Mr. McKnight: Our company was founded in 1976. Myself and Jeff Hakman founded the company making and distributing boardshorts, which are surfing shorts for surfers. We've initially distributed shorts into small specialty stores, surf shops and sports shops up and down the coast of California, the East Coast, and Hawaii. We basically sold the shorts out of the back of my car. We had a very small grassroots beginning, a hand-to-mouth kind of niche business, making boardshorts, for the specialized sport of surfing, with surf stars promoting our company and doing advertising in all those types of magazines of that lifestyle and culture. We grew and grew all the way to being an 18 million company in 1988, based on just boardshorts, T-shirts, and walkshorts. We went public in 1988, through a very boutique public offering with Wedbush, Noble, Cook in Los Angeles. We used the proceeds to buy our trademark from Australia, which was the original founding company, and we used the proceeds for growth, we paid off debt, that kind of thing. And we grew really quickly to 100 million in annualized sales over the next three years through the introduction of back-to- school goods, denim, lots of new product in shirts and jackets and pants. So we were a 100 million company in 1991. A lot of the business was based on neon, which was a fad in those days, and anyway, in 1991 neon came to an end as a look and a fad in the market. Our company regressed quite a bit, all the way back down to 60 million in sales. At that time we had some foresight into the market We bought our sister company in Europe, which added another 30 million in revenues, so we never lost money, even in those critical times. But with that, we learned a lot about coming back to fight another day, being more of a diversified company. So, at that point in 1991, we launched our modern- day diversification strategy so that we could be the very best player in the surf-skate-snow industry, (very niched board-riding sports,) youth orientation, (although, not so much an age thing, more of a mindset thing). We wanted to be in female as well as male. We wanted to be in older as well as younger; but dealing with that active, outdoor, coastal culture, spirit and lifestyle. So at that point we launched a juniors line called Quiksilver 'Roxy' for young girls. Today, Roxy is a 200 million piece of the business. We also bought a swimwear company called Raisins, which had Raisins, Radio Fiji and Leilani as their three brands. Today, that's a 50 million piece of the business in women's swimwear. We also started denim back in those days, 'QSD,' and now we have Quik Jean and Roxy Jean, which is a big piece of what we do in the denim category. We also launched an older guys line called 'Que.' Today, it's Quiksilver Silver Edition, and a nice piece of the business. Also, we bought Quiksilver Europe, which is a 200-million business in Europe. We also started retail in 1991. Today we have over 200 Quiksilver Boardriders Clubs, Roxy Stores, Tony Hawk Stores and Youth Stores altogether. And we did several other moves back in those days. But today, fast forward all the way to 2001, we've sustained a nice compound growth rate per year since those days. We have been a very profitable company doing about 20%-30% growth in sales, and 20%-30% growth in earnings ever since 1991. We've made just about every quarter since then in Wall Street expectations. We are now a very diversified 600 million apparel company that operates globally. In the past year we've made several moves. We started a skate line with Tony Hawk. It's called Hawk, and it's for the young skate market, which we feel is a very nice growth vehicle for the company in the future, dealing with the sport of skating, which is the fastest-growing youth extreme sport right now. We also bought a snowboard company several years ago called Lib Tech, and Gnu, and we've added a whole collection of men's and women's snow wear to go along with the sport of snowboarding, which is also a very fast- growing sport. We started a contemporary women's line in the past 12 months called Alex Goes, which has been a really nice surprise for the company dealing with the women's contemporary market in very active, fresh, innovative fabrics. It's a very functional line which is going into the contemporary women's specialty market. We've also launched a golf line with John Ashworth (as the designer and the brand manager) called Fidra, and is going to Greengrass Shops only. Fidra has been a wonderful surprise, we shipped it in for the spring and summer season this year, sold through to the piece, and now we think we're going to have a great year next year with Fidra. We also got very aggressive with retail, launching some 30 new stores in the past 12 months with Boardriders Club and Roxy. The final thing we did, we came full circle and bought our original trademark company out of Australia, Quiksilver International, so now we're the owners of the trademark worldwide, which is a great royalty income for the company and gives us a lot more of diversification vehicles for international business. It has been an accretive deal from the word go, and it sets us up really nicely for the future.
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