VLCM Valcom (MM)

Volcom, Inc. (NASDAQ:VLCM) today announced that total revenues for the fourth quarter ended December 31, 2007 increased 22.1% to $69.1 million, compared with $56.6 million in the fourth quarter of 2006. Total revenues for the full year of 2007 increased 30.9% to $268.6 million from $205.3 million in 2006. These reported results are in line with the company�s revenue and earnings preview issued on January 16, 2008. �Last year was an important year for Volcom,� said Richard Woolcott, Volcom�s president and chief executive officer. �We achieved solid revenue growth of approximately 31%, driven by great product, diversified distribution and the successful launch of our new European operation. We kicked off 2008 with the acquisition of Electric Visual, one of the hottest eyewear brands in action sports, and we are executing our plan for diversification and growth in 2008 and beyond.� In the 2007 fourth quarter, gross profit as a percentage of total revenues was 43.4%, compared with 47.2% in the fourth quarter of 2006, primarily reflecting greater than expected off-price sales due to a soft retail environment during the quarter. For the year, gross profit as a percentage of total revenues was 48.4%, compared with 49.7% in 2006. Operating income for the fourth quarter of 2007 decreased 8.3% to $10.7 million, compared with $11.7 million for the fourth quarter of 2006. Operating margin for the fourth quarter of 2007 was 15.5%, compared with 20.6% in the fourth quarter of 2006. Operating income for 2007 increased 16.1% to $50.6 million, compared with $43.6 million for 2006. Operating margin was 18.8% for 2007, compared with 21.2% in 2006. Net income for the fourth quarter of 2007 decreased to $7.1�million, or $0.29 per diluted share, compared with $7.6 million, or $0.31 per diluted share for the fourth quarter of 2006. Net income for the full year 2007 increased 16% to $33.3 million, or $1.37 per diluted share. This compares with $28.7 million, or $1.18 per diluted share in 2006. 2008 Financial Outlook Given the company�s current visibility into its business in 2008 amid the present soft retail environment, Volcom expects total consolidated revenue of between $339 million to $344 million. This estimate includes the financial contribution from the acquisition of Electric Visual Evolution in January, as well as a full year�s contribution from the company�s European operation, which was up and running at full capacity in the third quarter of 2007. Earnings per diluted share are expected to be in the range of $1.50 to $1.53. As previously reported, it is anticipated that Electric will be earnings neutral to Volcom in 2008. For the 2008 first quarter, the company anticipates total consolidated revenues of approximately $69 million to $70 million, representing an increase of approximately 36% to 38%. Fully diluted earnings per share are expected to be in the range of $0.20 to $0.21. The company will host a conference call today at approximately 4:30 p.m. EST to discuss its financial results and outlook in further detail. The conference call will be available to interested parties through a live audio Internet broadcast at www.volcom.com. About Volcom, Inc. Volcom is an innovative designer, marketer and distributor of premium quality young men's and women's clothing, accessories and related products. The Volcom brand, symbolized by The Stone, is athlete-driven, creative and forward thinking. Volcom has consistently followed its motto of �youth against establishment,� and the brand is inspired by the energy of youth culture. Volcom branded products are sold throughout the United States and internationally. Volcom�s news announcements and SEC filings are available through the company�s website at www.volcom.com. Safe Harbor Statement Certain statements in this press release and oral statements made from time to time by representatives of the company are forward-looking statements for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995, including statements in connection with or related to any discussion of or reference to our future operations, opportunities or financial performance. In particular, statements regarding our guidance and future financial performance contained under the section entitled 2008 Financial Outlook, and Mr. Woolcott�s statements regarding executing our plan for diversification and growth in 2008 and beyond constitute forward-looking statements. These forward-looking statements are based on management�s current expectations but they involve a number of risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, including, without limitation, further softening of the retail environment, sales of our products by key retailers, including Pacific Sunwear and Zumiez, our ability to successfully shift from a licensee model in Europe to a direct control model, changes in fashion trends and consumer preferences, general economic conditions, the impact of trade safeguards with China, and additional factors which are detailed in our filings with the Securities and Exchange Commission, including the Risk Factors contained in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the �SEC�) and our subsequently filed Quarterly Reports on Form 10-Q, all of which are available at www.sec.gov. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Volcom is under no obligation, and expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. VOLCOM, INC. AND SUBSIDIARIES � CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except share and per share data) � � Three Months Ended December 31, Year Ended December 31, � 2007 � � 2006 � � 2007 � � 2006 Revenues: Product revenues $ 68,352 $ 55,476 $ 265,193 $ 201,186 Licensing revenues � 717 � 1,085 � � 3,420 � 4,072 Total revenues 69,069 56,561 268,613 205,258 Cost of goods sold � 39,093 � 29,885 � � 138,570 � 103,237 Gross profit 29,976 26,676 130,043 102,021 Selling, general and administrative expenses � 19,282 � 15,008 � � 79,411 � 58,417 Operating income 10,694 11,668 50,632 43,604 Other income: Interest income, net 830 1,071 3,973 3,833 Dividend income from cost method investee � � � 3 Foreign currency gain (loss) � 123 � (152 ) � 401 � 233 Total other income � 953 � 919 � � 4,374 � 4,069 Income before provision for income taxes 11,647 12,587 55,006 47,763 Provision for income taxes � 4,532 � 4,956 � � 21,671 � 18,920 Net income $ 7,115 $ 7,631 � $ 33,335 $ 28,753 � Net income per share: Basic $ 0.29 $ 0.31 $ 1.37 $ 1.19 Diluted $ 0.29 $ 0.31 $ 1.37 $ 1.18 Weighted average shares outstanding: Basic 24,325,058 24,244,750 24,302,893 24,227,845 Diluted 24,413,164 24,325,062 24,419,802 24,304,627 VOLCOM, INC. AND SUBSIDIARIES � CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands) � � December 31, 2007 December 31, 2006 Assets Current assets: Cash and cash equivalents $ 92,962 $ 85,414 Accounts receivable � net of allowances 58,270 34,175 Inventories 20,440 13,185 Prepaid expenses and other current assets 1,720 1,383 Income taxes receivable 326 � Deferred income taxes � 2,956 � 2,353 Total current assets � 176,674 � 136,510 Property and equipment � net 24,427 11,527 Investments in unconsolidated investees 298 298 Deferred income taxes 268 660 Intangible assets � net 363 386 Goodwill � 158 Other assets � 464 � 209 Total assets $ 202,494 $ 149,748 � Liabilities and Stockholders� Equity Current liabilities: Accounts payable $ 18,694 $ 8,764 Accrued expenses and other current liabilities 10,561 6,175 Income taxes payable � 424 Current portion of capital lease obligations � 72 � 78 Total current liabilities � 29,327 � 15,441 Long-term capital lease obligations 33 106 Other long-term liabilities 190 204 Income taxes payable � non-current 89 � Stockholders� equity: Common stock 24 24 Additional paid-in capital 89,185 86,773 Retained earnings 80,226 47,019 Accumulated other comprehensive income � 3,420 � 181 Total stockholders� equity � 172,855 � 133,997 Total liabilities and stockholders� equity $ 202,494 $ 149,748 VOLCOM, INC. AND SUBSIDIARIES � CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) � � Year Ended December 31, � � � 2007 � � � 2006 � Cash flows from operating activities: Net income $ 33,335 $ 28,753 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,895 1,423 Provision for doubtful accounts 831 588 Tax benefits related to exercise of stock options (444 ) (303 ) Loss on disposal of property and equipment 24 64 Asset impairment 161 Stock-based compensation 934 812 Deferred income taxes (191 ) (1,983 ) Changes in operating assets and liabilities: Accounts receivable (23,736 ) (13,248 ) Inventories (6,789 ) (2,335 ) Prepaid expenses and other current assets (311 ) 12 Income taxes receivable/payable (339 ) 1,186 Other assets (242 ) (97 ) Accounts payable 9,396 2,912 Accrued expenses 3,791 2,977 Other long-term liabilities � (36 ) � 195 � Net cash provided by operating activities � 19,279 � � 20,956 � � Cash flows from investing activities: Purchase of property and equipment (14,989 ) (9,063 ) Business acquisitions, net of cash acquired � (168 ) Proceeds from sale of property and equipment � 16 � � 2 � Net cash used in investing activities � (14,973 ) � (9,229 ) � Cash flows from financing activities: Principal payments capital lease obligations (78 ) (71 ) Proceeds from government grants 229 210 Proceeds from exercise of stock options 1,028 1,261 Tax benefits related to exercise of stock options � 444 � � 303 � Net cash provided by financing activities � 1,623 � � 1,703 � � Effect of exchange rate changes on cash � 1,619 � � 272 � � Net increase in cash and cash equivalents 7,548 13,702 Cash and cash equivalents � Beginning of period � 85,414 � � 71,712 � Cash and cash equivalents � End of period $ 92,962 � $ 85,414 �