       |          | 15                     |        |   |              | 8  |     |   |  | 12  |    
|Domestic exports                              |       |          | 10                     |        |   |              |   |     |   |  | 6   |    
|European distributors                         |       |          |                       |        |   |              | 9  |     |   |  | 3   |    
|                                              |       |          |                        |        |   |              |    |     |   |  |     |    
|                                              | Total |          |                        | 100    | % |              |    | 100 | % |  |     | 100 | %
|                                              |       |          |                        |        |   |              |    |     |   |  |     |    
|Geographic segment                            |       |          | 60                     | %      |   |              | 40 | %   |   |  | 100 | %  
|                                              |       |          |                        |        |   |              |    |     |   |  |     |    

Our revenues are spread over a large wholesale customer base. During fiscal
2002, approximately 22% of our consolidated revenues were from our ten largest
customers. No single customer accounted for more than 6% of our consolidated
net sales during fiscal 2002.

Our products are sold by approximately 230 independent sales representatives in
the U.S. and Europe and approximately 80 distributors in Europe. Our sales
representatives are generally compensated on a commission basis. We employ
retail merchandise coordinators who travel between specified retail locations
of our wholesale customers to further improve the
presentation of our product and build our image at the retail level.

Our sales are geographically diversified. The following table summarizes the
approximate percentages of our fiscal 2002 revenues by geographic region
(excluding licensees):

|                         |       |          |                        |        |   |              |    |     |   |  |    |     |  
|------------------------ | ----- | -------- | ---------------------- | ------ | - | ------------ | -- | --- | - |  | -- | --- | -
|                         |       |          | Percentage of Revenues
|                         |       |          |                       
|Geographic Region        |       | Domestic |                        | Europe |   | Consolidated
|                         |       |          |                        |        |   |             
|United States West Coast |       |          | 51                     | %      |   |              |   | %   |   |  | 30 | %  
|United States East Coast |       |          | 20                     |        |   |              |   |     |   |  | 12 |    
|Hawaii                   |       |          | 3                      |        |   |              |   |     |   |  | 2  |    
|Other United States      |       |          | 16                     |        |   |              |   |     |   |  | 10 |    
|France                   |       |          |                       |        |   |              | 41 |     |   |  | 17 |    
|United Kingdom and Spain |       |          |                       |        |   |              | 36 |     |   |  | 14 |    
|Other European countries |       |          |                       |        |   |              | 23 |     |   |  | 9  |    
|Other International      |       |          | 10                     |        |   |              |   |     |   |  | 6  |    
|                         |       |          |                        |        |   |              |    |     |   |  |    |    
|                         | Total |          |                        | 100    | % |              |    | 100 | % |  |    | 100 | %
|                         |       |          |                        |        |   |              |    |     |   |  |    |    

5



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We generally sell our products to domestic customers on a net-30 to net-60 day
basis in the United States, and in Europe on a net-30 to net-90 day basis
depending on the country and whether we sell directly to retailers in the
country or to a distributor. We have a limited number of cooperative
advertising programs with our customers and generally do not reimburse our
customers for marketing expenses. We generally do not participate in markdown
programs with our customers nor do we offer goods on consignment.

For additional information regarding our revenues, operating profits and
identifiable assets attributable to our domestic and European geographic
segments, see Note 14 of the Notes to Consolidated Financial Statements.

Retail Concepts

Quiksilverconcept stores (Boardriders Clubs) are a crucial part of our retail
strategy. These stores are stocked primarily with Quiksilverproduct, and
their proprietary design demonstrates the Companys history, authenticity and
commitment to surfing and other boardriding sports. We also have Roxystores,
which are dedicated to the Juniors customer, Quiksilver Youthstores, Hawk
Clothingstores, Gotchastores in Europe and multibrand stores in Europe.

The majority of our full-price stores are owned by independent retailers, while
our own stores are located in selected markets that provide enhanced
brand-building opportunities. In territories where we operated our wholesale
businesses during fiscal 2002, we had 116 stores with independent retailers
under license. We do not receive royalty income from these stores. Rather, we
provide the independent retailer with our retail expertise and store design
concepts in exchange for the independent retailer agreeing to maintain our
brands at a minimum of 80% of the stores inventory. Certain minimum purchase
obligations are also required. In addition to these independent stores, we own
95 stores that operate in these territories. In our newly added
Asia/Pacific segment and other licensed territories, such as Turkey and South
Africa, our licensees operate 129 Boardriders Clubs.We receive royalty income
from sales in these stores based on wholesale volume. The total number of
stores open at October 31, 2002 was 340.

We also distribute our products through outlet stores generally located in
outlet malls in geographically diverse, non-urban locations.

The unit count of both Company-owned and licensed stores at October 31, 2002 is
summarized in the following table:

|                                         |  |                  |    |          |  |          |     |          |  |       |    |          |  |          |    |  |  |  |    |  |  |  |     | 
|---------------------------------------- |  | ---------------- | -- | -------- |  | -------- | --- | -------- |  | ----- | -- | -------- |  | -------- | -- |  |  |  | -- |  |  |  | --- | 
|                                         |  | Number of Stores
|                                         |  |                 
|                                         |  | Domestic         |    | Europe   |  | Combined
|                                         |  |                  |    |          |  |         
|                                         |  | Company-         |    |          |  |          |     | Company- |  |       |    |          |  | Company- |    |  |  | 
|Store Concept                            |  | Owned            |    | Licensed |  | Owned    |     | Licensed |  | Owned |    | Licensed
|                                         |  |                  |    |          |  |          |     |          |  |       |    |         
|Boardriders Clubs                        |  |                  | 20 |          |  |          | 14  |          |  |       | 31 |          |  |          | 87 |  |  |  | 51 |  |  |  | 101 | 
|Roxystores                               |  |                  | 3  |          |  |          | 2   |          |  |       | 2  |          |  |          | 8  |  |  |  | 5  |  |  |  | 10  | 
|Youth stores                             |  |                  | 2  |          |  |          | 2   |          |  |       |   |          |  |          |   |  |  |  | 2  |  |  |  | 2   | 
|Hawkstores                               |  |                  | 3  |          |  |          |    |          |  |       |   |          |  |          |   |  |  |  | 3  |  |  |  |    | 
|Multibrand stores                        |  |                  |   |          |  |          |    |          |  |       |   |          |  |          | 2  |  |  |  |   |  |  |  | 2   | 
|Gotchastores                             |  |                  |   |          |  |          |    |          |  |       | 2  |          |  |          | 1  |  |  |  | 2  |  |  |  | 1   | 
|Outlet stores                            |  |                  | 28 |          |  |          |    |          |  |       | 4  |          |  |          |   |  |  |  | 32 |  |  |  |    | 
|                                         |  |                  |    |          |  |          |     |          |  |       |    |          |  |          |    |  |  |  |    |  |  |  |     | 
|                                         |  |                  | 56 |          |  |          | 18  |          |  |       | 39 |          |  |          | 98 |  |  |  | 95 |  |  |  | 116 | 
|Boardriders Clubsin
licensed territories |  |                  |   |          |  |          | 129 |          |  |       |   |          |  |          |   |  |  |  |   |  |  |  | 129 | 
|                                         |  |                  |    |          |  |          |     |          |  |       |    |          |  |          |    |  |  |  |    |  |  |  |     | 
|Total                                    |  |                  | 56 |          |  |          | 147 |          |  |       | 39 |          |  |          | 98 |  |  |  | 95 |  |  |  | 245 | 
|                                         |  |                  |    |          |  |          |     |          |  |       |    |          |  |          |    |  |  |  |    |  |  |  |     | 

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Seasonality

Our sales fluctuate from quarter to quarter primarily due to seasonal consumer
demand patterns for different categories of our products, and due to the effect
that the Christmas season has on the buying patterns of our customers.

|                            |       |        |                       |         |      |        |      |         |   |        |         |         |  |  |    |     |   |   |         |         |  |  |    |     |  
|--------------------------- | ----- | ------ | --------------------- | ------- | ---- | ------ | ---- | ------- | - | ------ | ------- | ------- |  |  | -- | --- | - | - | ------- | ------- |  |  | -- | --- | -
|                            |       |        | Consolidated Revenues
|                            |       |        |                      
|                            |       |        | 2002                  |         | 2001 |        | 2000
|                            |       |        |                       |         |      |        |     
|Dollar amounts in thousands |       | Amount |                       | Percent |      | Amount |      | Percent |   | Amount |         | Percent
|                            |       |        |                       |         |      |        |      |         |   |        |         |        
|Quarter ended January 31    |       | $      | 146,959               |         |      |        | 21   | %       |   | $      | 122,959 |         |  |  | 20 | %   |   | $ | 100,542 |         |  |  | 19 | %  
|Quarter ended April 30      |       |        | 187,423               |         |      |        | 26   |         |   |        | 169,546 |         |  |  | 27 |     |   |   | 142,648 |         |  |  | 27 |    
|Quarter ended July 31       |       |        | 175,044               |         |      |        | 25   |         |   |        | 156,656 |         |  |  | 25 |     |   |   | 122,899 |         |  |  | 24 |    
|Quarter ended October 31    |       |        | 196,058               |         |      |        | 28   |         |   |        | 171,460 |         |  |  | 28 |     |   |   | 153,281 |         |  |  | 30 |    
|                            |       |        |                       |         |      |        |      |         |   |        |         |         |  |  |    |     |   |   |         |         |  |  |    |    
|                            | Total |        | $                     | 705,484 |      |        |      | 100     | % |        | $       | 620,621 |  |  |    | 100 | % |   | $       | 519,370 |  |  |    | 100 | %
|                            |       |        |                       |         |      |        |      |         |   |        |         |         |  |  |    |     |   |   |         |         |  |  |    |    

Production and Raw Materials

Our apparel and accessories are generally sourced separately for domestic,
European and, now, Asia/Pacific operations. When cost-effective, categories
are sourced together. Approximately 85% of our apparel and accessories are
purchased or imported as finished goods from suppliers principally in Hong
Kong, China and the Far East, but also in Mexico, India, North Africa, Portugal
and other foreign countries. After being imported, many of these products
require embellishment such as screenprinting, dying, washing or embroidery.
The rest of our apparel is manufactured by domestic independent contractors
from raw materials we provide. Approximately 56% of this manufacturing is done
in the U.S. with the balance in Mexico. We manufacture our snowboards and
skateboards in company-owned factories in the U.S.

All products are manufactured based upon design specifications provided by us,
whether they are purchased or imported as finished goods or produced from raw materials provided by us.

The majority of finished goods as well as raw materials must be committed to
and purchased prior to the receipt of customer orders. If we overestimate the
demand for a particular product, we use this excess for distribution in our
outlet stores or through secondary distribution channels. If we overestimate
a particular raw material, it can be used in garments for subsequent seasons in
or garments for distribution through our outlet stores or secondary
distribution channels.

During fiscal 2002, no single contractor of finished goods production accounted
for more than 5% of our consolidated production. No single raw material
supplier of fabric and trims accounted for more than 18% of our expenditures
for raw materials during fiscal 2002. We believe that numerous qualified
contractors and finished goods and raw materials suppliers are available to
provide additional capacity on an as-needed basis and that we enjoy favorable
on-going relationships with these contractors and suppliers.

Although we continue to explore new sourcing opportunities for finished goods
and raw materials, we have established solid working relationships over many
years with vendors who are financially stable and reputable, and who understand
our product quality and delivery standards. As part of our efforts to reduce
costs and enhance our sourcing efficiency, we have shifted increasingly to
foreign suppliers. We research, test and add, as needed, alternate and/or
back-up suppliers. However, in the event of any unanticipated substantial
disruption of our relationship with, or performance by, key existing suppliers
and/or contractors, there could be a short-term adverse effect on our
operations.

Imports and Import Restrictions

We have for some time imported finished goods and raw materials for our
domestic operations under multilateral and bilateral trade agreements between
the U.S. and a number of foreign countries, including Hong Kong, India, China
and Japan. These agreements impose quotas on the amount and type of textile
and apparel products that can be imported into the U.S. from the affected
countries. We do not anticipate

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that these restrictions will materially or adversely affect
our operations since we would be able to meet our needs domestically or from countries not
affected by the restrictions on an annual basis.

In Europe we operate in the European
Union (EU), within which
there are few trade barriers. We sell to six other countries outside of France belonging to a
trade union, which has some restrictions on imports of textile products and their sources. We
also operate under constraints imposed on imports of finished goods and raw materials from
outside the EU, including quotas and duty charges. We do not anticipate that these restrictions
will materially or adversely impact our operations since we have always operated under such
constraints, and the trend in Europe is continuing toward
unification.

We retain independent buying agents, primarily in China, Hong Kong,
India and other foreign countries to assist us in selecting and overseeing independent third party
manufacturing and sourcing of finished goods, fabrics, and blanks and other products. These agents
also monitor quota and other trade regulations and perform some quality control functions. With the
addition of Quiksilver Asia/Pacific to our operations, we will have approximately 50 employees
involved in sourcing and quality control functions to assist in monitoring and coordinating our
overseas shipments from Asia.

By having employees in regions where we source our products, we
enhance our ability to monitor factories to ensure their compliance with our standards of
manufacturing practices.  Our policies require every factory to comply with a code of conduct
relating to factory working conditions and the treatment of workers involved in the manufacture of
products.

Trademarks and Licensing Agreements

Trademarks

We own the
Quiksilver, Roxy and famous mountain and wave and heart logos in
virtually every country in the world. Other trademarks we own include
Raisins, Radio Fiji,
Leilani, Hawk, Fidra, Lib
Tech, Gnu, Supernatural Mfg.and
Bent Metal.

We apply for and register our trademarks throughout the world mainly for use on
apparel and related accessories and for retail services. We believe our
trademarks and our other intellectual property are crucial to the successful
marketing and sale of our products, and we attempt to vigorously prosecute and
defend our rights throughout the world. Because of the success of our
trademarks, we are required to maintain global anti-counterfeiting programs to
protect our brands.

Licensing Agreements

Since acquiring Quiksilver International in July 2000, we have owned the
international rights to use the Quiksilverand Roxytrademarks in substantially
all apparel and related accessory product classifications. With the
acquisition of the Asia/Pacific licensees (see Recent Developments) we now
directly operate all of the global Quiksilverand Roxylicensed territories
with the exception of Korea and certain countries in the Mideast, Africa and
South America.

We have a license agreement with Gotcha International, LP, which provides that
we can sell products primarily in Western Europe under the Gotchatrademark.
We have licensed the use of the Quiksilverand Roxytrademarks in Mexico, and
we have also entered into licensing agreements in certain foreign territories
with respect to several other of our non-Quiksilverand Roxybrands where we
believe operating efficiencies and brand protection may best be achieved. In
fiscal 2002, we terminated our domestic licensing agreement for Quiksilverand
Roxywatches (see Legal Proceedings). We expect to enter into a long-term
licensing agreement for watches or add watches to our technical accessory line
during the current fiscal year.

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Competition

Competition is strong in the global beachwear, snowboardwear, skate apparel,
casual sportswear and snowboard markets in which we operate, and each territory
can have different competitors. Our direct competitors in the United States
differ depending on distribution channel. Our principal competitors in our
core channel of surf shops, Boardriders Clubs and Quiksvilles in the United
States include Billabong, Hurley, ONeill and Volcom. Our competitors in the
department store and specialty store channels in the United States include
Tommy Hilfiger, Abercrombie and Fitch, Nautica and Calvin Klein. In Europe,
our principal competitors in the core channel include ONeill, Billabong, Rip
Curl, Oxbow and Chimsee. In Australia our primary competitors are Billabong
and Rip Curl. In broader European distribution, and in Asia/Pacific, our
competitors also include brands such as Nike, Adidas and Levis. Our principal
competitors both in the United States and Europe in the snowboardwear and
snowboard market are Burton, K2 and Morrow, along with a host of smaller
manufacturers. Some of our competitors may be significantly larger and have
substantially greater resources than us.

We compete primarily on the basis of successful brand management and product
design and quality born out of our ability to:



| |  | maintain our reputation for authenticity in the core boardriding lifestyle demographic,                                          
|- |  | ---------------------------------------------------------------------------------------------------------------------------------
| 
| |  | continue to develop and respond to global fashion and lifestyle trends in our core markets,                                      
| 
| |  | create innovative, high quality and stylish product at appropriate price points, and                                             
| 
| |  | convey our boardriding lifestyle message to young-minded consumers worldwide (see Risk Factors  Relating to Apparel
Industry).

Future Season Orders

We generally receive wholesale orders for apparel products approximately two to
four months prior to the time the products are delivered to stores. All such
orders are subject to cancellation for late delivery. We generally sell our
products on a season-by-season basis. Our product ranges are separated into
four delivery seasons, Spring, Summer, Fall and Holiday. At the end of
November 2002, our Spring 2003 orders totaled $263.7 million and were up 16%
over the previous years level of $227.3 million. Out of that combined
increase, domestic orders were up 16% and European orders were up 15%. Our
forward orders depend upon a number of factors and can fluctuate based on the
timing of trade shows, sales meetings and market weeks. The timing of
shipments also fluctuates from year to year and varies based on the production
of goods. As a consequence, a comparison of forward orders from season to
season is not necessarily meaningful and may not be indicative of eventual
shipments.

Employees

At October 31, 2002, we had approximately 2,700 employees, consisting of
approximately 1,800 in the United States and approximately 900 in foreign
countries. Approximately 1,200 of these individuals were employed in
production, operations and shipping functions, approximately 1,460 in sales,
administrative or clerical capacities, and approximately 40 in executive
capacities. None of our domestic employees are represented by a union, and
less than ten of our foreign employees are represented by a union. We have
never experienced a work stoppage and consider our working relationships with
our employees to be good.

Environmental Matters

Compliance with environmental laws and regulations did not have a significant
impact on our capital expenditures, earnings or competitive position during the
last three fiscal years.

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Forward-Looking Statements

Various statements in this Form 10-K or incorporated by reference into this
Form 10-K, in future filings by us with the SEC, in our press releases and in
oral statements made by or with the approval of authorized personnel constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based on current
expectations and are indicated by words or phrases such as anticipate,
estimate, expect, project, we believe, currently envisions and
similar words or phrases and involve known and unknown risks, uncertainties and
other factors which may cause actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Some of the factors
that could affect our financial performance or cause actual results to differ
from our estimates in, or underlying, such forward-looking statements are set
forth under the heading of Risk Factors. Forward-looking statements include
statements regarding, among other items:



| |  | our anticipated growth strategies,                                        
|- |  | --------------------------------------------------------------------------
| 
| |  | our plans to expand internationally,                                      
| 
| |  | our intention to introduce new products and enter into new joint ventures,
| 
| |  | our plans to open new retail stores,                                      
| 
| |  | future renewals of our credit
facilities,                                 
| 
| |  | anticipated effective tax rates in future periods,                        
| 
| |  | future expenditures for capital projects, and                             
| 
| |  | our ability to continue to maintain our brand image and reputation.       

These forward-looking statements are based largely on our expectations and are
subject to a number of risks and uncertainties, many of which are beyond our
control. Actual results could differ materially from these forward-looking
statements as a result of the facts described in Risk Factors including,
among others, changes in the competitive marketplace, including the
introduction of new products or pricing changes by our competitors, changes in
the economy, and other events leading to a reduction in discretionary consumer
spending. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks and uncertainties, we cannot
assure you that the forward-looking information contained in this Form 10-K
will, in fact, transpire.

Risk Factors

Competition

The apparel industry is highly competitive. We compete with numerous domestic
and foreign designers, brands and manufacturers of apparel, accessories and
other products, some of which are significantly larger and have greater
resources than us. We believe that our ability to compete effectively depends
upon our continued ability to maintain our reputation for authenticity in our
core boardriding market, our flexibility in responding to market demand and our
ability to manage our brands and offer fashion conscious consumers a wide
variety of high quality apparel at competitive prices. See Business 
Competition.

Changes in Fashion Trends

We believe that our success depends in substantial part on our ability to
anticipate, gauge and respond to changing consumer demand and fashion trends in
a timely manner. We attempt to minimize the risk of changing fashion trends
and product acceptance by closely monitoring retail sales trends. However, if
fashion trends shift away from our products, or if we otherwise misjudge the
market for our product lines, we may be faced with a significant amount of
unsold finished goods inventory or other conditions which could have a material
adverse effect on us.

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Uncertainties in Apparel Retailing

The apparel industry historically has been subject to substantial cyclical
variations, and a recession in the general economy or uncertainties regarding
future economic prospects that affect consumer spending habits could have a
material adverse effect on our results of operations. While various retailers,
including some of our customers, experienced financial difficulties in the past
three years which increased the risk of extending credit to such retailers, our
bad debt experience has been limited. Under our current credit and collection
arrangements, the bankruptcy of a customer which continued to operate and carry
our products should not have a material adverse effect on us.

Our Business is Subject to Seasonal Trends

Historically, our operating results have been subject to seasonal trends when
measured on a quarterly basis. Our first fiscal quarter is traditionally
weaker compared with our other fiscal quarters. This trend is dependent on
numerous factors, including the markets in which we operate, holiday seasons,
consumer demand, climate, economic conditions and numerous other factors beyond
our control. There can be no assurance that our historic operating patterns
will continue in future periods as we cannot influence or forecast many of
these factors.

Sourcing

We are dependent upon third parties
for the manufacture of substantially all of our products. The
inability of a manufacturer to ship orders of our products in a timely manner,
including as a result of local financial market disruption which could impair
the ability of such suppliers to finance their operations, or to meet quality
standards, could cause us to miss the delivery date requirements of our
customers for those items, which could result in cancellation of orders,
refusal to accept deliveries or a reduction in purchase prices, any of which
could have a material adverse effect on our financial condition and results of
operations. We have no long-term formal arrangements with any of our suppliers
of raw materials, and to date we have experienced only limited difficulty in
satisfying our raw materials requirements. Although we believe we could
replace such suppliers without a material adverse effect on us, there can be no
assurance that such suppliers could be replaced in a timely manner, and the
loss of such suppliers could have a material adverse effect on our short-term
operating results.

Impact of Potential Future Acquisitions

From time to time, we have pursued, and may continue to pursue, acquisitions.
For example, during the first quarter ending January 31, 2003, we completed the
acquisition of the licensees of our trademarks in Australia, Japan, New
Zealand and several other countries and territories in Southeast Asia for a
purchase price of approximately $94.4 million, funded using available lines of
credit and common stock. If one or more acquisitions results in us becoming
substantially more leveraged on a consolidated basis, our flexibility in
responding to adverse changes in economic, business or market conditions may be
adversely affected.

Risks Relating to International Operations

We conduct a significant portion of our business outside of the United States
and, particularly in light of our recent acquisitions, we anticipate that
revenue from foreign operations will account for an increasingly larger portion
of our future revenue. Our international operations are directly related to
and dependent on the volume of international trade and local market conditions.
Our international operations and international commerce are influenced by many
factors, including:



| |  | changes in economic and political conditions and in governmental policies,    
|- |  | ------------------------------------------------------------------------------
| 
| |  | changes in international and domestic customs regulations,                    
| 
| |  | wars, civil unrest, acts of terrorism and other conflicts,                    
| 
| |  | natural disasters,                                                            
| 
| |  | changes in tariffs, trade restrictions, trade agreements and taxation,        
| 
| |  | difficulties in managing or overseeing foreign operations,                    
| 
| |  | limitations on the repatriation of funds because of foreign exchange controls,

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| |  | different liability standards, and                                      
|- |  | ------------------------------------------------------------------------
| 
| |  | difficulties in enforcing intellectual property laws of other countries.

The occurrence or consequences of any of these factors may restrict our ability
to operate in the affected region and/or decrease the profitability of our
operations in that region.

Foreign Currency and Derivatives

We are exposed to gains and losses resulting from fluctuations in foreign
currency exchange rates relating to certain sales, royalty income, and product
purchases of our international subsidiaries that are denominated in currencies
other than their functional currencies. We are 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
our variable rate debt. Furthermore, we are exposed to gains and losses
resulting from the effect that fluctuations in foreign currency exchange rates
have on the reported results in our consolidated financial statements due to
the translation of the operating results and financial position of our
international subsidiaries. As part of our overall strategy to limit the level
of exposure to the risk of fluctuations in foreign currency exchange rates, we
use various foreign currency exchange contracts and intercompany loans. In
addition, interest rate swaps are used to manage our exposure to the risk of
fluctuations in interest rates.

Loss or Infringement of Our Trademarks

We believe that our trademarks are important to our success and competitive
position. Accordingly, we devote substantial resources to the establishment
and protection of our trademarks on a worldwide basis. We cannot assure that
our actions taken to establish and protect our trademarks will be adequate to
prevent imitation of our products by others or to prevent others from seeking
to block sales of our products as violative of their trademarks and proprietary
rights. Moreover, we cannot assure that others will not assert rights in, or
ownership of, our trademarks or that we will be able to successfully resolve
such conflicts. In addition, the laws of certain foreign countries may not
protect trademarks to the same extent as do the laws of the U.S. The loss of
such trademarks, or the loss of the exclusive use of our trademarks, could have
a material adverse effect on our business, financial condition and results of
operations.

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Item 2.  PROPERTIES

Certain information concerning our principal
facilities in excess of 40,000 rentable square feet, all of which are leased,
is as follows:

|                             |  |                       |  |             |         |               |  |       
|---------------------------- |  | --------------------- |  | ----------- | ------- | ------------- |  | ------
|                             |  |                       |  | Approximate |         | Current Lease
|Location                     |  | Use                   |  | Sq. Ft.     |         | Expiration   
|                             |  |                       |  |             |         |              
|Huntington Beach, California |  | Headquarters          |  |             | 120,000 |               |  | 2023 *
|Huntington Beach, California |  | Distribution center   |  |             | 225,000 |               |  | 2016 *
|Huntington Beach, California |  | Distribution center   |  |             | 75,000  |               |  | 2019 *
|Huntington Beach, California |  | Distribution center   |  |             | 110,000 |               |  | 2018 *
|St. Jean de Luz, France      |  | European headquarters |  |             | 45,000  |               |  | 2009  
|St. Jean de Luz, France      |  | Distribution center   |  |             | 100,000 |               |  | 2007  
|Hendaye, France              |  | Distribution center   |  |             | 90,000  |               |  | 2008  



|* |  | Includes extension periods exercisable at our option.
|- |  | -----------------------------------------------------

As of October 31, 2002, we operated 56 domestic retail stores and 39 European
retail stores on leased premises. The leases for our facilities required
aggregate annual rentals of approximately $14.9 million in fiscal 2002. We
anticipate that we will be able to extend those leases that expire in the near
future on terms satisfactory to us or, if necessary, locate substitute
facilities on acceptable terms.

Item 3.  LEGAL PROCEEDINGS

On March 28, 2002, we filed a lawsuit against GMT Corporation, our then
licensee for watches in the U.S., and simultaneously terminated our license
agreement with GMT, based on our allegations that GMT was in material breach of
the agreement. GMT has disputed our right to terminate and has brought claims
against us for wrongful termination and other alleged breaches by us of the
license agreement.

This lawsuit, which was removed from the United States District Court for the
Southern District of New York to the United States District Court for the
Southern District of California, continues to proceed to trial as the court
hears various motions. We believe that GMTs claims are substantially without
merit and intend to vigorously pursue our claims and defend against those of
GMT.

We are otherwise involved from time to time in legal claims involving trademark
and intellectual property, licensing, employee relations and other matters
incidental to our business. We believe that the resolution of any such matter
currently pending will not have a material adverse effect on our financial
condition or results of operations.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted for a vote of our stockholders during the fourth
quarter of the fiscal year ended October 31, 2002.

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PART II




Item 5.  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock trades on the New York Stock Exchange (NYSE) under the
symbol ZQK. The high and low sales prices of our common stock, as reported
by the NYSE for the two most recent fiscal years, are set forth below.

|            |                                   |  |      |       |     |  |   |       | 
|----------- | --------------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|            |                                   |  | High |       | Low
|            |                                   |  |      |       |    
|Fiscal 2002 |                                   |  |      |       |     |  |   |      
|            | 4thquarter ended October 31, 2002 |  | $    | 24.90 |     |  | $ | 17.26 | 
|            | 3rdquarter ended July 31, 2002    |  |      | 27.58 |     |  |   | 18.42 | 
|            | 2ndquarter ended April 30, 2002   |  |      | 25.69 |     |  |   | 16.90 | 
|            | 1stquarter ended January 31, 2002 |  |      | 19.49 |     |  |   | 12.42 | 
|Fiscal 2001 |                                   |  |      |       |     |  |   |      
|            | 4thquarter ended October 31, 2001 |  | $    | 23.20 |     |  | $ | 11.60 | 
|            | 3rdquarter ended July 31, 2001    |  |      | 28.20 |     |  |   | 20.70 | 
|            | 2ndquarter ended April 30, 2001   |  |      | 28.15 |     |  |   | 22.69 | 
|            | 1stquarter ended January 31, 2001 |  |      | 24.91 |     |  |   | 16.13 | 

We have historically reinvested our earnings in our business and have never
paid a cash dividend. No change in this practice is currently being
considered. Our payment of cash dividends in the future will be determined by
the Board of Directors, considering conditions existing at that time, including
our earnings, financial requirements and condition, opportunities for
reinvesting earnings, business conditions and other factors. In addition,
under our principal credit agreement with a bank group, we must obtain the bank
groups prior consent to pay dividends.

On January 21, 2003, there were approximately 400 holders of record of our
common stock and an estimated 6,000 beneficial stockholders.

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Item 6.  SELECTED FINANCIAL DATA

The statement of income and balance sheet data shown below were derived from
our consolidated financial statements. Our consolidated financial statements
as of October 31, 2002 and 2001 and for each of the three years in the period
ended October 31, 2002, included herein, have been audited by Deloitte & Touche
LLP, our independent auditors. You should read this selected financial data
together with our consolidated financial statements and related notes, as well
as the discussion under the caption Managements Discussion and Analysis of
Financial Condition and Results of Operations.

|                                                                  |  |                         |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|----------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                                  |  | Years Ended October 31,
|                                                                  |  |                        
|Amounts in thousands,
except per share data and ratios            |  | 2002                    |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                                                                  |  |                         |         |      |  |      |         |      |  |     
|Statement of Income Data                                          |  |                         |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|Revenues                                                          |  | $                       | 705,484 |      |  | $    | 620,621 |      |  | $    | 519,370 |  |  | $ | 445,857 |  |  | $ | 317,629 | 
|Income before provision for income taxes                          |  |                         | 59,986  |      |  |      | 45,412  |      |  |      | 51,862  |  |  |   | 44,867  |  |  |   | 30,768  | 
|Net income                                                        |  |                         | 37,591  |      |  |      | 28,021  |      |  |      | 31,836  |  |  |   | 26,584  |  |  |   | 17,963  | 
|Net income per share (1)                                          |  |                         | 1.60    |      |  |      | 1.22    |      |  |      | 1.42    |  |  |   | 1.20    |  |  |   | 0.85    | 
|Net income per share, assuming dilution (1)                       |  |                         | 1.54    |      |  |      | 1.17    |      |  |      | 1.37    |  |  |   | 1.14    |  |  |   | 0.82    | 
|Weighted average common shares
outstanding (1)                    |  |                         | 23,459  |      |  |      | 22,952  |      |  |      | 22,406  |  |  |   | 22,096  |  |  |   | 21,144  | 
|Weighted average common shares
outstanding, assuming dilution (1) |  |                         | 24,472  |      |  |      | 24,049  |      |  |      | 23,232  |  |  |   | 23,284  |  |  |   | 21,820  | 
|Balance Sheet Data                                                |  |                         |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|Total assets                                                      |  | $                       | 450,589 |      |  | $    | 418,738 |      |  | $    | 358,742 |  |  | $ | 259,673 |  |  | $ | 213,071 | 
|Working capital                                                   |  |                         | 160,518 |      |  |      | 132,416 |      |  |      | 119,529 |  |  |   | 109,823 |  |  |   | 92,321  | 
|Lines of credit                                                   |  |                         | 32,498  |      |  |      | 66,228  |      |  |      | 49,203  |  |  |   | 28,619  |  |  |   | 17,465  | 
|Long-term debt                                                    |  |                         | 54,085  |      |  |      | 70,464  |      |  |      | 66,712  |  |  |   | 28,184  |  |  |   | 30,962  | 
|Stockholders equity                                              |  |                         | 272,873 |      |  |      | 216,594 |      |  |      | 177,614 |  |  |   | 151,753 |  |  |   | 117,659 | 
|Current ratio                                                     |  |                         | 2.2     |      |  |      | 1.8     |      |  |      | 2.0     |  |  |   | 2.3     |  |  |   | 2.4     | 
|Return on average stockholders equity(2)                         |  |                         | 15.4    |      |  |      | 14.2    |      |  |      | 19.3    |  |  |   | 19.7    |  |  |   | 16.9    | 



|(1) |  | Per share amounts and shares outstanding have been adjusted to
reflect a three-for-two stock split effected on April 23, 1999 and a
two-for-one stock split effected on April 24, 1998.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Computed based on net income divided by the average of beginning and
ending stockholders equity.                                                                                      

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Item 7.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion below should be read together with our consolidated
financial statements and related notes, which are included in this report, and
the Risk Factors information in the Business section of this report.

Overview

We began our domestic operations in 1976 as a designer and manufacturer of
Quiksilverbranded boardshorts designed for the sport of surfing. We grew our
business through the late 1980s by expanding our Quiksilverproducts into a
full range of sportswear, and we bought our U.S. trademark from the Quiksilver
brands Australian founders in 1988. The distribution of our products was
primarily through surf shops. Since the early 1990s, we have diversified and
grown our business by increased sales of our Quiksilverproduct line, the
creation of new brands such as Roxy, the introduction of new products, the
development of our retail operations, and acquisitions. We acquired the
Quiksilverlicensee in Europe in 1991 to expand geographically, we purchased
Quiksilver International in 2000 to gain global ownership of the Quiksilver


brand, and we acquired Quiksilver Asia/Pacific at the end of 2002 to unify our
global operating platform. We also acquired various other smaller businesses
and brands. Brand building has been a key to our growth, and we have always
maintained our roots in the boardriding lifestyle. Today our products are sold
throughout the world, primarily in surf shops and specialty stores that provide
an authentic retail experience for our customers.

Over the last five years, our revenues have grown from approximately $300
million in fiscal 1998 to approximately $700 million in fiscal 2002. We
design, produce and distribute clothing, accessories and related products
exclusively in the consumer products industry. For fiscal 2002, we had two
geographic segments, domestic and Europe. As a result of our recent
acquisition, we will have a third geographic segment beginning in fiscal 2003,
Asia/Pacific. The domestic segment includes revenues from the U.S., Canada and
other exports from the U.S., as well as royalties earned from various licenses
in international territories and from licenses for the design and distribution
of certain products such as eyewear. The European segment includes revenues
primarily from Western Europe.

|                  |  |                         |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|----------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                  |  | Years Ended October 31,
|                  |  |                        
|In thousands      |  | 2002                    |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                  |  |                         |         |      |  |      |         |      |  |     
|Domestic revenues |  | $                       | 422,800 |      |  | $    | 396,744 |      |  | $    | 336,756 |  |  | $ | 292,486 |  |  | $ | 204,321 | 
|European revenues |  |                         | 282,684 |      |  |      | 223,877 |      |  |      | 182,614 |  |  |   | 153,371 |  |  |   | 113,308 | 
|                  |  |                         |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|Total revenues    |  | $                       | 705,484 |      |  | $    | 620,621 |      |  | $    | 519,370 |  |  | $ | 445,857 |  |  | $ | 317,629 | 
|                  |  |                         |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 

We operate in markets that are highly competitive, and our ability to evaluate
and respond to changing consumer demands and tastes is critical to our success.
Shifts in consumer preferences could have a negative effect on companies that
misjudge these preferences. We believe that our historical success is due to
the development of an experienced team of designers, artists, sponsored
athletes, merchandisers, pattern makers, and cutting and sewing contractors.
Its this team and the heritage and current strength of our brands that has
helped us remain in the forefront of design in our markets. Our success in the
future will depend on our ability to continue to design products that are
acceptable to the marketplace. There can be no assurance that we can do this.
The consumer products industry is fragmented, and in order to retain and/or
grow our market share, we must continue to be competitive in the areas of
quality, brand image, distribution methods, price, customer service, and
intellectual property protection.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America. To
prepare these financial statements, we must make estimates and assumptions that
affect the reported amounts of assets and liabilities. These estimates also affect our reported revenues and expenses. Judgments must also be made about
the disclosure of contingent liabilities. Actual results could be
significantly different from these estimates. We

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believe that the following
discussion addresses the significant accounting policies that are the most
critical to help fully understand and evaluate our reported financial results.

Revenue Recognition

Revenues are recognized when the risk of ownership and title passes to our
customers. Generally, we extend credit to our customers and do not require
collateral. Our payment terms range from net-30 to net-90, depending on the
country or whether we sell directly to retailers in the country or to a
distributor. None of our sales agreements with any of our customers provide
for any rights of return. However, we do approve returns on a case-by-case
basis at our sole discretion to protect our brands and our image. We provide
allowances for estimated returns when revenues are recorded, and related losses
have historically been within our expectations. If returns are higher than our
estimates, our earnings would be adversely affected.

Accounts Receivable

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

Inventories

We value inventories at the cost to purchase and/or manufacture the product or
the current estimated market value of the inventory, whichever is lower. We
regularly review our inventory quantities on hand, and we record a provision
for excess and obsolete inventory based primarily on estimated forecasts of
product demand and market value. Demand for our products could fluctuate
significantly, which was evident in the aftermath of September 11th. The
demand for our products could be negatively affected by many factors, including
the following:



| 
|-
|
| 
|
| 
|
| 
|
| 
|
| 

Some of these factors could also interrupt the production and/or importation of
our products or otherwise increase the cost of our products. As a result, our
operations and financial performance could be negatively affected.
Additionally, our 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.

Long-Lived Assets

We acquire tangible and intangible assets in the normal course of our business.
We evaluate the recoverability of the carrying amount of these long-lived
assets (including fixed assets, trademarks and goodwill) at least annually or
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be fully recoverable. An impairment is assessed when the
undiscounted expected future cash flows derived from an asset are less than its
carrying amount. Impairments, if any, would be recognized in operating
earnings. We continually use judgment when applying these impairment rules to
determine the timing of the impairment tests, the undiscounted cash flows used
to assess impairments, and the fair value of a potentially impaired asset. The
reasonableness of our judgment could significantly affect the carrying value of
our long-lived assets.

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Income Taxes

Current income tax expense is the amount of income taxes expected to be payable
for the current year. A deferred income tax asset or liability is established
for the expected future consequences of temporary differences in the financial
reporting and tax bases of assets and liabilities. We consider future taxable
income and ongoing prudent and feasible tax planning strategies in assessing
the value of our deferred tax assets. If we determine that it is more likely
than not that these assets will not be realized, we would reduce the value of
these assets to their expected realizable value, thereby decreasing net income.
Evaluating the value of these assets is necessarily based on our judgment. If
we subsequently determined that the deferred tax assets, which had been written
down would, in our judgment, be realized in the future, the value of the
deferred tax assets would be increased, thereby increasing net income in the
period when that determination was made.

Foreign Currency Translation

A significant portion of our revenues are generated in Europe, where we operate
with the euro as our functional currency. Our European revenues in the United
Kingdom are denominated in British pounds and some European product is
sourced in U.S. dollars, both of which result in exposure to gains and losses
that could occur from fluctuations in foreign exchange rates. We also have
other foreign currency obligations related to our acquisition of Quiksilver
International. Our assets and liabilities that are 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 income or loss.

As part of our overall strategy to manage our level of exposure to the risk of
fluctuations in foreign currency exchange rates, we enter into various foreign
exchange contracts generally in the form of forward contracts. For all
contracts that qualify as cash flow hedges, we record the changes in the fair
value of the derivatives in other comprehensive income. We also use other
derivatives that do not qualify for hedge accounting to mitigate our exposure
to currency risks. These derivatives are marked to fair value with
corresponding gains or losses recorded in earnings.

Results of Operations

The table below shows the components in our statements of income as a
percentage of revenues:

|                                            |  |                         |       |      |  |      |       |   |  |  |       |  
|------------------------------------------- |  | ----------------------- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                            |  | Years Ended October 31,
|                                            |  |                        
|                                            |  | 2002                    |       | 2001 |  | 2000
|                                            |  |                         |       |      |  |     
|Revenues                                    |  |                         | 100.0 | %    |  |      | 100.0 | % |  |  | 100.0 | %
|Gross profit                                |  |                         | 40.6  |      |  |      | 38.3  |   |  |  | 39.2  |  
|Selling, general and administrative expense |  |                         | 30.7  |      |  |      | 29.2  |   |  |  | 28.2  |  
|                                            |  |                         |       |      |  |      |       |   |  |  |       |  
|Operating income                            |  |                         | 9.9   |      |  |      | 9.1   |   |  |  | 11.0  |  
|Interest expense                            |  |                         | 1.2   |      |  |      | 1.8   |   |  |  | 1.2   |  
|Foreign currency and other expense          |  |                         | 0.2   |      |  |      |      |   |  |  | (0.2  | )
|                                            |  |                         |       |      |  |      |       |   |  |  |       |  
|Income before provision for income taxes    |  |                         | 8.5   | %    |  |      | 7.3   | % |  |  | 10.0  | %
|                                            |  |                         |       |      |  |      |       |   |  |  |       |  

Fiscal 2002 Compared to Fiscal 2001

Revenues

Revenues increased 14% to $705.5 million in fiscal 2002 from $620.6 million in
fiscal 2001 primarily as a result of increased unit sales and new products. Of
those totals, domestic revenues increased 7% to $422.8 million
from $396.7 million, and European revenues increased 26% to
$282.7 million from $223.9 million.

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Domestic revenues in our mens category, which includes Quiksilver Young Mens,
Boys, Toddlers, Wintersports, Quiksilveredition, Hawk Clothing and Fidra,
increased 7% to $229.2 million in fiscal 2002 from $214.3 million the year
before. Domestic revenues in our womens category, which includes Roxy, Roxy
Girl, Teenie Wahine, Raisins, Leilaniand Radio Fiji, increased 8% to $178.4
million from $165.9 million for those same periods. Wintersports hardgoods are
sold under the Lib Technologies, Gnu, Supernatural Mfg.and Bent Metalbrands
and totaled $10.4 million in fiscal 2002 compared to $11.3 million in the
previous year. Royalty income decreased to $4.8 million in fiscal 2002 from
$5.2 million in fiscal 2001. Revenues in the domestic mens category increased
generally across all divisions. The womens increase came from both the Roxy
and Raisinsdivisions. We believe that our product design and marketing
efforts are resulting in increased consumer demand for our products in the
domestic market. Royalty income decreased because we acquired our domestic
outlet store licensee during the fourth quarter of the fiscal year and
terminated our domestic watch licensee. Also, we acquired the business of our
Australian and Japanese licensees in the first quarter of fiscal 2003, which
eliminates the related royalty income stream going forward. Accordingly, we
expect royalty income to decline in fiscal 2003 compared to fiscal 2002.
However, this decline would be more than offset in fiscal 2003 by the increased
product shipment revenues from the acquired business.

European revenues were approximately 40% of the consolidated total in fiscal
2002. In U.S. dollars, revenues in the mens category increased 19% to $208.3
million in fiscal 2002 from $175.2 million in the previous year. Womens
revenues increased 53% to $74.4 million from $48.7 million for those same
periods. Revenue growth was the largest in the United Kingdom, France and
Spain. We believe that our product design and marketing efforts are resulting
in increased consumer demand for our products in the European market. For
consolidated financial statement reporting, euro results must be translated
into U.S. dollar amounts at average exchange rates, but this can distort
performance when exchange rates change from year to year. To understand our
European fiscal 2002 growth and better assess competitive performance and
market share gains, it is important to look at revenues in euros as well, which
is our operational currency in Europe. In euros, revenues grew 22% in fiscal
2002. This is lower than the 26% growth rate in U.S. dollars because the U.S.
dollar was worth fewer euros on average in fiscal 2002 compared to fiscal 2001.

Gross Profit

Our consolidated gross profit margin increased to 40.6% in fiscal 2002 from
38.3% in the previous year. The domestic gross profit margin increased to
37.5% from 35.6%, while our European gross profit margin increased to 45.3%
from 43.2%. The majority of the domestic gross profit margin improvement was
related to events in the prior year. We recorded a $6.0 million writedown in
the carrying value of our domestic inventory in the fourth quarter of fiscal
2001. In the aftermath of September 11, 2001, the market for consumer
products, including casual lifestyle apparel, experienced a dramatic falloff in
demand and resulted in a substantial amount of customer order cancellations.
This phenomenon created an industry wide glut of excess product available to
the traditional off-price channel thereby driving the price of certain seasonal
product below cost. Accordingly, a reduction in the carrying value of our
domestic inventories was required. We had no such reduction in fiscal 2002.
The domestic gross profit margin improved in the second half fiscal 2002
because we lowered inventory levels toward the end of the year. Consequently,
our end-of season clearance business was down compared to the year before, and
our gross margins on those sales were up. This offset lower domestic gross
margins on sales of end-of-season inventories in the first half of the year.
We anticipate that our domestic gross margins will be higher for the first part
of fiscal 2003 compared to the prior year periods. Our European gross profit
margin increased primarily due to lower production costs. Additionally, both
the domestic and European gross profit margins improved because we had a higher
percentage of our sales through company-owned retail stores. We earn higher
gross margins on sales in company-owned stores, but these higher gross margins
are offset by store operating costs.

Selling, General and Administrative Expense

Selling, general and administrative expense increased 20% to $216.6 million in
fiscal 2002 from $181.2 million in the previous year. Domestically, it
increased 12% to $130.0 million from $116.4 million and in Europe it increased
34% to $86.6 million from $64.8 million for those same periods. Higher
personnel costs and other costs related to increased sales volume were the
primary reasons for these increases. As a percentage of revenues, selling general
and administrative expense increased to 30.7% in fiscal 2002 from

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29.2% in fiscal 2001. Selling, general and administrative expense increased as
a percentage of revenues primarily due to the incremental operating costs of new
company-owned retail stores.

Interest Expense and Income Taxes

Interest expense in fiscal 2002 decreased 21% to $8.6 million from $10.9
million in the previous 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 Companys income tax rate decreased to 37.3% in fiscal 2002 from 38.3% in
fiscal 2001. This improvement resulted primarily because a higher percentage
of our fiscal 2002 profits were generated in countries with lower tax rates.
Our rate also decreased because we adopted SFAS No. 142 during fiscal 2002 and
discontinued the amortization of certain intangible assets, which was not tax
deductible.

Net Income

Net income in fiscal 2002 totaled $37.6 million or $1.54 per share on a diluted
basis. In the previous year, net income was $28.0 million or $1.17 per share
on a diluted basis. Basic earnings per share amounted to $1.60 for fiscal 2002
compared to $1.22 for fiscal 2001.

Results of Operations  Fiscal 2001 Compared to Fiscal 2000

Revenues

Revenues increased 19% to $620.6 million in fiscal 2001 from $519.4 million in
fiscal 2000. Domestic revenues increased 18% to $396.7 million from $336.8
million, and European revenues increased 23% to $223.9 million from $182.6
million.

Domestic revenues in our mens category increased 8% to $214.3 million in
fiscal 2001 from $197.8 million the year before. Domestic revenues in our
womens category increased 34% to $165.9 million from $123.5 million for those
same periods. Wintersports hardgoods totaled $11.3 million in fiscal 2001
compared to $11.8 million in the previous year. Revenues in our domestic mens
category increased generally across all divisions. The increase in our womens
category was the result of increases in both the Roxyand Raisinsdivisions.
We believe that our product design and marketing efforts resulted in increased
consumer demand for our products. Royalty income totaled $5.2 million in
fiscal 2001 compared to $3.7 million in fiscal 2000. This increase reflects
our ownership of Quiksilver International for the full fiscal year in 2001.

European revenues represented approximately 36% of our total net sales in
fiscal 2001. Revenue growth was the largest in France, the United Kingdom and
Spain. In U.S. dollars, revenues in our mens category increased 15% to $175.2
million in fiscal 2001 from $152.5 million in the previous year. Revenues in
our womens category increased 62% to $48.7 million from $30.1 million for
those same periods. In euros, revenues grew 29% in fiscal 2001. This is
higher than the 23% growth rate in U.S. dollars because the U.S. dollar was
worth more euros in fiscal 2001 compared to fiscal 2000.

Gross Profit

Our consolidated gross profit margin decreased to 38.3% in fiscal 2001 from
39.2% in the previous year. Our domestic gross profit margin decreased to
35.6% from 36.9%, while our European gross profit margin decreased slightly to
43.2% from 43.3%. The domestic gross profit margin decreased primarily as a
result of a $6.0 million writedown in the carrying value of our inventory. In
the aftermath of September 11, 2001, the market for consumer products,
including casual lifestyle apparel, experienced a dramatic falloff in demand
and resulted in a substantial amount of customer order cancellations. This
phenomenon created an industry wide glut of excess product available to the
traditional off-price channel thereby driving the price of certain seasonal
product below cost. Accordingly, a reduction in the carrying value of our
domestic inventories was required.

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Selling, General and Administrative Expense

Selling, general and administrative expense increased 24% in fiscal 2001 to
$181.2 million from $146.3 million in the previous year. Domestically, it
increased 24% to $116.4 million from $93.6 million, and in Europe it increased
23% to $64.8 million from $52.7 million in those same periods. Higher
personnel and other costs related to increased sales volume were the primary
reasons for these increases. As a percentage of revenues, selling, general
and administrative expense increased to 29.2% in fiscal 2001 from 28.2% in
fiscal 2000. This increase as a percentage of revenues was primarily due to the
incremental operating costs of new company-owned retail stores and to the
operating costs of Quiksilver International, which was acquired in the third
quarter of fiscal 2000.

Interest Expense and Income Taxes

Interest expense increased 69% to $10.9 million in fiscal 2001 from $6.4
million in the previous year. Approximately $2.2 million was related to debt
arising from our acquisition of Quiksilver International. The remainder of the
increase was primarily from additional borrowings to provide working capital to
support our growth and continued investment in retail stores.

Our income tax rate for fiscal 2001 decreased to 38.3% from 38.6% in fiscal
2000. This reduction resulted primarily because a higher percentage of our profits were generated in countries with lower tax rates.

Net Income

Net income in fiscal 2001 totaled $28.0 million or $1.17 per share on a diluted
basis. In the previous year, net income was $31.8 million or $1.37 per share
on a diluted basis. Basic earnings per share amounted to $1.22 for fiscal
2001 compared to $1.42 for fiscal 2000.

Financial Position, Capital Resources and Liquidity

We finance our working capital needs and capital investments with operating
cash flows and bank revolving lines of credit. Multiple banks in the U.S.,
Europe and, now, Australia, make these lines of credit available. Term loans
are also used to supplement these lines of credit and are typically used to
finance long-term assets.

Cash and cash equivalents totaled $2.6 million at October 31, 2002 versus $5.0
million at October 31, 2001. Working capital amounted to $160.5 million at
October 31, 2002, compared to $132.4 million at October 31, 2001, an increase
of 21%. Our strategy is to keep cash balances low and maintain adequate
liquidity in our credit facilities to supplement operating cash flows as
needed. We believe that our current cash flows and credit facilities are
adequate to cover our cash needs at least for the next twelve months.
Furthermore, we believe that increases in our credit facilities can be obtained
if needed to fund future growth.

Operating Cash Flows

We generated $76.8 million from operations in fiscal 2002 compared to $5.8
million in fiscal 2001. This $71.0 million improvement resulted from several
factors. The largest factor was the decrease in inventories. We used $17.7
million in fiscal 2001 as inventories increased and accounts payable decreased.
By contrast, we generated $21.1 million in fiscal 2002 as inventories
decreased and trade accounts payable increased, an improvement of $38.8
million. Cash flows increased by $10.1 million from higher net income adjusted
for noncash expenses, and accounts receivable increased at a slower rate,
resulting in an $8.0 million improvement. The increases in accrued liabilities
and income taxes payable resulted in an additional $18.9 million of positive
cash flows compared to the year before.

We generated $5.8 million from operations in fiscal 2001 compared to using $4.1
million of cash in fiscal 2000. The amount of net income plus noncash expenses
was comparable in fiscal 2001 and fiscal 2000. And although cash invested in
inventories exceeded the prior year by $7.5 million (net of the accounts
payable decrease), the increase in trade accounts receivable was $18.3 million
less in fiscal 2001. These factors resulted in a $9.9 million improvement in
operating cash flows in fiscal 2001 over the previous year.

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Capital Expenditures

We have avoided high levels of capital expenditures for our manufacturing
functions by using independent contractors for sewing and other processes such
as washing, dyeing and embroidery. We perform the cutting process in-house
domestically to enhance control and efficiency, and we screenprint a portion of
our product in-house both domestically and in Europe.

Fiscal 2002 capital expenditures were $22.2 million, which was comparable to
the $22.6 million we spent in fiscal 2001 and $5.8 million higher than the
$16.4 million spent in fiscal 2000. In fiscal 2002 and 2001, we increased our
investment in company-owned retail stores. We also expanded our facilities in
Europe in fiscal 2001. Investments in warehouse equipment, computer equipment
and fixtures also continued in fiscal 2002.

New company-owned retail stores are again part of our plans in fiscal 2003.
Computer hardware and software will also be added to continuously improve
systems. Capital spending for these and other projects in fiscal 2003 is
expected to range between $35.0 million and $40.0 million.

Acquisitions

Shortly after the end of fiscal 2002, we acquired our licensees in Australia
and Japan to unify our global operating platform. The transaction date was
December 1, 2002. We refer to the operations of this group of companies, which
constitutes a new geographic segment for us, as Quiksilver Asia/Pacific. The
group includes two Australian companies, Ug Manufacturing Co. Pty Ltd. and QSJ
Holdings Pty Ltd., and one Japanese company, Quiksilver Japan KK. Ug
Manufacturing Co. Pty Ltd. was still owned by the founders of the Quiksilver
brand and was the original Quiksilveroperating company that has been producing
Quiksilverproducts in Australia and surrounding countries and territories for
over 30 years. Along with a Japanese partner, the founders also started
Quiksilver Japan KK, which has been the Quiksilverlicensee in Japan for
approximately 20 years. We also acquired a 25% interest in our Turkish
licensee as part of the transaction. The Asia/Pacific operations will be
included in our results beginning with the effective date of the acquisition in
the first quarter of our fiscal year ending October 31, 2003.

The initial purchase price includes cash of $23.1 million and 2.8 million
shares of our common stock valued at $71.3 million. The initial purchase price
is subject to adjustment based on the acquired entities closing balance
sheets, which are expected to be finalized in the second quarter of fiscal
2003. The sellers are entitled to future payments ranging from zero to $18.6
million if certain sales and earnings targets are achieved during the three
years ending October 31, 2005. The amount of goodwill we initially recorded
for the transaction will increase if such contingent payments are made.

Effective September 15, 2002, we acquired Beach Street, Inc., a company that
operates 26 Quiksilver outlet stores. The acquisition of Beach Street is
expected to increase our control over our brands and distribution and is
expected to enable us to capture some incremental gross margin. We issued
298,092 shares of common stock valued at $6.9 million as consideration for the
acquisition.

Effective July 1, 2000, we acquired Quiksilver International, an Australian
company that owns the worldwide trademark rights to the Quiksilverbrand name
(other than in the United States and Mexico where those rights were already
owned by us). The initial acquisition payment was $23.6 million, which
included cash consideration of $23.1 million and transaction costs, net of
imputed interest, of $0.5 million. Under the terms of the purchase agreement,
two additional payments were to be made. One was made at the end of fiscal
2002, and another is to be made at the end of fiscal 2005. These additional
payments, which are denominated in Australian dollars, are contingent on the
computed earnings of Quiksilver International through June 20, 2005, subject to
specified minimums. The deferred minimum purchase price payments, which were
discounted to present value, totaled $17.3 million at the date of the
acquisition and were included as a component of the purchase price recorded at
July 1, 2000. The payment made at the end of fiscal 2002 was increased by $9.6
million, with a corresponding increase to Trademarks, as a result of Quiksilver
Internationals operations for the two years ended June 30, 2002, resulting in
a total payment of $20.7 million. The obligation related to the remaining
deferred purchase price payment is reflected in our consolidated balance sheet
as a component of debt.

We believe that we have benefited and will continue to benefit from unified
ownership of the Quiksilverbrand worldwide. Global product decisions can be
controlled by us, and the opportunities for coordinated global sourcing and
marketing programs are enhanced.

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Debt Structure

A syndication of U.S. banks finances our domestic business, and European banks
finance our European business. Australian banks finance our new Asia/Pacific
business. Our debt structure includes short-term lines of credit and long-term
loans as follows:

|                                        |  |             |        | 
|--------------------------------------- |  | ----------- | ------ | 
|                                        |  | October 31,
|In thousands                            |  | 2002       
|                                        | 
|Domestic syndicated line of credit      |  | $           | 20,388 | 
|European short-term credit arrangements |  |             | 12,110 | 
|Domestic syndicated term loan           |  |             | 12,500 | 
|Domestic term loan                      |  |             | 9,225  | 
|European long-term debt                 |  |             | 23,752 | 
|Deferred purchase price obligation      |  |             | 8,608  | 
|                                        |  |             |        | 
|Total debt                              |  | $           | 86,583 | 
|                                        |  |             |        | 

The domestic credit facility includes a term loan and a revolving line of
credit facility that totals $125.0 million. The line of credit expires on June
28, 2003, and it bears interest based on the agent banks reference rate or
LIBOR. The weighted average interest rate at October 31, 2002 was 6.3%. The
term loan is repayable in equal quarterly installments through October 2004 and
amounted to $12.5 million at October 31, 2002. The term loan bears interest
contractually based on LIBOR. However, we entered into an interest rate swap
agreement to fix the interest rate at 7.2% per year. This swap agreement is
effective through October 2004 and is an effective hedge of the related
interest rate exposure. The line of credit and the term loan are secured and
are subject to generally the same restrictive covenants. The most significant
covenants relate to maintaining certain leverage and fixed charge coverage
ratios. The payment of dividends is restricted, among other things, and our
assets, other than trademarks and other intellectual property, generally have
been pledged as collateral. At October 31, 2002, we were in compliance with
such covenants. We believe that the line of credit will be renewed with
substantially similar terms.

We also have another domestic term loan with a single bank that amounted to
$9.2 million on October 31, 2002 and is repayable in installments of $0.1
million per month with a final balloon payment due on October 29, 2004. We
anticipate that these monthly payments and final balloon payment will be paid
from borrowings on our revolving line of credit facility. This term loan was
established in April 2000 and is secured by the leasehold improvements at our
headquarters in Huntington Beach, California. The interest rate structure and
restrictive covenants are substantially the same as those under the syndicated
credit facility. However, we entered into an interest rate swap agreement to
fix the interest rate at 8.4% per year. This swap agreement is effective
through April 2007 and is an effective hedge of the related interest rate
exposure.

In Europe, we have arrangements with several banks that provide approximately
$60.0 million for cash borrowings and approximately $38.0 million for letters
of credit. At October 31, 2002, related interest rates ranged from 3.9% to
4.2%. These lines of credit expire on various dates through April 2003, and we
believe that the banks will continue to make these facilities available with
substantially similar terms. The amount outstanding on these lines of credit
at October 31, 2002 was $12.1 million at an average interest rate of 4.0%.

In Europe, we also have $23.8 million of long-term debt, most of which is
collateralized by fixed assets. This debt bears interest at rates
ranging generally from 3.9% to 6.0%. Required principal and interest payments
are either monthly, quarterly or annually, and the loans are due at various
dates through 2011.

Our financing activities used $35.7 million of cash in fiscal 2002 as debt was
reduced. This compares to $19.9 million provided in the previous year and
$45.6 million in fiscal 2000 as funds were borrowed. We used these borrowings
to fund the business acquisitions, capital expenditures and the inventory
investments discussed above.

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Contractual Obligations and Commitments

We lease certain land and buildings under non-cancelable operating leases. The
leases expire at various dates through 2014, excluding extensions at our
option, and contain various provisions for rental adjustments including, in
certain cases, adjustments based on increases in the Consumer Price Index. The
leases generally contain renewal provisions for varying periods of time. We
also have long-term debt and obligations related to business acquisitions.
Additional payments to the sellers, ranging from zero to $18.6 million, could
be required for our acquisition of Quiksilver Asia/Pacific if certain sales and
earnings targets are achieved. Our deferred purchase price obligation related
to our acquisition of Quiksilver International could increase based on the
computed earnings of Quiksilver International through June 2005. Our
significant contractual obligations and commitments as of October 31, 2002 are
summarized in the following table:

|                                   |  |                        |        |       |  |        |        |         |  |       |        |  |  |   |        |  |  |   |         | 
|---------------------------------- |  | ---------------------- | ------ | ----- |  | ------ | ------ | ------- |  | ----- | ------ |  |  | - | ------ |  |  | - | ------- | 
|                                   |  | Payments Due by Period
|                                   |  |                       
|                                   |  |                        |        |       |  | Two to |        | Four to |  | After |        |  |  |  
|                                   |  | One                    |        | Three |  | Five   |        | Five    |  |       |        | 
|In thousands                       |  | Year                   |        | Years |  | Years  |        | Years   |  | Total
|                                   |  |                        |        |       |  |        |        |         |  |      
|Minimum lease payments             |  | $                      | 17,383 |       |  | $      | 30,208 |         |  | $     | 26,753 |  |  | $ | 32,653 |  |  | $ | 106,997 | 
|Domestic syndicated term loan      |  |                        | 6,250  |       |  |        | 6,250  |         |  |       |       |  |  |   |       |  |  |   | 12,500  | 
|Domestic term loan                 |  |                        | 1,230  |       |  |        | 7,995  |         |  |       |       |  |  |   |       |  |  |   | 9,225   | 
|European long-term debt            |  |                        | 3,200  |       |  |        | 10,984 |         |  |       | 6,869  |  |  |   | 2,699  |  |  |   | 23,752  | 
|Deferred purchase price obligation |  |                        |       |       |  |        | 8,608  |         |  |       |       |  |  |   |       |  |  |   | 8,608   | 
|                                   |  |                        |        |       |  |        |        |         |  |       |        |  |  |   |        |  |  |   |         | 
|                                   |  | $                      | 28,063 |       |  | $      | 64,045 |         |  | $     | 33,622 |  |  | $ | 35,352 |  |  | $ | 161,082 | 
|                                   |  |                        |        |       |  |        |        |         |  |       |        |  |  |   |        |  |  |   |         | 

We have domestic and European short-term line of credit commitments that allow
for maximum cash borrowings and letters of credit of $223.0 million. These
commitments expire in fiscal 2003. We had $32.5 million of borrowings drawn on
these lines of credit as of October 31, 2002, and letters of credit issued at
that time totaled $47.5 million.

Trade Accounts Receivable and Inventories

Our trade accounts receivable were $168.2 million at October 31, 2002 versus
$155.9 million the previous year, an increase of 8%. Of those totals, domestic
receivables decreased 8% to $80.8 million compared to $87.4 million, and
European receivables increased 28% to $87.4 million from $68.5 million. The
growth in European receivables was generally consistent with the increase in
European revenues. However, domestic receivables decreased even though
revenues increased primarily because of improved collections and the
elimination of certain trade accounts receivable when we acquired our domestic
outlet store licensee, Beach Street, Inc., in September 2002.

Inventories decreased 11% to $95.9 million at October 31, 2002 from $107.6
million the year before. The domestic component decreased 18% to $69.0 million
from $83.9 million, and the European piece increased 14% to $26.9 million from
$23.7 million. Our average inventory turnover was 5.0 times at the end of
fiscal 2002 based on a rolling average computation compared to average turnover
of 3.8 times at the end of the previous year.

Inflation

Inflation has been modest during the years covered by this report.
Accordingly, inflation has had an insignificant impact on our sales and
profits.

New Accounting Pronouncements

Effective November 1, 2001, we adopted Statement of Financial Accounting
Standards (SFAS) No. 141, Business Combinations. This standard eliminates
the pooling method of accounting for business combinations initiated after June
30, 2001. In addition, SFAS No. 141 addresses the accounting for intangible
assets and goodwill acquired in a business combination. This portion of SFAS
No. 141 is effective for business combinations completed after June 30, 2001.
The adoption of SFAS No. 141 did not have a material effect on our financial
position or results of operations.

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Effective November 1, 2001, we 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. An impairment is assessed when the
undiscounted expected future cash flows derived from an asset are less than its
carrying amount. Impairments, if any, would be recognized in operating
earnings. We completed the required transitional impairment test and
the annual 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 we
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 year ended October 31, 2001, net income would
have increased by $2.6 million, net of taxes, and diluted earnings per share
would have increased by $0.10. Likewise, net income would have increased by
$1.3 million, net of taxes, in fiscal 2000, and diluted earnings per share
would have increased by $0.06.

In August 2001, the Financial Accounting Standards Board (FASB) 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 2003. We do not
expect the adoption of SFAS No. 144 to have a significant impact on our
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.

In August 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which requires that costs associated with
exit or disposal activities be recognized when they are incurred rather than at
the date of a commitment to an exit or disposal plan. We must apply SFAS No.
146 prospectively to exit or disposal activities initiated after December 31,
2002. If we initiate exit or disposal activities after that date,
SFAS No. 146
will affect the timing of the recognition of the related costs. We do not
expect the adoption of this standard to have a significant impact on our
financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure - an amendment of FASB Statement No.
123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. We are
required to follow the prescribed format and provide the additional disclosures
required by SFAS No. 148 in our financial statements for fiscal 2003 and must
also provide the disclosures in our quarterly reports containing condensed
financial statements for interim periods beginning with our quarterly period
ending April 30, 2003.

Forward-Looking Statements

Certain words in this report like believes, anticipates, expects,
estimates and similar expressions are intended to identify, in certain cases,
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve known and unknown
risks, uncertainties and other factors that may cause actual results to differ
materially from the predicted results. Such factors include, among others, the
following:

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| |  | General economic and business conditions                                                                              
|- |  | ----------------------------------------------------------------------------------------------------------------------
| 
| |  | The acceptance in the marketplace of new products                                                                     
| 
| |  | The availability of outside contractors at prices favorable to us                                                     
| 
| |  | The ability to source raw materials at prices favorable to us                                                         
| 
| |  | Currency fluctuations                                                                                                 
| 
| |  | Changes in business strategy or development plans                                                                     
| 
| |  | Availability of qualified personnel                                                                                   
| 
| |  | Changes in political, social and economic conditions and local
regulations, particularly in Europe and Asia           
| 
| |  | Other factors outlined in our previously filed public documents,
copies of which may be obtained without cost from us.

Given these uncertainties, investors are cautioned not to place too much weight
on such statements. We are not obligated to update these forward-looking
statements.

Item 7a.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We are exposed to a variety of risks. Two of these risks are foreign currency
fluctuations and changes in interest rates that affect interest expense. (See
also Note 15 to our financial statements.)

Foreign Currency and Derivatives

We are exposed to gains and losses resulting from fluctuations in foreign
currency exchange rates relating to certain sales, royalty income, and product
purchases of our international subsidiaries that are denominated in currencies
other than their functional currencies. We are 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
our variable rate debt. Furthermore, we are exposed to gains and losses
resulting from the effect that fluctuations in foreign currency exchange rates
have on the reported results in our consolidated financial statements due to
the translation of the operating results and financial position of our
international subsidiaries. We use various foreign currency exchange contracts
and intercompany loans as part of our overall strategy to manage the level of
exposure to the risk of fluctuations in foreign currency exchange rates. In
addition, we use interest rate swaps to manage our exposure to the risk of
fluctuations in interest rates.

Changes in the fair value of the derivatives for all qualifying cash flow
hedges are recorded in other comprehensive income. Other derivatives not
qualifying for hedge accounting but used to mitigate exposure to currency risks
are marked to fair value with corresponding gains or losses recorded in
earnings. As of October 31, 2002, we were hedging forecasted transactions
expected to occur in the following eight months. Assuming exchange rates at
October 31, 2002 remain constant, we expect $2.0 million of losses related to
hedges of these transactions to be reclassed into earnings over the next eight
months. Also included in accumulated other comprehensive income at October 31,
2002 is a $0.4 million net charge related to cash flow hedges of our long-term
debt, which is denominated in Australian dollars and matures through fiscal
2005, and the fair value of interest rate swaps, totaling $1.1 million that is
related to our U.S. dollar denominated long-term debt and matures
through fiscal
2007.

On the date we enter into a derivative contract, we designate the derivative as
a hedge of the identified exposure. We formally document all relationships
between hedging instruments and hedged items, as well as the risk-management
objective and strategy for entering into various hedge transactions. We
identify in this documentation the asset, liability, firm commitment, or
forecasted transaction that has been designated as a hedged item and indicate
how the hedging instrument is expected to hedge the risks related to the hedged
item. We formally measure effectiveness of our hedging relationships both at
the hedge inception and on an ongoing basis in accordance with our risk
management policy. We will discontinue hedge accounting prospectively:



| |  | if we determine that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item,
|- |  | --------------------------------------------------------------------------------------------------------------------
| 
| |  | when the derivative expires or is sold, terminated or exercised,                                                    

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| |  | if it becomes probable that the forecasted transaction being hedged by the derivative will not occur,
|- |  | -----------------------------------------------------------------------------------------------------
| 
| |  | because a hedged firm commitment no longer meets the definition of a firm commitment, or             
| 
| |  | if we determine that designation of the derivative as a hedge instrument is no longer appropriate.   

During the fiscal year ended October 31, 2002, we reclassified into earnings a
net loss of $0.3 million resulting from the expiration, sale, termination or
exercise of derivative contracts. Additionally, we recognized a loss of $0.5
million during the fiscal year ended October 31, 2002 for changes in the value
of derivatives that were marked to fair value.

We enter into forward exchange and other derivative contracts with major banks
and are exposed to credit losses in the event of nonperformance by these banks.
We anticipate, however, that these banks will be able to fully satisfy their
obligations under the contracts. Accordingly, we do not obtain collateral or
other security to support the contracts.

Translation of Results of International Subsidiaries

As discussed above, we are exposed to financial statement gains and losses as a
result of translating the operating results and financial position of our
international subsidiaries. We translate the local currency statements of
income of our foreign subsidiaries into U.S. dollars using the average exchange
rate during the reporting period. Changes in foreign exchange rates affect our
reported profits and distort comparisons from year to year. We use various
foreign currency exchange contracts and intercompany loans to hedge the profit
and loss effects of such exposure, but accounting rules do not allow us to
hedge the actual translation of sales and expenses.

By way of example, when the U.S. dollar strengthens compared to the euro, there
is a negative effect on our reported results for Europe. It takes more profits
in euros to generate the same amount of profits in stronger U.S. dollars. The
opposite is also true. That is, when the U.S. dollar weakens there is a
positive effect.

In fiscal 2002, the U.S. dollar weakened compared to the euro. As a result,
our European sales increased 22% in euros compared to the year before, but
increased 26% in U.S. dollars.

The Euro

The primary countries where our European subsidiary operates, with the
exception of the United Kingdom, adopted the euro as legal currency effective
January 1, 1999. At that time, exchange rates between the French franc and
certain other European currencies were fixed versus the euro. Euro denominated
currency began circulating as of January 1, 2002. Our European subsidiary
began processing transactions in euros as of November 1, 2001.

Interest Rates

Most of our lines of credit and long-term debt bear interest based on LIBOR.
Interest rates, therefore, can move up or down depending on market conditions.
As discussed above, we have entered into interest rate swap agreements to hedge
a portion of our exposure to such fluctuations. The approximate amount of our
remaining variable rate debt was $12.0 million at October 31, 2002, and the
average interest rate at that time was 4.0%. If interest rates were to
increase by 10%, our net income would be reduced by approximately $30,000 based
on these fiscal 2002 levels.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item
appears beginning on page 30.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not Applicable.

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PART III
















Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required to be included by this item will be included in our
proxy statement for the 2003 Annual Meeting of Stockholders. That information
is incorporated herein by reference to that proxy statement, which will be
filed with the Securities and Exchange Commission within 120 days of our fiscal
year ended October 31, 2002.

Item 11.  EXECUTIVE COMPENSATION

The information required to be included by this item will be included in our
proxy statement for the 2003 Annual Meeting of Stockholders. That information
is incorporated herein by reference to that proxy statement, which will be
filed with the Securities and Exchange Commission within 120 days of our fiscal
year ended October 31, 2002.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required to be included by this item will be included in our
proxy statement for the 2003 Annual Meeting of Stockholders. That information
is incorporated herein by reference to that proxy statement, which will be
filed with the Securities and Exchange Commission within 120 days of our fiscal
year ended October 31, 2002.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required to be included by this item will be included in our
proxy statement for the 2003 Annual Meeting of Stockholders. That information
is incorporated herein by reference to that proxy statement, which will be
filed with the Securities and Exchange Commission within 120 days of our fiscal
year ended October 31, 2002.

Item 14.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Our chief executive officer and chief financial officer, after evaluating the
effectiveness of our disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date
(the Evaluation Date) within 90 days before the filing date of this annual
report on Form 10-K, have concluded that, as of the Evaluation Date, our
disclosure controls and procedures were adequate and designed to ensure that
material information relating to us and our consolidated subsidiaries would be
made known to them by others within those entities.

Changes in Internal Controls.

There were no significant changes in our internal controls or in other factors
that could significantly affect such controls subsequent to the Evaluation
Date, including any corrective actions with regard to significant deficiencies
and material weaknesses.

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PART IV




Item 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



|(a) |  | The following documents are filed as part of this report:
|--- |  | ---------------------------------------------------------



| | 1. |  | Consolidated Financial Statements                          
| | -- |  | -----------------------------------------------------------
| |    |  | See Index to Consolidated
Financial Statements on page 30
|
| | 2. |  | Exhibits                                                   
| |    |  | See Exhibit Index on page 55                             



|(b) |  | Reports on Form 8-K.
|--- |  | --------------------



| | 1. |  | We filed a report on Form 8-K to report our
merger with our Australian and Japanese licensees on January
2, 2003.
| | -- |  | -----------------------------------------------------------------------------------------------------------------

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QUIKSILVER, INC.




INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                  |                                                                                                   |  |      |    | 
|--------------------------------- | ------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                  |                                                                                                   |  | Page
|                                  |                                                                                                   |  |     
|INDEPENDENT AUDITORS REPORT      |                                                                                                   |  | 31   |   
|CONSOLIDATED FINANCIAL STATEMENTS |                                                                                                   |  |      |   
|                                  | Consolidated
Balance Sheets

     October 31, 2002 and 2001                                       |  |      | 32 | 
|                                  | Consolidated Statements of Income

     Years Ended October 31, 2002, 2001 and 2000               |  |      | 33 | 
|                                  | Consolidated Statements of Comprehensive Income

     Years Ended October 31, 2002, 2001 and 2000 |  |      | 33 | 
|                                  | Consolidated Statements of Stockholders Equity

     Years Ended October 31, 2002, 2001 and 2000 |  |      | 34 | 
|                                  | Consolidated Statements of Cash Flows

     Years Ended October 31, 2002, 2001 and 2000           |  |      | 35 | 
|                                  | Notes to Consolidated Financial Statements                                                        |  |      | 36 | 

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INDEPENDENT AUDITORS REPORT

To The Board of Directors and Stockholders of
Quiksilver, Inc.:

We have audited the accompanying consolidated balance sheets of Quiksilver,
Inc. and subsidiaries as of October 31, 2002 and 2001, and the related
consolidated statements of income, comprehensive income, stockholders equity
and cash flows for each of the three years in the period ended October 31,
2002. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Quiksilver, Inc. and subsidiaries
as of October 31, 2002 and 2001, and the results of their operations and their
cash flows for each of the three years in the period ended October 31, 2002, in
conformity with accounting principles generally accepted in the United States
of America.

As discussed in Note 1 to the financial statements, in 2002 the Company changed
its method of accounting for goodwill and intangible assets.

DELOITTE & TOUCHE LLP

December 17, 2002
Costa Mesa, California

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QUIKSILVER, INC.

CONSOLIDATED BALANCE SHEETS

October 31, 2002 and 2001


|                                       |                                                                                                                                       |                                            |        |         |         |  |        |         |         | 
|-------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------- | ------- |  | ------ | ------- | ------- | 
|In
thousands, except share amounts     |                                                                                                                                       | 2002                                       |        | 2001   
|                                       |                                                                                                                                       |                                            |        |        
|ASSETS                                 |                                                                                                                                       |                                            |        |         |         |  |        |        
|Current assets:                        |                                                                                                                                       |                                            |        |         |         |  |        |        
|                                       | Cash and cash equivalents                                                                                                             |                                            | $      | 2,597   |         |  | $      | 5,002   |        
|                                       | Trade
accounts receivable, net - Note 3                                                                                               |                                            |        | 168,237 |         |  |        | 155,879 |        
|                                       | Other receivables                                                                                                                     |                                            |        | 7,415   |         |  |        | 6,427   |        
|                                       | Inventories - Note 4                                                                                                                  |                                            |        | 95,872  |         |  |        | 107,562 |        
|                                       | Deferred income taxes - Note 12                                                                                                       |                                            |        | 14,070  |         |  |        | 8,548   |        
|                                       | Prepaid expenses and other current assets                                                                                             |                                            |        | 6,638   |         |  |        | 4,831   |        
|                                       |                                                                                                                                       |                                            |        |         |         |  |        |        
|                                       |                                                                                                                                       | Total current assets                       |        |         | 294,829 |  |        |         | 288,249 | 
|Fixed assets, net - Notes 5 and 7      |                                                                                                                                       |                                            | 73,182 |         |         |  | 61,453 |        
|Trademarks, net - Notes 6 and 11       |                                                                                                                                       |                                            | 51,134 |         |         |  | 45,911 |        
|Goodwill - Note 2                      |                                                                                                                                       |                                            | 26,978 |         |         |  | 18,929 |        
|Deferred income taxes - Note 12        |                                                                                                                                       |                                            | 1,411  |         |         |  | 1,837  |        
|Other assets                           |                                                                                                                                       |                                            | 3,055  |         |         |  | 2,359  |        
|                                       |                                                                                                                                       |                                            |        |         |         |  |        |        
|                                       |                                                                                                                                       | Total assets                               |        | $       | 450,589 |  |        | $       | 418,738 | 
|                                       |                                                                                                                                       |                                            |        |         |         |  |        |        
|LIABILITIES AND STOCKHOLDERS EQUITY   |                                                                                                                                       |                                            |        |         |         |  |        |        
|Current liabilities:                   |                                                                                                                                       |                                            |        |         |         |  |        |        
|                                       | Lines of credit - Note 7                                                                                                              |                                            | $      | 32,498  |         |  | $      | 66,228  |        
|                                       | Accounts payable                                                                                                                      |                                            |        | 47,279  |         |  |        | 40,554  |        
|                                       | Accrued liabilities - Note 8                                                                                                          |                                            |        | 40,137  |         |  |        | 24,898  |        
|                                       | Current portion of long-term debt - Note 7                                                                                            |                                            |        | 10,680  |         |  |        | 24,153  |        
|                                       | Income taxes payable - Note 12                                                                                                        |                                            |        | 3,717   |         |  |        |        |        
|                                       |                                                                                                                                       |                                            |        |         |         |  |        |        
|                                       |                                                                                                                                       | Total current liabilities                  |        |         | 134,311 |  |        |         | 155,833 | 
|Long-term debt - Note 7                |                                                                                                                                       |                                            | 43,405 |         |         |  | 46,311 |        
|                                       |                                                                                                                                       |                                            |        |         |         |  |        |        
|                                       |                                                                                                                                       | Total liabilities                          |        |         | 177,716 |  |        |         | 202,144 | 
|                                       |                                                                                                                                       |                                            |        |         |         |  |        |        
|Commitments and contingencies - Note 9 |                                                                                                                                       |                                            |        |         |         |  |        |        
|Stockholders
 equity - Note 10:       |                                                                                                                                       |                                            |        |         |         |  |        |        
|                                       | 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 -
24,680,147 (2002) and 23,890,283 (2001) |                                            |        | 247     |         |  |        | 239     |        
|                                       | Additional paid-in capital                                                                                                            |                                            |        | 66,769  |         |  |        | 52,706  |        
|                                       | Treasury stock, 721,300 shares                                                                                                        |                                            |        | (6,778  | )       |  |        | (6,778  | )      
|                                       | Retained earnings                                                                                                                     |                                            |        | 219,038 |         |  |        | 181,447 |        
|                                       | Accumulated other comprehensive loss                                                                                                  |                                            |        | (6,403  | )       |  |        | (11,020 | )      
|                                       |                                                                                                                                       |                                            |        |         |         |  |        |        
|                                       |                                                                                                                                       | Total stockholders equity                 |        |         | 272,873 |  |        |         | 216,594 | 
|                                       |                                                                                                                                       |                                            |        |         |         |  |        |        
|                                       |                                                                                                                                       | Total liabilities and stockholders equity |        | $       | 450,589 |  |        | $       | 418,738 | 
|                                       |                                                                                                                                       |                                            |        |         |         |  |        |        

See notes to consolidated financial statements.

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QUIKSILVER, INC.

CONSOLIDATED STATEMENTS OF INCOME

Years Ended October 31, 2002, 2001 and 2000


|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |         | 
|---------------------------------------------------------------------- | ---------------- | ---- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|In
thousands, except per share amounts                                 |                  | 2002 |         | 2001    |  | 2000
|                                                                       |                  |      |         |         |  |     
|Revenues                                                               |                  | $    | 705,484 |         |  | $    | 620,621 |         |  | $ | 519,370 |        
|Cost of goods sold                                                     |                  |      | 419,155 |         |  |      | 382,762 |         |  |   | 315,900 |        
|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |        
|                                                                       | Gross profit     |      |         | 286,329 |  |      |         | 237,859 |  |   |         | 203,470 | 
|Selling, general and administrative expense                            |                  |      | 216,625 |         |  |      | 181,220 |         |  |   | 146,337 |        
|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |        
|                                                                       | Operating income |      |         | 69,704  |  |      |         | 56,639  |  |   |         | 57,133  | 
|Interest expense                                                       |                  |      | 8,640   |         |  |      | 10,873  |         |  |   | 6,435   |        
|Foreign currency loss (gain)                                           |                  |      | 729     |         |  |      | (95     | )       |  |   | (1,650  | )      
|Other expense                                                          |                  |      | 349     |         |  |      | 449     |         |  |   | 486     |        
|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |        
|Income before provision for income taxes                               |                  |      | 59,986  |         |  |      | 45,412  |         |  |   | 51,862  |        
|Provision
for income taxes - Note 12                                   |                  |      | 22,395  |         |  |      | 17,391  |         |  |   | 20,026  |        
|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |        
|Net income                                                             |                  | $    | 37,591  |         |  | $    | 28,021  |         |  | $ | 31,836  |        
|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |        
|Net income per share - Note 1                                          |                  | $    | 1.60    |         |  | $    | 1.22    |         |  | $ | 1.42    |        
|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |        
|Net
income per share, assuming dilution - Note 1                       |                  | $    | 1.54    |         |  | $    | 1.17    |         |  | $ | 1.37    |        
|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |        
|Weighted
average common shares outstanding -  Note 1                   |                  |      | 23,459  |         |  |      | 22,952  |         |  |   | 22,406  |        
|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |        
|Weighted
average common shares outstanding, assuming
dilution - Note 1 |                  |      | 24,472  |         |  |      | 24,049  |         |  |   | 23,232  |        
|                                                                       |                  |      |         |         |  |      |         |         |  |   |         |        

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended October 31, 2002, 2001 and 2000


|                                 |                                                              |                               |        |       |        |      |        |       |        |   |        |        |   | 
|-------------------------------- | ------------------------------------------------------------ | ----------------------------- | ------ | ----- | ------ | ---- | ------ | ----- | ------ | - | ------ | ------ | - | 
|In
thousands                     |                                                              | 2002                          |        | 2001  |        | 2000
|                                 |                                                              |                               |        |       |        |     
|Net income                       |                                                              | $                             | 37,591 |       |        | $    | 28,021 |       |        | $ | 31,836 |       
|Other comprehensive gain (loss): |                                                              |                               |        |       |        |      |        |       |        |   |        |       
|                                 | Foreign currency translation adjustment                      |                               |        | 6,896 |        |      |        | 2,274 |        |   |        | (8,309 | )
|                                 | Net unrealized loss on derivative instruments, net of tax of |                               |        |       |        |      |        |       |        |   |        |        |  
|                                 |                                                              | $1,274 (2002) and $839 (2001) |        |       | (2,279 | )    |        |       | (1,195 | ) |        |        |  | 
|                                 |                                                              |                               |        |       |        |      |        |       |        |   |        |       
|Comprehensive income             |                                                              | $                             | 42,208 |       |        | $    | 29,100 |       |        | $ | 23,527 |       
|                                 |                                                              |                               |        |       |        |      |        |       |        |   |        |       

See notes to consolidated financial statements.

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QUIKSILVER, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

Years Ended October 31, 2002, 2001 and 2000


|                                   |                                            |        |              |         |         |         |          |       |          |          |               |               |               |        |        |        |   |   |         |        |       |   |             |        |   |   |         |        |  
|---------------------------------- | ------------------------------------------ | ------ | ------------ | ------- | ------- | ------- | -------- | ----- | -------- | -------- | ------------- | ------------- | ------------- | ------ | ------ | ------ | - | - | ------- | ------ | ----- | - | ----------- | ------ | - | - | ------- | ------ | -
|                                   |                                            |        |              |         |         |         |          |       |          |          |               |               |               |        |        |        |   |   |         |        |       |   | Accumulated |        |   |   |        
|                                   |                                            |        |              |         |         |         |          |       |          |          | Additional    |               |               |        |        |        |   |   |         |        | Other |   | Total      
|                                   |                                            |        | Common Stock |         | Paid-in |         | Treasury |       | Retained |          | Comprehensive |               | Stockholders'
|In
thousands, except share amounts |                                            | Shares |              | Amount  |         | Capital |          | Stock |          | Earnings |               | Income (Loss) |               | Equity
|                                   |                                            |        |              |         |         |         |          |       |          |          |               |               |               |       
|Balance, November 1, 1999          |                                            |        | 22,731,220   |         |         | $       | 227      |       |          | $        | 36,780        |               |               | $      | (3,054 | )      |   | $ | 121,590 |        |       | $ | (3,790      | )      |   | $ | 151,753 |       
|                                   | Exercise of stock options                  |        |              | 502,816 |         |         |          | 5     |          |          |               | 4,302         |               |        |        |       |   |   |         |       |       |   |             |       |   |   |         | 4,307  |  
|                                   | Tax benefit from exercise of
stock options |        |              |        |         |         |          |      |          |          |               | 1,751         |               |        |        |       |   |   |         |       |       |   |             |       |   |   |         | 1,751  |  
|                                   | Repurchase of common stock                 |        |              |        |         |         |          |      |          |          |               |              |               |        |        | (3,724 | ) |   |         |       |       |   |             |       |   |   |         | (3,724 | )
|                                   | Net income and other
comprehensive loss    |        |              |        |         |         |          |      |          |          |               |              |               |        |        |       |   |   |         | 31,836 |       |   |             | (8,309 | ) |   |         | 23,527 |  
|                                   |                                            |        |              |         |         |         |          |       |          |          |               |               |               |        |        |        |   |   |         |        |       |   |             |        |   |   |         |       
|Balance, October 31, 2000          |                                            |        | 23,234,036   |         |         |         | 232      |       |          |          | 42,833        |               |               |        | (6,778 | )      |   |   | 153,426 |        |       |   | (12,099     | )      |   |   | 177,614 |       
|                                   | Exercise of stock options                  |        |              | 641,000 |         |         |          | 6     |          |          |               | 5,859         |               |        |        |       |   |   |         |       |       |   |             |       |   |   |         | 5,865  |  
|                                   | Tax benefit from exercise
of stock options |        |              |        |         |         |          |      |          |          |               | 3,778         |               |        |        |       |   |   |         |       |       |   |             |       |   |   |         | 3,778  |  
|                                   | Employee stock purchase
plan               |        |              | 15,247  |         |         |          | 1     |          |          |               | 236           |               |        |        |       |   |   |         |       |       |   |             |       |   |   |         | 237    |  
|                                   | Net income and other
comprehensive income  |        |              |        |         |         |          |      |          |          |               |              |               |        |        |       |   |   |         | 28,021 |       |   |             | 1,079  |   |   |         | 29,100 |  
|                                   |                                            |        |              |         |         |         |          |       |          |          |               |               |               |        |        |        |   |   |         |        |       |   |             |        |   |   |         |       
|Balance, October 31, 2001          |                                            |        | 23,890,283   |         |         |         | 239      |       |          |          | 52,706        |               |               |        | (6,778 | )      |   |   | 181,447 |        |       |   | (11,020     | )      |   |   | 216,594 |       
|                                   | Exercise of stock options                  |        |              | 459,346 |         |         |          | 4     |          |          |               | 4,144         |               |        |        |       |   |   |         |       |       |   |             |       |   |   |         | 4,148  |  
|                                   | Tax benefit from exercise
of stock options |        |              |        |         |         |          |      |          |          |               | 2,543         |               |        |        |       |   |   |         |       |       |   |             |       |   |   |         | 2,543  |  
|                                   | Employee stock purchase
plan               |        |              | 32,426  |         |         |          | 1     |          |          |               | 471           |               |        |        |       |   |   |         |       |       |   |             |       |   |   |         | 472    |  
|                                   | Beach Street acquisition                   |        |              | 298,092 |         |         |          | 3     |          |          |               | 6,905         |               |        |        |       |   |   |         |       |       |   |             |       |   |   |         | 6,908  |  
|                                   | Net income and other
comprehensive income  |        |              |        |         |         |          |      |          |          |               |              |               |        |        |       |   |   |         | 37,591 |       |   |             | 4,617  |   |   |         | 42,208 |  
|                                   |                                            |        |              |         |         |         |          |       |          |          |               |               |               |        |        |        |   |   |         |        |       |   |             |        |   |   |         |       
|Balance, October 31, 2002          |                                            |        | 24,680,147   |         |         | $       | 247      |       |          | $        | 66,769        |               |               | $      | (6,778 | )      |   | $ | 219,038 |        |       | $ | (6,403      | )      |   | $ | 272,873 |       
|                                   |                                            |        |              |         |         |         |          |       |          |          |               |               |               |        |        |        |   |   |         |        |       |   |             |        |   |   |         |       

See notes to consolidated financial statements.

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QUIKSILVER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended October 31, 2002, 2001 and 2000


|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |         |        |        |         |  
|----------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------------------------------------------------------- | --------------------------------------------------- | ------ | ------ | ------- | ------- | ------ | ------ | ------- | ------- | ------ | ------ | ------- | -
|In
thousands                                          |                                                                                                | 2002                                                    |                                                                                           | 2001                                                |        | 2000  
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |       
|Cash flows from operating activities:                 |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      | Net income                                                                                     |                                                         | $                                                                                         | 37,591                                              |        |        | $       | 28,021  |        |        | $       | 31,836  |       
|                                                      | Adjustments to reconcile net income to net cash
   provided by (used in) operating activities: |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |         |       
|                                                      |                                                                                                |                                                         | Depreciation and amortization                                                             |                                                     |        | 14,349 |         |         |        | 13,877 |         |         |        | 10,023 |        
|                                                      |                                                                                                |                                                         | Provision for doubtful accounts                                                           |                                                     |        | 5,771  |         |         |        | 5,042  |         |         |        | 3,135  |        
|                                                      |                                                                                                |                                                         | Loss on sale of fixed assets                                                              |                                                     |        | 27     |         |         |        | 39     |         |         |        | 183    |        
|                                                      |                                                                                                |                                                         | Foreign currency loss (gain)                                                              |                                                     |        | 75     |         |         |        | 140    |         |         |        | (2,002 | )      
|                                                      |                                                                                                |                                                         | Interest accretion                                                                        |                                                     |        | 1,713  |         |         |        | 1,667  |         |         |        | 518    |        
|                                                      |                                                                                                |                                                         | Deferred income taxes                                                                     |                                                     |        | (4,038 | )       |         |        | (3,364 | )       |         |        | 1,392  |        
|                                                      |                                                                                                |                                                         | Changes in operating assets and liabilities, net of effects
  from business acquisitions: |                                                     |        |        |         |         |        |        |         |         |        |        |        
|                                                      |                                                                                                |                                                         |                                                                                           | Trade accounts receivable                           |        |        | (13,663 | )       |        |        | (21,699 | )       |        |        | (40,004 | )
|                                                      |                                                                                                |                                                         |                                                                                           | Other receivables                                   |        |        | 922     |         |        |        | 301     |         |        |        | (1,091  | )
|                                                      |                                                                                                |                                                         |                                                                                           | Inventories                                         |        |        | 16,444  |         |        |        | (16,492 | )       |        |        | (21,481 | )
|                                                      |                                                                                                |                                                         |                                                                                           | Prepaid expenses and other current assets           |        |        | (2,811  | )       |        |        | 2,190   |         |        |        | (2,315  | )
|                                                      |                                                                                                |                                                         |                                                                                           | Other assets                                        |        |        | 437     |         |        |        | 871     |         |        |        | (275    | )
|                                                      |                                                                                                |                                                         |                                                                                           | Accounts payable                                    |        |        | 4,661   |         |        |        | (1,224  | )       |        |        | 11,275  |  
|                                                      |                                                                                                |                                                         |                                                                                           | Accrued liabilities                                 |        |        | 9,291   |         |        |        | (1,484  | )       |        |        | 659     |  
|                                                      |                                                                                                |                                                         |                                                                                           | Income taxes payable                                |        |        | 6,061   |         |        |        | (2,038  | )       |        |        | 4,047   |  
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      |                                                                                                |                                                         |                                                                                           | Net cash provided by (used in) operating activities |        |        | 76,830  |         |        |        | 5,847   |         |        |        | (4,100  | )
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|Cash flows from investing activities:                 |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      | Proceeds from sales of fixed assets                                                            |                                                         |                                                                                           |                                                    |        |        |         | 82      |        |        |         | 2       |       
|                                                      | Capital expenditures                                                                           |                                                         |                                                                                           | (22,216                                             | )      |        |         | (22,622 | )      |        |         | (16,420 | )     
|                                                      | Business
acquisitions, net of acquired cash -  Note 2                                          |                                                         |                                                                                           | (20,676                                             | )      |        |         | (250    | )      |        |         | (24,409 | )     
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      |                                                                                                |                                                         |                                                                                           | Net cash used in investing activities               |        |        | (42,892 | )       |        |        | (22,790 | )       |        |        | (40,827 | )
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|Cash flows from financing activities:                 |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      | Borrowings on lines of credit                                                                  |                                                         |                                                                                           | 4,585                                               |        |        |         | 70,363  |        |        |         | 71,127  |       
|                                                      | Payments on lines of credit                                                                    |                                                         |                                                                                           | (39,584                                             | )      |        |         | (53,630 | )      |        |         | (50,872 | )     
|                                                      | Borrowings on long-term debt                                                                   |                                                         |                                                                                           | 6,000                                               |        |        |         | 7,872   |        |        |         | 41,822  |       
|                                                      | Payments on long-term debt                                                                     |                                                         |                                                                                           | (11,309                                             | )      |        |         | (10,824 | )      |        |         | (17,038 | )     
|                                                      | Purchase of treasury stock                                                                     |                                                         |                                                                                           |                                                    |        |        |         |        |        |        |         | (3,724  | )     
|                                                      | Stock option exercises and employee stock purchases                                            |                                                         |                                                                                           | 4,620                                               |        |        |         | 6,102   |        |        |         | 4,307   |       
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      |                                                                                                |                                                         |                                                                                           | Net cash (used in) provided by financing activities |        |        | (35,688 | )       |        |        | 19,883  |         |        |        | 45,622  |  
|Effect of exchange rate changes on cash               |                                                                                                |                                                         | (655                                                                                      | )                                                   |        |        | (236    | )       |        |        | 154     |        
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|Net (decrease) increase  in cash and cash equivalents |                                                                                                |                                                         | (2,405                                                                                    | )                                                   |        |        | 2,704   |         |        |        | 849     |        
|Cash and cash equivalents, beginning of year          |                                                                                                |                                                         | 5,002                                                                                     |                                                     |        |        | 2,298   |         |        |        | 1,449   |        
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|Cash and cash equivalents, end of year                |                                                                                                | $                                                       | 2,597                                                                                     |                                                     |        | $      | 5,002   |         |        | $      | 2,298   |        
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|Supplementary cash flow information:                  |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      | Cash paid during the year for:                                                                 |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |         |       
|                                                      |                                                                                                | Interest                                                |                                                                                           | $                                                   | 6,297  |        |         | $       | 8,984  |        |         | $       | 5,526  |       
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      |                                                                                                | Income taxes                                            |                                                                                           | $                                                   | 18,914 |        |         | $       | 17,821 |        |         | $       | 15,284 |       
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      | Non-cash investing and financing activities:                                                   |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |         |       
|                                                      |                                                                                                | Deferred
purchase price obligation -  Note 2            |                                                                                           | $                                                   | 5,310  |        |         | $       | 4,267  |        |         | $       | 19,384 |       
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        
|                                                      |                                                                                                | Common
stock issued for business acquisitions -  Note 2 |                                                                                           | $                                                   | 6,908  |        |         | $       |       |        |         | $       |       |       
|                                                      |                                                                                                |                                                         |                                                                                           |                                                     |        |        |         |         |        |        |         |        

See notes to consolidated financial statements.

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QUIKSILVER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended October 31, 2002, 2001 and 2000

Note 1  Significant Accounting Policies

Company Business

The Company designs, produces and distributes clothing, accessories and related
products for young-minded people and develops brands that represent a casual
lifestyledriven from a boardriding heritage. The Companys primary focus is
apparel for young men and young women under the Quiksilver, Roxy, Raisins,
Radio Fiji and Gotcha(Europe) labels. The Company also manufactures apparel
for boys (Quiksilver Boysand Hawk Clothing), girls (Roxy Girl, Teenie Wahine
and Raisins Girls), men (Quiksilveredition and Fidra) and women (Leilani
swimwear), as well as snowboards, snowboard boots and bindings under the Lib
Technologies, Gnu, Supernatural Mfg.and Bent Metallabels. Distribution is
primarily in the United States and Europe and is primarily based in surf shops
and specialty stores that provide an outstanding retail experience for the
customer. The Company performs ongoing credit evaluations of its customers and
generally does not require collateral.

The Company competes in markets that are highly competitive. The Companys
ability to evaluate and respond to changing consumer demands and tastes is
critical to its success. The Company believes that consumer acceptance depends
on product, image, design, fit and quality. Consequently, the Company has
developed an experienced team of designers, artists, 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 believes, however, that its continued success will depend on its
ability to promote its image and to design products acceptable to the
marketplace.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
Quiksilver, Inc. and subsidiaries, including Na Pali, SAS and subsidiaries
(Quiksilver Europe) and Quiksilver Australia Pty Ltd. and subsidiaries
(Quiksilver International). Intercompany accounts and transactions have been
eliminated in consolidation.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America.

Cash Equivalents

Certificates of deposit and highly liquid short-term investments purchased with
original maturities of three months or less are considered cash equivalents.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market.

Fixed Assets

Furniture, equipment and buildings are recorded at cost and depreciated on a
straight-line basis over their estimated useful lives, which generally range
from two to ten years. Leasehold improvements are recorded at cost and
amortized over their estimated useful lives or related lease term, whichever is
shorter. The cost of land use rights for certain leased retail locations
(totaling approximately $7.2 million at October 31, 2002) is included in, and
accounted for, as land in the accompanying consolidated financial statements
and is reviewed periodically for impairment.

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Long-Lived Assets

The Company accounts for the impairment and disposition of long-lived assets in
accordance with Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of. In accordance with SFAS No. 121, long-lived assets are
reviewed for events or changes in circumstances which indicate that their
carrying value may not be recoverable.

Goodwill and 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 the annual 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 fiscal years ended October 31,
2001 and 2000, net income would have increased by $2.6 million and $1.3
million, respectively, net of taxes, and diluted earnings per share would have
increased by $0.10 and $0.06, respectively. Goodwill arose primarily from the
acquisitions of Quiksilver Europe, The Raisin Company, Inc., Mervin, Freestyle
SA and Beach Street. Changes to goodwill from October 31, 2001 reflect the
acquisition of Beach Street and foreign exchange fluctuations.

Revenue Recognition

Revenues are recognized upon the transfer of title and risk of ownership to
customers. Allowances for estimated returns and doubtful accounts are provided
when revenues are recorded. Revenues in the Consolidated Statements of Income
includes the following:

|                  |  |                         |         |      |  |      |         |  |  |   |         | 
|----------------- |  | ----------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                  |  | Years Ended October 31,
|                  |  |                        
|In thousands      |  | 2002                    |         | 2001 |  | 2000
|                  |  |                         |         |      |  |     
|Product shipments |  | $                       | 700,692 |      |  | $    | 615,452 |  |  | $ | 515,689 | 
|Royalty income    |  |                         | 4,792   |      |  |      | 5,169   |  |  |   | 3,681   | 
|                  |  |                         |         |      |  |      |         |  |  |   |         | 
|                  |  | $                       | 705,484 |      |  | $    | 620,621 |  |  | $ | 519,370 | 
|                  |  |                         |         |      |  |      |         |  |  |   |         | 

Stock-Based Compensation

The Company applies Accounting Principles Board Opinion 25 and related
interpretations in accounting for its stock option plans. Included in Note 10
 Stockholders Equity to these consolidated financial statements are the pro
forma disclosure requirements of SFAS No. 123, Accounting for Stock-Based
Compensation.

Income Taxes

The Company accounts for income taxes using the asset and liability approach as
promulgated by SFAS No. 109, Accounting for Income Taxes. Deferred income
tax assets and liabilities are established for temporary differences between
the financial reporting bases and the tax bases of the Companys assets and
liabilities at tax rates expected to be in effect when such assets or
liabilities are realized or settled. Deferred income tax assets are reduced by
a valuation allowance if, in the judgment of the Companys management, it is
more likely than not that such assets will not be realized.

Net Income Per Share

The Company reports 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. For the
years ended October 31, 2002, 2001 and 2000, the weighted average common shares
outstanding, assuming dilution, includes 1,013,000, 1,097,000 and 826,000,
respectively, of dilutive stock options.

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Foreign Currency and Derivatives

The Companys primary functional currency is the U.S. dollar, while the
functional currency of Quiksilver Europe is the euro. 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.

The Company adopted SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, on November 1, 2000. SFAS No. 133 affected the Companys
financial statements beginning with the first quarter of fiscal 2001 by
requiring that the Company recognize all derivatives as either assets or
liabilities measured at fair value. The accounting for changes in the fair
value of a derivative depends on the use of the derivative. The adoption of
SFAS No. 133 resulted in a transition adjustment of $0.8 million in the year
ended October 31, 2001 (net of tax effects of $0.5 million) that was recorded
as a cumulative-effect type adjustment in other comprehensive income to
recognize the fair value of derivatives that are designated as cash-flow
hedges.

Comprehensive Income

Comprehensive income includes all changes in stockholders equity except those
resulting from investments by, and distributions to, stockholders.
Accordingly, the Companys Consolidated Statements of Comprehensive Income
include net income and foreign currency adjustments that arise from the
translation of the financial statements of Quiksilver Europe and Quiksilver
International into U.S. dollars and unrealized gains and losses on certain
derivative instruments.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. Such estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Fair Value of Financial Instruments

The carrying value of the Companys trade accounts receivable and accounts
payable approximates their fair value due to their short-term nature. The
carrying value of the Companys lines of credit and long-term debt approximates
its fair value as these borrowings include a series of short-term notes at
floating interest rates.

New Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (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 the Companys fiscal year ending October 31, 2003.
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.

In August 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities, which requires that costs associated with
exit or disposal activities be recognized when they are incurred rather than at
the date of a commitment to an exit or disposal plan. The Company must apply
SFAS No. 146 prospectively to exit or disposal activities initiated after
December 31, 2002. If the Company initiates exit or disposal activities after
that date, SFAS No.146 will affect the timing of the recognition of the related
costs. Management does not expect the adoption of this standard to have a
significant impact on the Companys financial position or results of
operations.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure  an amendment of FASB Statement No.
123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transistion for a

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voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS No. 148 amends the disclosure requirements
of SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
Company is required to follow the prescribed format and provide the additional
disclosures required by SFAS No. 148 in its annual financial statements for the
year ending October 31, 2003 and must also provide the disclosures in its
quarterly reports containing condensed financial statements for interim periods
beginning with the quarterly period ending April 30, 2003.

Reclassifications

Certain reclassifications were made in the Consolidated Statements of Income for
the years ended October 31, 2001 and 2000 to conform to the current years
presentation.

Note 2  Business Acquisitions

Effective December 1, 2002, the Company acquired its licensees in Australia and
Japan to unify its global operating platform. This group of companies is
referred to herein as Quiksilver Asia/Pacific and comprises two Australian
companies, Ug Manufacturing Co. Pty Ltd. and QSJ Holdings Pty Ltd., and one
Japanese company, Quiksilver Japan KK. Ug Manufacturing Co. Pty Ltd. was still
owned by the founders of the Quiksilver brand and was the original Quiksilver
operating company that has been producing Quiksilver products in Australia and
surrounding countries and territories for over 30 years. Along with a Japanese
partner, the founders also started Quiksilver Japan KK, which has been the
Quiksilver licensee in Japan for approximately 20 years. In conjunction with
its acquisition of Quiksilver Asia/Pacific, the Company also acquired a 25%
interest in its Turkish licensee. The operations of Quiksilver Asia/Pacific
will be included in the Companys results beginning with the effective date of
the acquisition in the first quarter of the fiscal year ending October 31,
2003.

The initial purchase price, excluding transaction costs, includes cash of $23.1
million and 2.8 million shares of the Companys common stock valued at $71.3
million. The valuation of the common stock issued in connection with the
acquisition was based on the quoted market price for 5 days before and after
the announcement date. The initial purchase price is subject to adjustment
based on the closing balance sheet, which is expected to be finalized in the
second quarter of the Companys fiscal year ending October 31, 2003. The
sellers are entitled to future payments ranging from zero to $18.6 million if
certain sales and earnings targets are achieved during the three years ending
October 31, 2005. The amount of goodwill initially recorded for the
transaction would increase if such contingent payments are made.

Quiksilver Asia/Pacific is in the process of finalizing its closing balance
sheet, and third-party valuations of goodwill and certain intangible assets are
being completed; accordingly, the allocation of the purchase price is
preliminary and subject to refinement. The following table summarizes the
estimated fair values of the assets acquired and liabilities assumed at the
date of acquisition.

|                               |  |                   |         | 
|------------------------------ |  | ----------------- | ------- | 
|                               |  | November
30,
2002
|In thousands                   |  |                  
|Current assets                 |  | $                 | 40,000  | 
|Fixed assets                   |  |                   | 5,000   | 
|Intangible assets and goodwill |  |                   | 69,000  | 
|                               |  |                   |         | 
|Total assets acquired          |  |                   | 114,000 | 
|Current liabilities            |  |                   | 15,000  | 
|                               |  |                   |         | 
|Net assets acquired            |  | $                 | 99,000  | 
|                               |  |                   |         | 

Intangible assets includes license agreements that will be amortized over their
remaining lives through June 2012, trademark values and goodwill. Trademark
values and goodwill are not subject to amortization and are generally not
expected to be deductible for tax purposes, and any allocation other than to the
Asia/Pacific segment will be made when the third-party valuations of goodwill and
certain intangible assets are completed.

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Effective September 15, 2002, the Company acquired Beach Street, Inc. (Beach
Street), a company that operates 26 Quiksilver outlet stores. The results of
Beach Streets operations have been included in the consolidated financial
statements since that date. As consideration for the acquisition, the Company
issued 298,092 shares of common stock valued at $6.9 million. The acquisition
has been recorded using the purchase method of accounting. As a result of the
acquisition, the Company recorded goodwill of $8.1 million, which is not
expected to be tax deductible.

Effective July 1, 2000, the Company acquired Quiksilver International, an
Australian company that owns the worldwide trademark rights to the Quiksilver
brand name (other than in the United States and Mexico where those rights were
already owned by the Company.) The initial acquisition payment was $23.6
million, which includes cash consideration of $23.1 million and transaction
costs, net of imputed interest, of $0.5 million. Under the terms of the
purchase agreement, two additional payments were to be made. One was made at
the end of fiscal 2002, and another is to be made at the end of fiscal 2005.
Such deferred purchase price payments, which are denominated in Australian
dollars, are contingent on the computed earnings of Quiksilver International
through June 20, 2005, subject to specified minimums. The deferred minimum
purchase price payments, which were discounted to present value, totaled $17.3
million at the date of the acquisition and are included as a component of the
purchase price recorded at July 1, 2000. The deferred purchase price payment
made at the end of fiscal 2002 was increased by $5.3 million and $4.3 million,
with a corresponding increase to Trademarks, as a result of Quiksilver
Internationals operations for the 12 months ended June 30, 2002 and 2001,
respectively, resulting in a total payment of $20.7 million. The obligation
related to these deferred purchase price payments is reflected in the
Consolidated Balance Sheet as a component of debt. The acquisition has been
recorded using the purchase method of accounting.

Effective May 1, 2000, the Company acquired the operations of Freestyle, SA, a
French company that is the European licensee of GotchaInternational (Gotcha
Europe). The initial purchase price was $2.2 million, which includes a cash
payment of $0.9 million and assumed debt of $1.3 million. The acquisition has
been recorded using the purchase method of accounting and resulted in goodwill
of $3.0 million at the acquisition date.

Effective March 1, 2000, the Company acquired the operations of Hawk Designs,
Inc., the owner of the intellectual property rights to the name Tony Hawkfor
apparel and related accessories. The initial purchase price was $1.3 million,
which includes cash payments of $1.0 million paid in installments, and assumed
bank debt of $0.3 million. Under the terms of the purchase agreement and for
additional compensation, Tony Hawk also agreed to promote Quiksilverproducts
through December 31, 2005, renewable through 2015 at the Companys option. The
acquisition has been recorded using the purchase method of accounting and
resulted in a trademark valuation of $1.2 million, which is being amortized
over 25 years.

The results of operations for all
acquisitions consummated through October 31,
2002 are included in the consolidated statements of income from their
respective acquisition dates.

Note 3  Allowance for Doubtful Accounts

The allowance for doubtful accounts includes the following:

|                           |                                 |      |                         |        |   |      |       |        |   |   |       |        |  
|-------------------------- | ------------------------------- | ---- | ----------------------- | ------ | - | ---- | ----- | ------ | - | - | ----- | ------ | -
|                           |                                 |      | Years Ended October 31,
|                           |                                 |      |                        
|In
thousands               |                                 | 2002 |                         | 2001   |   | 2000
|                           |                                 |      |                         |        |   |     
|Balance, beginning of year |                                 | $    | 6,280                   |        |   | $    | 5,090 |        |   | $ | 5,738 |       
|                           | Provision for doubtful accounts |      |                         | 5,771  |   |      |       | 5,042  |   |   |       | 3,135  |  
|                           | Deductions                      |      |                         | (5,384 | ) |      |       | (3,852 | ) |   |       | (3,783 | )
|                           |                                 |      |                         |        |   |      |       |        |   |   |       |       
|Balance, end of year       |                                 | $    | 6,667                   |        |   | $    | 6,280 |        |   | $ | 5,090 |       
|                           |                                 |      |                         |        |   |      |       |        |   |   |       |       

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Note 4  Inventories

During the fiscal year ended October 31, 2001, the Company recorded a $6.0
million writedown of its domestic inventories. This writedown was required
primarily as a result of the aftermath of September 11, 2001, when the market
for consumer products, including casual lifestyle apparel, experienced a
dramatic falloff in demand and resulted in a substantial amount of customer
order cancellations. This phenomenon created an industry wide glut of excess
product available to the traditional off price channel thereby driving the
price of certain seasonal product below cost. Inventories consist of the
following:

|                |  |             |        |      |  |   |         | 
|--------------- |  | ----------- | ------ | ---- |  | - | ------- | 
|                |  | October 31,
|                |  |            
|In thousands    |  | 2002        |        | 2001
|                |  |             |        |     
|Raw materials   |  | $           | 14,232 |      |  | $ | 21,325  | 
|Work in process |  |             | 6,826  |      |  |   | 8,138   | 
|Finished goods  |  |             | 74,814 |      |  |   | 78,099  | 
|                |  |             |        |      |  |   |         | 
|                |  | $           | 95,872 |      |  | $ | 107,562 | 
|                |  |             |        |      |  |   |         | 

Note 5  Fixed Assets

Fixed assets consist of the following:

|                                          |  |             |         |      |  |   |         |  
|----------------------------------------- |  | ----------- | ------- | ---- |  | - | ------- | -
|                                          |  | October 31,
|                                          |  |            
|In thousands                              |  | 2002        |         | 2001
|                                          |  |             |         |     
|Furniture and equipment                   |  | $           | 83,366  |      |  | $ | 64,791  |  
|Leasehold improvements                    |  |             | 24,727  |      |  |   | 17,898  |  
|Land and buildings                        |  |             | 13,813  |      |  |   | 13,233  |  
|                                          |  |             |         |      |  |   |         |  
|                                          |  |             | 121,906 |      |  |   | 95,922  |  
|Accumulated depreciation and amortization |  |             | (48,724 | )    |  |   | (34,469 | )
|                                          |  |             |         |      |  |   |         |  
|                                          |  | $           | 73,182  |      |  | $ | 61,453  |  
|                                          |  |             |         |      |  |   |         |  

Note 6  Trademarks

A summary of trademarks is as follows:

|                           |  |             |        |              |  |          |        |   |  |          |        |             |  |          |  |        |  |              |  |       |  |   |        |  |  |   |        |   |  |   |        | 
|-------------------------- |  | ----------- | ------ | ------------ |  | -------- | ------ | - |  | -------- | ------ | ----------- |  | -------- |  | ------ |  | ------------ |  | ----- |  | - | ------ |  |  | - | ------ | - |  | - | ------ | 
|                           |  | October 31,
|                           |  |            
|                           |  | 2002        |        | 2001        
|                           |  |             |        |             
|                           |  | Gross       |        |              |  |          |        |   |  |          |        |             |  |          |  |        |  |              |  | Gross
|                           |  | Carrying    |        | Accumulated  |  | Net Book |        |   |  | Carrying |        | Accumulated |  | Net Book
|In thousands               |  | Amount      |        | Amortization |  | Value    |        |   |  |          |        |             |  |          |  | Amount |  | Amortization |  | Value
|                           |  |             |        |              |  |          |        |   |  |          |        |             |  |          |  |        |  |              |  |      
|Non-amortizable trademarks |  | $           | 54,139 |              |  | $        | (4,670 | ) |  | $        | 49,469 |             |  |          |  |        |  |              |  |       |  | $ | 48,821 |  |  | $ | (4,619 | ) |  | $ | 44,202 | 
|Amortizable trademarks     |  |             | 2,002  |              |  |          | (337   | ) |  |          | 1,665  |             |  |          |  |        |  |              |  |       |  |   | 1,920  |  |  |   | (211   | ) |  |   | 1,709  | 
|                           |  |             |        |              |  |          |        |   |  |          |        |             |  |          |  |        |  |              |  |       |  |   |        |  |  |   |        |   |  |   |        | 
|                           |  | $           | 56,141 |              |  | $        | (5,007 | ) |  | $        | 51,134 |             |  |          |  |        |  |              |  |       |  | $ | 50,741 |  |  | $ | (4,830 | ) |  | $ | 45,911 | 
|                           |  |             |        |              |  |          |        |   |  |          |        |             |  |          |  |        |  |              |  |       |  |   |        |  |  |   |        |   |  |   |        | 

The change in non-amortizable trademarks is due primarily to an increase in the
deferred purchase price payment for the Quiksilver International acquisition.
Certain intangible assets will continue to be amortized by the Company using
estimated useful lives of 10 to 25 years with no residual values. Intangible
amortization expense for the fiscal year ended October 31, 2002 was $0.1
million. Annual amortization expense, based on the Companys amortizable
intangible assets at October 31, 2002, is estimated to be approximately $0.1
million in each of the fiscal years ending October 31, 2003 through 2007.

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Note 7  Lines of Credit and Long-term Debt

A summary of lines of credit and long-term debt is as follows:

|                                   |  |             |        |      |  |   |         | 
|---------------------------------- |  | ----------- | ------ | ---- |  | - | ------- | 
|                                   |  | October 31,
|                                   |  |            
|In thousands                       |  | 2002        |        | 2001
|                                   |  |             |        |     
|Domestic syndicated line of credit |  | $           | 20,388 |      |  | $ | 47,000  | 
|Quiksilver Europe arrangements     |  |             | 12,110 |      |  |   | 19,228  | 
|Domestic syndicated term loan      |  |             | 12,500 |      |  |   | 18,750  | 
|Domestic term loan                 |  |             | 9,225  |      |  |   | 10,353  | 
|Quiksilver Europe long-term debt   |  |             | 23,752 |      |  |   | 19,706  | 
|Deferred purchase price obligation |  |             | 8,608  |      |  |   | 21,655  | 
|                                   |  |             |        |      |  |   |         | 
|                                   |  | $           | 86,583 |      |  | $ | 136,692 | 
|                                   |  |             |        |      |  |   |         | 

The Company has a syndicated bank facility that was amended in May 2002 (the
Credit Agreement). The Credit Agreement provides for (i) a revolving line of
credit of up to $125.0 million, including a $60.0 million sublimit for letters
of credit and (ii) a term loan initially totaling $25.0 million. The revolving
line of credit expires on June 28, 2003. Borrowings under the revolving line
of credit bear interest based on the banks reference rate or based on LIBOR
for borrowings committed to be outstanding for 30 days or longer. The weighted
average interest rate at October 31, 2002 was 6.3%. The term loan is repayable
in equal quarterly installments through October 2004 and bears interest
contractually based on LIBOR. However, the Company entered into an interest
rate swap agreement to fix the interest rate at 7.2% per year. This swap
agreement is effective through October 2004 and is an effective hedge of the
related interest rate exposure. The fair value of the interest rate swap at
October 31, 2002 was a loss of $0.5 million. As of October 31, 2002, the
Company had $20.4 million of cash borrowings outstanding under the revolving
line of credit and $12.5 million outstanding under the term loan.

The Credit Agreement contains restrictive covenants. The most significant
covenants relate to maintaining certain leverage and fixed charge coverage

ratios. The payment of dividends is restricted, among other things, and the
Companys assets, other than trademarks and other intellectual property,
generally have been pledged as collateral. At October 31, 2002, the Company
was in compliance with such covenants. The Company believes that the line of
credit will be renewed with substantially similar terms.

The Company also has a term loan with a U.S. bank that initially totaled $12.3
million in April 2000. This term loan is repayable in installments of $0.1
million per month with a final maturity in October 2004. The Company
anticipates that these monthly payments and final balloon payment will be paid
from borrowings on the Companys revolving credit facility. This term loan is
secured by the leasehold improvements at the Companys Huntington Beach
headquarters and bears interest contractually based on LIBOR. However, in
January 2000, the Company entered into an interest rate swap agreement with a
notional amount equal to the term loan, effective through April 2007, to fix
the interest rate at 8.4% per annum. The fair value of the interest rate swap
at October 31, 2002 was a loss of $1.1 million. The restrictive covenants
under this term loan are substantially the same as those under the Credit
Agreement. The outstanding balance of this term loan at October 31, 2002 was
$9.2 million.

Quiksilver Europe has arrangements with banks that provide for maximum cash
borrowings of approximately $60.0 million in addition to approximately $38.0
million available for the issuance of letters of credit. At October 31, 2002,
these lines of credit bore interest at rates ranging from 3.9% to 4.2%. The
lines of credit expire on various dates through April 2003, and the Company
believes that these lines of credit will continue to be available with
substantially similar terms. As of October 31, 2002, $12.1 million was
outstanding under these lines of credit.

Quiksilver Europe also has $23.8 million of long-term debt, the majority of
which is collateralized by land and buildings. This long-term debt bears
interest at rates ranging generally from 3.9% to 6.0%, requires monthly,
quarterly or annual principal and interest payments and is due at various dates
through 2011.

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As part of the acquisition of Quiksilver International, the Company is
obligated to make an additional purchase price payment, which is denominated in
Australian dollars, and is contingent on the computed earnings of Quiksilver
International through June 20, 2005. While this obligation was discounted to
present value as of the acquisition date, the carrying amount of the obligation
fluctuates based on changes in the exchange rate between Australian dollars and
U.S. dollars. As of October 31, 2002, this obligation totaled $8.6 million.

Principal payments on long-term debt are due approximately as follows (in
thousands):

|           |  |   |       
|---------- |  | - | ------
|2003       |  | $ | 10,680
|2004       |  |   | 20,610
|2005       |  |   | 13,227
|2006       |  |   | 3,569 
|2007       |  |   | 3,300 
|Thereafter |  |   | 2,699 
|           |  |   |       
|           |  | $ | 54,085
|           |  |   |       

Note 8  Accrued Liabilities

Accrued liabilities consist of the following:

|                                           |  |             |        |      |  |   |        | 
|------------------------------------------ |  | ----------- | ------ | ---- |  | - | ------ | 
|                                           |  | October 31,
|                                           |  |            
|In thousands                               |  | 2002        |        | 2001
|                                           |  |             |        |     
|Accrued employee compensation and benefits |  | $           | 18,767 |      |  | $ | 11,411 | 
|Accrued sales and payroll taxes            |  |             | 1,840  |      |  |   | 2,428  | 
|Derivative liability                       |  |             | 4,437  |      |  |   | 2,646  | 
|Other liabilities                          |  |             | 15,093 |      |  |   | 8,413  | 
|                                           |  |             |        |      |  |   |        | 
|                                           |  | $           | 40,137 |      |  | $ | 24,898 | 
|                                           |  |             |        |      |  |   |        | 

Note 9  Commitments and Contingencies

Operating Leases

The Company leases certain land and buildings under long-term operating lease
agreements. The following is a schedule of future minimum lease payments
required under such leases as of October 31, 2002 (in thousands):

|           |  |   |        
|---------- |  | - | -------
|2003       |  | $ | 17,383 
|2004       |  |   | 15,513 
|2005       |  |   | 14,695 
|2006       |  |   | 13,930 
|2007       |  |   | 12,823 
|Thereafter |  |   | 32,653 
|           |  |   |        
|           |  | $ | 106,997
|           |  |   |        

Total rent expense was $14.9 million, $11.1 million and $6.7 million for the
years ended October 31, 2002, 2001 and 2000, respectively.

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Litigation

On March 28, 2002, the Company filed a lawsuit against GMT Corporation (GMT),
its then licensee for watches in the U.S., and simultaneously terminated its
license agreement with GMT based on allegations that GMT was in material breach
of the agreement. GMT has disputed the Companys right to terminate and has
brought claims against the Company for wrongful termination and other alleged
breaches of the license agreement. Management believes that GMTs claims are
substantially without merit and intends to vigorously pursue the Companys
claims and defend against those of GMT. Other legal claims against the Company
consist of matters incidental to the Companys business. In the opinion of
management, the outcome of these claims will not materially affect the
Companys consolidated financial position or results of operations.

Note 10  Stockholders Equity

In March 2000, the Companys stockholders approved the Companys 2000 Stock
Incentive Plan (the 2000 Plan), which generally replaced the Companys
previous stock option plans. Under the 2000 Plan, 5,036,209 shares are
reserved for issuance over its term, consisting of 3,236,209 shares authorized
under predecessor plans plus an additional 1,800,000 shares. Nonqualified and
incentive options may be granted to officers and employees selected by the
plans administrative committee at an exercise price not less than the fair
market value of the underlying shares on the date of grant. Payment by option
holders upon exercise of an option may be made in cash or, with the consent of
the committee, by delivering previously outstanding shares of the Companys
Common Stock. Options vest over a period of time, generally three to five
years, as designated by the committee and are subject to such other terms and
conditions as the committee determines. Certain stock options have also been
granted to employees of acquired businesses.

Changes in shares under option are summarized as follows:

|                                                               |  |                         |           |       |  |          |       |       |  |        |           |          |  |   |       |  |  |          |           |   |  |   |       | 
|-------------------------------------------------------------- |  | ----------------------- | --------- | ----- |  | -------- | ----- | ----- |  | ------ | --------- | -------- |  | - | ----- |  |  | -------- | --------- | - |  | - | ----- | 
|                                                               |  | Years Ended October 31,
|                                                               |  |                        
|                                                               |  | 2002                    |           | 2001  |  | 2000    
|                                                               |  |                         |           |       |  |         
|                                                               |  |                         |           |       |  | Weighted |       |       |  |        |           | Weighted |  |   |       |  |  | Weighted
|                                                               |  |                         |           |       |  | Average  |       |       |  |        |           | Average  |  |   |       |  |  | Average 
|                                                               |  | Shares                  |           | Price |  | Shares   |       | Price |  | Shares |           | Price   
|                                                               |  |                         |           |       |  |          |       |       |  |        |           |         
|Outstanding, beginning of year                                 |  |                         | 3,572,682 |       |  | $        | 11.42 |       |  |        | 3,616,301 |          |  | $ | 10.01 |  |  |          | 3,410,531 |   |  | $ | 9.22  | 
|Granted                                                        |  |                         | 733,000   |       |  |          | 14.59 |       |  |        | 642,100   |          |  |   | 17.30 |  |  |          | 784,790   |   |  |   | 13.00 | 
|Exercised                                                      |  |                         | (459,346  | )     |  |          | 9.31  |       |  |        | (641,000  | )        |  |   | 9.16  |  |  |          | (502,818  | ) |  |   | 8.59  | 
|Canceled                                                       |  |                         | (10,997   | )     |  |          | 12.56 |       |  |        | (44,719   | )        |  |   | 14.30 |  |  |          | (76,202   | ) |  |   | 14.71 | 
|                                                               |  |                         |           |       |  |          |       |       |  |        |           |          |  |   |       |  |  |          |           |   |  |   |       | 
|Outstanding, end of year                                       |  |                         | 3,835,339 |       |  | $        | 12.28 |       |  |        | 3,572,682 |          |  | $ | 11.42 |  |  |          | 3,616,301 |   |  | $ | 10.01 | 
|                                                               |  |                         |           |       |  |          |       |       |  |        |           |          |  |   |       |  |  |          |           |   |  |   |       | 
|Options exercisable, end of year                               |  |                         | 2,326,491 |       |  | $        | 10.72 |       |  |        | 2,340,242 |          |  | $ | 9.52  |  |  |          | 2,168,831 |   |  | $ | 8.30  | 
|                                                               |  |                         |           |       |  |          |       |       |  |        |           |          |  |   |       |  |  |          |           |   |  |   |       | 
|Weighted average fair value of
options granted during the year |  |                         |           |       |  | $        | 10.79 |       |  |        |           |          |  | $ | 10.70 |  |  |          |           |   |  | $ | 6.55  | 
|                                                               |  |                         |           |       |  |          |       |       |  |        |           |          |  |   |       |  |  |          |           |   |  |   |       | 

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Outstanding stock options at October 31, 2002 consist of the following:

|              |  |                     |           |                     |  |           |         |          |  |       |       |  |  |          |           |  |  |   |       | 
|------------- |  | ------------------- | --------- | ------------------- |  | --------- | ------- | -------- |  | ----- | ----- |  |  | -------- | --------- |  |  | - | ----- | 
|              |  | Options Outstanding |           | Options Exercisable
|              |  |                     |           |                    
|              |  |                     |           |                     |  |           |         |          |  |       |       |  |  |          |           |  |  |  
|              |  |                     |           |                     |  | Weighted  |         |          |  |       |       |  |  |          |           | 
|Range of      |  |                     |           |                     |  | Average   |         | Weighted |  |       |       |  |  | Weighted
|Exercise      |  |                     |           |                     |  | Remaining |         | Average  |  |       |       |  |  | Average 
|Prices        |  | Shares              |           | Life                |  | Price     |         | Shares   |  | Price
|              |  |                     |           |                     |  |           |         |          |  |      
|              |  |                     |           |                     |  |           | (Years) |          |  |       |       |  |  |          |           |  |  |   |       | 
|$2.66  5.31  |  |                     | 166,500   |                     |  |           | 1.0     |          |  | $     | 3.35  |  |  |          | 166,500   |  |  | $ | 3.35  | 
|5.32  7.96   |  |                     | 607,156   |                     |  |           | 3.1     |          |  |       | 6.94  |  |  |          | 607,156   |  |  |   | 6.94  | 
|7.97  10.62  |  |                     | 480,205   |                     |  |           | 4.4     |          |  |       | 9.02  |  |  |          | 453,205   |  |  |   | 9.06  | 
|10.63  13.28 |  |                     | 836,871   |                     |  |           | 6.7     |          |  |       | 11.98 |  |  |          | 540,009   |  |  |   | 11.98 | 
|13.29  15.93 |  |                     | 1,152,101 |                     |  |           | 8.0     |          |  |       | 14.54 |  |  |          | 317,147   |  |  |   | 15.20 | 
|15.94  21.24 |  |                     | 527,506   |                     |  |           | 8.0     |          |  |       | 18.25 |  |  |          | 177,474   |  |  |   | 18.03 | 
|21.25  26.55 |  |                     | 65,000    |                     |  |           | 9.1     |          |  |       | 24.35 |  |  |          | 65,000    |  |  |   | 24.35 | 
|              |  |                     |           |                     |  |           |         |          |  |       |       |  |  |          |           |  |  |   |       | 
|              |  |                     | 3,835,339 |                     |  |           | 6.2     |          |  | $     | 12.28 |  |  |          | 2,326,491 |  |  | $ | 10.72 | 
|              |  |                     |           |                     |  |           |         |          |  |       |       |  |  |          |           |  |  |   |       | 

The fair value of each option grant was estimated as of the grant date using
the Black-Scholes option-pricing model for the years ended October 31, 2002,
2001 and 2000 assuming risk-free interest rates of 3.9%, 4.9% and 5.8%,
respectively, volatility of 63.4%, 64.8% and 58.6%, respectively, zero dividend
yield, and expected lives of 4.9, 4.6 and 3.7 years, respectively. If
compensation expense was determined based on the fair value method beginning
with grants in the year ended October 31, 1996, the Companys net income and
net income per share, assuming dilution would have been reduced to the pro
forma amounts indicated below:

|                                                  |  |                         |        |      |  |      |        |  |  |   |        | 
|------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                                  |  | Years Ended October 31,
|                                                  |  |                        
|In thousands, except per share amounts            |  | 2002                    |        | 2001 |  | 2000
|                                                  |  |                         |        |      |  |     
|Actual net income                                 |  | $                       | 37,591 |      |  | $    | 28,021 |  |  | $ | 31,836 | 
|Pro forma net income                              |  |                         | 33,905 |      |  |      | 24,832 |  |  |   | 29,658 | 
|Actual net income per share, assuming dilution    |  |                         | 1.54   |      |  |      | 1.17   |  |  |   | 1.37   | 
|Pro forma net income per share, assuming dilution |  |                         | 1.39   |      |  |      | 1.04   |  |  |   | 1.28   | 

The impact of outstanding nonvested stock options granted prior to the year
ended October 31, 1996 has been excluded from the pro forma calculation.
Accordingly, the pro forma adjustments are not indicative of future period pro
forma adjustments.

As of October 31, 2002, there were 666,946 shares of common stock that were
available for future grant.

The Company began the Quiksilver Employee Stock Purchase Plan (the ESPP) in
fiscal 2001, which provides a method for employees of the Company to purchase
common stock at a 15% discount from fair market value as of the beginning or
end of each purchasing period of six months, whichever is lower. The ESPP
covers substantially all full-time domestic employees who have at least five
months of service with the Company. The ESPP is intended to constitute an
employee stock purchase plan within the meaning of section 423 of the
Internal Revenue Code of 1986, as amended, and therefore the Company does not
recognize compensation expense related to the ESPP. During the years ended
October 31, 2002 and 2001, 32,426 and 15,247 shares of stock were issued under
the plan with proceeds to the Company of $0.5 million and $0.2 million,
respectively.

Note 11  Licensing

Since acquiring Quiksilver International Pty Ltd, an Australian company, in
July 2000 (See Note 2Acquisitions), the Company owns all international rights
to use the Quiksilvertrademark. Prior to this acquisition, the Company owned
these intellectual property rights in the United States and Mexico only, and
operated under license agreements with Quiksilver International Pty Ltd. to use
the Quiksilvertrademark in other countries and territories.

Quiksilver Europe has a license agreement with GotchaInternational, LP that
resulted from the Companys acquisition of Freestyle, SA, the European licensee
of GotchaInternational, LP. The license agreement provides that Quiksilver
Europe can sell products under the Gotchatrademark and tradename through 2015
in the territories covered by the license agreement (primarily Western Europe.)
Royalties range from 2.8% to 4.0% of net sales, based on sales volume, with
certain minimum requirements. Promotional contributions are also required
based on sales volume and range from 1.0% to 1.5%.

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The Company licensed the use of the Quiksilverand Roxytrademarks in Mexico in
exchange for royalties of 4.5% of net sales after Mexican taxes, and the use of
the Quiksilverand Roxytrademarks on sunglasses in exchange for royalties of
10% of sales. These license agreements expire through 2010. The Company also
licensed a chain of domestic outlet stores that paid the Company royalties of
4% of product purchases from the Company. This outlet store chain was acquired
in September 2002, and accordingly, the license agreement was eliminated. The
Companys license with its domestic watch licensee was terminated during the
year ended October 31, 2002.

Effective with the acquisition of Quiksilver International during fiscal 2000,
the Company acquired licenses for the use of theQuiksilver trademark in
various countries and territories around the world. The licensees are
headquartered in Australia, Japan, Turkey, South Africa, Brazil, Indonesia,
Korea, Argentina, Chile and Mauritius. These licensees pay the Company
royalties ranging from 3% to 5% of the licensees sales. The licensees
headquartered in Australia and Japan were acquired in December 2002. See Note
2Acquisitions.

Note 12  Income Taxes

A summary of the provision for income taxes is as follows:

|                           |         |      |                         |        |   |      |        |        |   |   |        |       | 
|-------------------------- | ------- | ---- | ----------------------- | ------ | - | ---- | ------ | ------ | - | - | ------ | ----- | 
|                           |         |      | Years Ended October 31,
|                           |         |      |                        
|In
thousands               |         | 2002 |                         | 2001   |   | 2000
|                           |         |      |                         |        |   |     
|Current:                   |         |      |                         |        |   |      |        |        |   |   |        |      
|                           | Federal |      | $                       | 10,874 |   |      | $      | 8,038  |   |   | $      | 8,820 | 
|                           | State   |      |                         | 2,545  |   |      |        | 2,023  |   |   |        | 2,103 | 
|                           | Foreign |      |                         | 13,014 |   |      |        | 10,694 |   |   |        | 7,711 | 
|                           |         |      |                         |        |   |      |        |        |   |   |        |      
|                           |         |      | 26,433                  |        |   |      | 20,755 |        |   |   | 18,634 |      
|                           |         |      |                         |        |   |      |        |        |   |   |        |      
|Deferred:                  |         |      |                         |        |   |      |        |        |   |   |        |      
|                           | Federal |      |                         | (2,435 | ) |      |        | (2,506 | ) |   |        | 1,158 | 
|                           | State   |      |                         | (530   | ) |      |        | (640   | ) |   |        | 209   | 
|                           | Foreign |      |                         | (1,073 | ) |      |        | (218   | ) |   |        | 25    | 
|                           |         |      |                         |        |   |      |        |        |   |   |        |      
|                           |         |      | (4,038                  | )      |   |      | (3,364 | )      |   |   | 1,392  |      
|                           |         |      |                         |        |   |      |        |        |   |   |        |      
|Provision for income taxes |         | $    | 22,395                  |        |   | $    | 17,391 |        |   | $ | 20,026 |      
|                           |         |      |                         |        |   |      |        |        |   |   |        |      

A reconciliation of the effective income tax rate to a computed expected
statutory federal income tax rate is as follows:

|                                                      |  |                         |      |      |  |      |      |   |  |  |      |  
|----------------------------------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                                      |  | Years Ended October 31,
|                                                      |  |                        
|                                                      |  | 2002                    |      | 2001 |  | 2000
|                                                      |  |                         |      |      |  |     
|Computed expected statutory federal income
tax rate |  |                         | 35.0 | %    |  |      | 35.0 | % |  |  | 35.0 | %
|State income taxes, net of federal income
tax benefit |  |                         | 2.2  |      |  |      | 2.0  |   |  |  | 2.9  |  
|Foreign                                               |  |                         | 0.1  |      |  |      | 1.3  |   |  |  | 0.3  |  
|Other                                                 |  |                         |     |      |  |      |     |   |  |  | 0.4  |  
|                                                      |  |                         |      |      |  |      |      |   |  |  |      |  
|Effective income tax rate                             |  |                         | 37.3 | %    |  |      | 38.3 | % |  |  | 38.6 | %
|                                                      |  |                         |      |      |  |      |      |   |  |  |      |  

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The components of net deferred income taxes are as follows:

|                                 |                                  |      |             |        |   |   |        |       |  
|-------------------------------- | -------------------------------- | ---- | ----------- | ------ | - | - | ------ | ----- | -
|                                 |                                  |      | October 31,
|                                 |                                  |      |            
|In
thousands                     |                                  | 2002 |             | 2001  
|                                 |                                  |      |             |       
|Deferred income tax assets:      |                                  |      |             |        |   |   |        |      
|                                 | Allowance for doubtful accounts  |      | $           | 5,718  |   |   | $      | 4,835 |  
|                                 | Trademark amortization           |      |             | 993    |   |   |        | 981   |  
|                                 | State taxes                      |      |             | 113    |   |   |        | 46    |  
|                                 | Other comprehensive income       |      |             | 2,090  |   |   |        | 961   |  
|                                 | Nondeductible accruals and other |      |             | 9,011  |   |   |        | 5,401 |  
|                                 |                                  |      |             |        |   |   |        |      
|                                 |                                  |      | 17,925      |        |   |   | 12,224 |      
|                                 |                                  |      |             |        |   |   |        |      
|Deferred income tax liabilities: |                                  |      |             |        |   |   |        |      
|                                 | Goodwill amortization            |      |             | (903   | ) |   |        | (622  | )
|                                 | Depreciation                     |      |             | (1,106 | ) |   |        | (737  | )
|                                 | Other                            |      |             | (435   | ) |   |        | (480  | )
|                                 |                                  |      |             |        |   |   |        |      
|                                 |                                  |      | (2,444      | )      |   |   | (1,839 | )    
|                                 |                                  |      |             |        |   |   |        |      
|Net deferred income taxes        |                                  | $    | 15,481      |        |   | $ | 10,385 |      
|                                 |                                  |      |             |        |   |   |        |      

The tax benefits from the exercise of certain stock options are reflected as
additions to paid-in capital.

Income before provision for income taxes includes $34.0 million, $23.6 million
and $22.9 million from foreign jurisdictions for the years ended October 31,
2002, 2001 and 2000, respectively. The Company does not provide for the U.S.
federal, state or additional foreign income tax effects on foreign earnings
that management intends to permanently reinvest. For the fiscal year ended
October 31, 2002, foreign earnings earmarked for permanent reinvestment totaled
approximately $87.0 million. The earnings associated with operations in
Australia through Quiksilver International have been, and are expected to be,
repatriated. The U.S. federal, state and foreign residual tax effects of those
repatriations have been included in the provision for income taxes and related
deferred tax assets and/or liabilities as appropriate.

Note 13  Employee Plans

The Company maintains the Quiksilver 401(k) Employee Savings Plan and Trust
(the 401(k) Plan). This plan is generally available to all domestic
employees with six months of service and is funded by employee contributions
and periodic discretionary contributions from the Company which are approved by
the Companys Board of Directors. The Company made contributions of $0.4
million, $0.4 million and $0.3 million to the 401(k) Plan for the years ended
October 31, 2002, 2001 and 2000, respectively.

Employees of the Companys French
subsidiary, Na Pali, SAS, with three months of
service are covered under the French Profit Sharing Plan (the French Profit
Sharing Plan), which is mandated by law. Compensation is earned under the
French Profit Sharing Plan based on statutory computations with an additional
discretionary component. Funds are maintained by the Company and vest with the
employees after five years, although earlier disbursement is optional if
certain personal events occur or upon the termination of employment.
Compensation expense of $1.6 million, $1.0 million and
$1.0 million was
recognized related to the French Profit Sharing Plan for the fiscal years ended
October 31, 2002, 2001 and 2000, respectively.

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Note 14  Segment and Geographic Information

Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
Companys management in deciding how to allocate resources and in assessing
performance. 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. Within the consumer products
industry, the Company operates primarily in the U.S. (referred to herein as
domestic) and in Europe, and no single customer accounts for more than 10% of
the Companys net sales.

Although the Company operates in one industry segment, it produces different
product lines within the segment. The percentages of revenues attributable to
each product line are as follows:

|                                                      |  |                        |     |      |  |      |     |   |  |  |     |  
|----------------------------------------------------- |  | ---------------------- | --- | ---- |  | ---- | --- | - |  |  | --- | -
|                                                      |  | Percentage of Revenues
|                                                      |  |                       
|                                                      |  | 2002                   |     | 2001 |  | 2000
|                                                      |  |                        |     |      |  |     
|T-Shirts                                              |  |                        | 20  | %    |  |      | 23  | % |  |  | 21  | %
|Accessories                                           |  |                        | 12  |      |  |      | 11  |   |  |  | 12  |  
|Pants                                                 |  |                        | 12  |      |  |      | 10  |   |  |  | 9   |  
|Shirts                                                |  |                        | 11  |      |  |      | 10  |   |  |  | 12  |  
|Jackets, sweaters and snowboardwear                   |  |                        | 9   |      |  |      | 11  |   |  |  | 9   |  
|Swimwear, excluding boardshorts                       |  |                        | 9   |      |  |      | 9   |   |  |  | 9   |  
|Fleece                                                |  |                        | 7   |      |  |      | 7   |   |  |  | 7   |  
|Shorts                                                |  |                        | 6   |      |  |      | 6   |   |  |  | 6   |  
|Footwear                                              |  |                        | 4   |      |  |      | 3   |   |  |  | 2   |  
|Boardshorts                                           |  |                        | 4   |      |  |      | 4   |   |  |  | 6   |  
|Tops and dresses                                      |  |                        | 4   |      |  |      | 4   |   |  |  | 4   |  
|Snowboards, snowboard boots, bindings and accessories |  |                        | 2   |      |  |      | 2   |   |  |  | 3   |  
|                                                      |  |                        |     |      |  |      |     |   |  |  |     |  
|                                                      |  |                        | 100 | %    |  |      | 100 | % |  |  | 100 | %
|                                                      |  |                        |     |      |  |      |     |   |  |  |     |  

Information related to domestic and European operations is as follows:

|                     |          |              |   |                         |         |      |   |         |         |  |   |         |         | 
|-------------------- | -------- | ------------ | - | ----------------------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                     |          |              |   | Years Ended October 31,
|                     |          |              |   |                        
|In
thousands         |          | 2002         |   | 2001                    |         | 2000
|                     |          |              |   |                         |         |     
|Revenues:            |          |              |   |                         |         |      |   |         |         |  |   |        
|                     | Domestic |              | $ | 422,800                 |         |      | $ | 396,744 |         |  | $ | 336,756 |        
|                     | Europe   |              |   | 282,684                 |         |      |   | 223,877 |         |  |   | 182,614 |        
|                     |          |              |   |                         |         |      |   |         |         |  |   |        
|                     |          | Consolidated |   | $                       | 705,484 |      |   | $       | 620,621 |  |   | $       | 519,370 | 
|                     |          |              |   |                         |         |      |   |         |         |  |   |        
|Gross profit:        |          |              |   |                         |         |      |   |         |         |  |   |        
|                     | Domestic |              | $ | 158,353                 |         |      | $ | 141,241 |         |  | $ | 124,366 |        
|                     | Europe   |              |   | 127,976                 |         |      |   | 96,618  |         |  |   | 79,104  |        
|                     |          |              |   |                         |         |      |   |         |         |  |   |        
|                     |          | Consolidated |   | $                       | 286,329 |      |   | $       | 237,859 |  |   | $       | 203,470 | 
|                     |          |              |   |                         |         |      |   |         |         |  |   |        
|Operating income:    |          |              |   |                         |         |      |   |         |         |  |   |        
|                     | Domestic |              | $ | 36,301                  |         |      | $ | 31,294  |         |  | $ | 36,110  |        
|                     | Europe   |              |   | 33,403                  |         |      |   | 25,345  |         |  |   | 21,023  |        
|                     |          |              |   |                         |         |      |   |         |         |  |   |        
|                     |          | Consolidated |   | $                       | 69,704  |      |   | $       | 56,639  |  |   | $       | 57,133  | 
|                     |          |              |   |                         |         |      |   |         |         |  |   |        
|Identifiable assets: |          |              |   |                         |         |      |   |         |         |  |   |        
|                     | Domestic |              | $ | 283,370                 |         |      | $ | 282,108 |         |  | $ | 265,000 |        
|                     | Europe   |              |   | 167,219                 |         |      |   | 136,630 |         |  |   | 93,742  |        
|                     |          |              |   |                         |         |      |   |         |         |  |   |        
|                     |          | Consolidated |   | $                       | 450,589 |      |   | $       | 418,738 |  |   | $       | 358,742 | 
|                     |          |              |   |                         |         |      |   |         |         |  |   |        

France accounted for 41.1%, 45.9% and 50.5% of European net sales to
unaffiliated customers for the years ended October 31, 2002, 2001 and 2000,
respectively, while the United Kingdom accounted for 20.6%, 18.0% and 12.8%,
respectively, and Spain accounted for 15.2%, 14.3% and 12.5%, respectively.

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Note 15  Derivative Financial Instruments

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 October 31, 2002,
the Company was hedging forecasted transactions expected to occur in the
following eight months. Assuming exchange rates at October 31, 2002 remain
constant, $2.0 million of losses related to hedges of these transactions are
expected to be reclassified into earnings over the next eight months. Also
included in accumulated other comprehensive income at October 31, 2002 is a
$0.4 million net charge related to cash flow hedges of the Companys long-term
debt, which is denominated in Australian dollars and matures through fiscal
2005, and the fair value of interest rate swaps, totaling $1.1 million that is
related to the Companys U.S. dollar denominated long-term debt and matures
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 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 fiscal year ended October 31,
2002, the Company reclassified into earnings a net loss of $0.3 million
resulting from the expiration, sale, termination, or exercise of derivative
contracts. Additionally, a loss of $0.5 million was recognized in earnings
during the fiscal year ended October 31, 2002 for changes in the value of
derivatives that were marked to fair 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 at October 31, 2002 is as follows:

|                   |  |          |         |          |  |                    |  |      |        |   |        |  
|------------------ |  | -------- | ------- | -------- |  | ------------------ |  | ---- | ------ | - | ------ | -
|                   |  | Notional |         |          |  |                    |  | Fair
|In thousands       |  | Amount   |         | Maturity |  | Value             
|                   |  |          |         |          |  |                   
|British pounds     |  | $        | 32,679  |          |  | Nov 2002-July 2003 |  | $    | (595   | )
|U.S. dollars       |  |          | 34,000  |          |  | Nov 2002-June 2003 |  |      | (1,647 | )
|Australian dollars |  |          | 10,627  |          |  | Sept 2005          |  |      | (287   | )
|Interest rate swap |  |          | 20,000  |          |  | Nov 2003           |  |      | (314   | )
|Interest rate swap |  |          | 12,500  |          |  | Oct 2004           |  |      | (515   | )
|Interest rate swap |  |          | 9,225   |          |  | Jan 2007           |  |      | (1,071 | )
|                   |  |          |         |          |  |                    |  |      |        |   |        |  
|                   |  | $        | 119,031 |          |  |                    |  |      |        | $ | (4,429 | )
|                   |  |          |         |          |  |                    |  |      |        |   |        |  

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Note 16  Quarterly Financial Data (Unaudited)

A summary of quarterly financial data (unaudited) is as follows:

|                            |                                         |            |         |          |         |         |         |            |         |  |   |         |  |  |   |         | 
|--------------------------- | --------------------------------------- | ---------- | ------- | -------- | ------- | ------- | ------- | ---------- | ------- |  | - | ------- |  |  | - | ------- | 
|                            |                                         |            | Quarter |          | Quarter |         | Quarter |            | Quarter
|In
thousands,               |                                         | Ended      |         | Ended    |         | Ended   |         | Ended     
|except
per share amounts    |                                         | January 31 |         | April 30 |         | July 31 |         | October 31
|                            |                                         |            |         |          |         |         |         |           
|Year
ended October 31, 2002 |                                         |            |         |          |         |         |         |            |         |  |   |         |  |  |   |        
|                            | Revenues                                |            | $       | 146,959  |         |         | $       | 187,423    |         |  | $ | 175,044 |  |  | $ | 196,058 | 
|                            | Gross profit                            |            |         | 54,780   |         |         |         | 75,739     |         |  |   | 70,353  |  |  |   | 85,457  | 
|                            | Net income                              |            |         | 3,086    |         |         |         | 13,463     |         |  |   | 8,845   |  |  |   | 12,197  | 
|                            | Net income per share,
assuming dilution |            |         | 0.13     |         |         |         | 0.55       |         |  |   | 0.36    |  |  |   | 0.49    | 
|                            | Trade accounts receivable               |            |         | 145,021  |         |         |         | 171,669    |         |  |   | 165,675 |  |  |   | 168,237 | 
|                            | Inventories                             |            |         | 116,364  |         |         |         | 76,313     |         |  |   | 93,316  |  |  |   | 95,872  | 
|Year
ended October 31, 2001 |                                         |            |         |          |         |         |         |            |         |  |   |         |  |  |   |        
|                            | Revenues                                |            | $       | 122,959  |         |         | $       | 169,546    |         |  | $ | 156,656 |  |  | $ | 171,460 | 
|                            | Gross profit                            |            |         | 48,561   |         |         |         | 68,810     |         |  |   | 60,275  |  |  |   | 60,213  | 
|                            | Net income                              |            |         | 3,706    |         |         |         | 13,981     |         |  |   | 7,955   |  |  |   | 2,379   | 
|                            | Net income per share,
assuming dilution |            |         | 0.16     |         |         |         | 0.58       |         |  |   | 0.33    |  |  |   | 0.10    | 
|                            | Trade accounts receivable               |            |         | 120,969  |         |         |         | 149,442    |         |  |   | 149,221 |  |  |   | 155,879 | 
|                            | Inventories                             |            |         | 113,281  |         |         |         | 98,241     |         |  |   | 125,508 |  |  |   | 107,562 | 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Date: January 28, 2003

QUIKSILVER, INC.
(Registrant)

|    |                                                                           |  |     |                                                      
|--- | ------------------------------------------------------------------------- |  | --- | -----------------------------------------------------
|By: | /s/ Robert B. McKnight, Jr.                                               |  | By: | /s/ Steven L. Brink                                  
|    |                                                                           |  |     |                                                      
|    | Robert B. McKnight, Jr.
Chairman of the Board and
Chief Executive Officer |  |     | Steven L. Brink
Chief Financial Officer
and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

|                                                 |  |                                                                                    |  |                 
|------------------------------------------------ |  | ---------------------------------------------------------------------------------- |  | ----------------
|Signatures                                       |  | Title                                                                              |  | Date Sign       
|                                                 |  |                                                                                    |  |                 
|                                                
|/s/ Robert B. McKnight,Jr.Robert B. McKnight,Jr. |  | Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)    |  | January 28, 2003
|                                                
|/s/ Steven L. BrinkSteven L. Brink               |  | Chief Financial Officer
and Treasurer
(Principal Financial and
Accounting Officer) |  | January 28, 2003
|                                                
|/s/ William M. Barnum, Jr.William M. Barnum, Jr. |  | Director                                                                           |  | January 28, 2003
|                                                
|/s/Charles E. CroweCharles E. Crowe              |  | Director                                                                           |  | January 28, 2003
|                                                 |  |                                                                                    | 
|Michael H. Gray                                  |  | Director                                                                           |  |                 
|                                                 |  |                                                                                    | 
|/s/ Harry HodgeHarry Hodge                       |  | Director                                                                           |  | January 28, 2003
|                                                
|/s/ Robert G. KirbyRobert G. Kirby               |  | Director                                                                           |  | January 28, 2003
|                                                
|/s/ Bernard MarietteBernard Mariette             |  | Director                                                                           |  | January 28, 2003
|                                                
|/s/Franck RiboudFranck Riboud                    |  | Director                                                                           |  | January 28, 2003
|                                                
|/s/ Tom RoachTom Roach                           |  | Director                                                                           |  | January 28, 2003

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§ 302 CERTIFICATION

I, Robert B. McKnight, certify that:

1.     I have reviewed this annual report on Form 10-K of Quiksilver, Inc.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a)   designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

(b)   evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and

(c)     presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

(a)     all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b)    any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with

regard to significant deficiencies and material weaknesses.

|                            |  |                                                
|--------------------------- |  | -----------------------------------------------
|Date:    
January 28,  2003 |  | /s/ Robert
B. McKnight, Jr.                    
|                            |  | Robert B. McKnight, Jr.
Chief Executive Officer

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§ 302 CERTIFICATION

I, Steven L. Brink, certify that:

1. I have reviewed this annual report on Form 10-K of Quiksilver, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

(b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the Evaluation Date); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6. The registrants other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

|                          |  |                                                                         
|------------------------- |  | ------------------------------------------------------------------------
|Date:    January 28, 2003 |  | /s/ Steven L. BrinkSteven L. Brink
Chief Financial Officer and Treasurer

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EXHIBIT INDEX

|        |       |             |  |                                                                                                                                                                                                                                                                                          
|------- | ----- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 3.1   |             |  | Certificate of Incorporation as presently in effect
(incorporated by reference to Exhibit 10.2 to the Registrants
Quarterly Report on Form 10-Q for the three months ended July
31, 2002).                                                                                              
|        |       |             | 
|        | 3.2   |             |  | Bylaws as presently in effect.                                                                                                                                                                                                                                                           
|        |       |             | 
|        | 10.1  |             |  | Revolving Credit and Term Loan Agreement dated as of October 6,
2000 (incorporated by reference from the Companys Annual Report
on Form 10-K for the fiscal year ended October 31, 2000).                                                                                               
|        |       |             | 
|        | 10.2  |             |  | First Amendment to Revolving Credit and Term Loan Agreement
dated October 9, 2001 (Incorporated by reference from the
Companys Annual Report on Form 10-K for the fiscal year ended
October 31, 2001).                                                                                  
|        |       |             | 
|        | 10.3  |             |  | Second Amendment to Revolving Credit and Term Loan Agreement and
Consent thereunder dated June 28, 2002 (incorporated by reference
from the Companys Quarterly Report on Form 10-Q for the three
months ended July 31, 2002).                                                           
|        |       |             | 
|        | 10.4  |             |  | Term Loan Agreement dated as of April 25, 2000 (incorporated by
reference to Exhibit 10.2 of the Registrants Quarterly Report on
Form 10-Q for the three months ended April 30, 2000).                                                                                                  
|        |       |             | 
|        | 10.5  |             |  | Second Amendment to term Loan Agreement dated October 12, 2000
(incorporated by reference from the Companys Annual Report on
Form 10-K for the fiscal year ended October 31, 2000).                                                                                                     
|        |       |             | 
|        | 10.6  |             |  | Share Purchase Agreement, dated July 27, 2000, by and among
Quiksilver, Inc., Quiksilver Australia Pty Ltd, Quiksilver
International Pty Ltd and Shareholders of Quiksilver
International Pty Ltd. (incorporated by reference from the
Companys report on Form 8-K dated July 27, 2000).
|        |       |             | 
|        | 10.7  |             |  | Minority Shareholder Purchase Agreement, dated July 27, 2000, by
and among Quiksilver, Inc., Quiksilver Australia Pty Ltd and
Shareholders of Quiksilver International Pty Ltd. (incorporated
by reference from the Companys report on Form 8-K dated July 27,
2000).                   
|        |       |             | 
|        | 10.8  |             |  | Form of Indemnity Agreement between the Registrant and
individual Directors and officers of the Registrant
(incorporated by reference to Exhibit 10.5 of the Registrants
Annual Report on Form 10-K for the fiscal year ended October 31,
1996). (1)                                    
|        |       |             | 
|        | 10.9  |             |  | Quiksilver, Inc. Stock Option Plan dated March 24, 1995
(incorporated by reference to Exhibit 10.1 of the Registrants
Quarterly Report on Form 10-Q for the quarter ended April 30,
1995). (1)                                                                                          
|        |       |             | 
|        | 10.10 |             |  | Quiksilver, Inc. 1995 Nonemployee Directors Stock Option Plan
dated March 24, 1995 (incorporated by reference to Exhibit 10.2
of the Registrants Quarterly Report on Form 10-Q for the three
months ended April 30, 1996). (1)                                                         
|        |       |             | 
|        | 10.11 |             |  | Quiksilver, Inc. 1996 Stock Option Plan dated January 26, 1996
(incorporated by reference to Exhibit 10.1 of the Registrants
Quarterly Report on Form 10-Q for the three months ended April
30, 1996. (1)                                                                               
|        |       |             | 
|        | 10.12 |             |  | Quiksilver, Inc. 2000 Stock Incentive Plan (incorporated by
reference from the Companys Annual Report on Form 10-K for the
fiscal year ended October 31, 2000).                                                                                                                         
|        |       |             | 
|        | 10.13 |             |  | Employment Agreement between Robert B. McKnight, Jr. and
Registrant dated 2002 (1)                                                                                                                                                                                                       
|        |       |             | 
|        | 10.14 |             |  | Employment Agreement between Harry Hodge and Registrant dated
April 1, 1996 (incorporated by reference to Exhibit 10.11 of the
Registrants Annual Report on Form 10-K for the fiscal year ended
October 31, 1996). (1)                                                                  

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|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.15                                             |  | Employment Agreement between Steven L. Brink and Registrant
dated October 24, 1996 (incorporated by reference to Exhibit 10.12 of
the Registrants Annual Report on Form 10-K for the fiscal year ended
October 31, 1996). (1)                                                                                                                                    
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|10.16                                             |  | Services Agreement between Bernard Mariette and Registrant dated
November 1, 1998 (incorporated by reference from the Companys Annual
Report on Form 10-K for the fiscal year ended October 31, 2000).                                                                                                                                                           
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|10.17                                             |  | Employment Agreement between Charles Exon and Registrant dated
August 1, 2000 (incorporated by reference from the Companys
Annual Report on Form 10-K for the fiscal year ended October 31,
2001).                                                                                                                                                               
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|10.18                                             |  | Merger Agreement, dated November 18, 2002, by and among
Quiksilver, Inc., Quiksilver Australia Pty Ltd., QSJ Holdings Pty
Ltd., Ug Manufacturing Co. Pty Ltd., Quiksilver Japan K.K., and
certain shareholders of Ug Manufacturing Co. Pty Ltd. and
Quiksilver Japan K.K. (incorporated by reference from the
Companys report on Form 8-K dated January 2, 2003).
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|10.19                                             |  | Agreement and Plan of Merger and Reorganization by and among
Quiksilver, Inc., QS Retail, Inc., Beach Street, Inc. and John
Thompson and Diana Thompson dated as of September 17, 2002.                                                                                                                                                                           
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|21.1                                              |  | Names and Jurisdictions of Subsidiaries.                                                                                                                                                                                                                                                                                                                          
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|23.1                                              |  | Independent Auditors Consent.                                                                                                                                                                                                                                                                                                                                    
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|99.1                                              |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
to Section 906 of The Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                            
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|99.2                                              |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
to Section 906 of The Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                            
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|(1)    
Management contract or compensatory plan.
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                   

55