VLCM Valcom (MM)

Volcom, Inc. (NASDAQ: VLCM) today announced financial results for the fourth quarter ended December 31, 2008.

For the 2008 fourth quarter, total consolidated revenues were $69.6 million compared with $69.1 million in the fourth quarter of 2007. Total revenues in the company�s U.S. segment, which includes revenues from the U.S., Canada, Japan and most other international territories outside of Europe, as well as the company�s branded retail stores, were $54.9 million compared with $58.9 million in the prior year period. Total revenues in the company�s Europe segment were $10.9 million compared with $10.2 million in the same period in 2007. Total revenues in the company�s Electric segment, which Volcom acquired in January 2008, were $3.8 million.

�While the ongoing global macroeconomic turmoil affected our results for the 2008 fourth quarter and full year, the underlying strength of Volcom is well intact,� said Richard Woolcott, Volcom�s chairman and chief executive officer. �In the face of this economic uncertainty, we are working to maintain a healthy balance between being aggressive when we see opportunities and pulling back where we can, including reducing our cost structure. We have a solid cash position and a strong global brand with a devout following. Further, we believe that our product line-up for 2009 is one of our best ever. We plan to approach the year with discipline, commitment and focus, and we remain confident in our ability to ride this period out and prevail as an even stronger company.�

The company noted that as part of its cost reduction measures it has recently concluded a cutback of approximately 8% of its domestic, in-house workforce, including its Electric subsidiary; announced decreased salaries throughout the company; and, implemented company-wide spending cuts.

Consolidated gross profit for the 2008 fourth quarter was $30.9 million, equal to 44.4% of total revenues, compared with $30.0 million, or 43.4% of total revenues, in the fourth quarter of 2007.

Selling, general and administrative expenses on a consolidated basis were $26.5 million in the 2008 fourth quarter versus $19.3 million in the comparable period in 2007.

The company reported a pre-tax, non-cash impairment charge on goodwill and intangible assets amounting to $16.2 million, or approximately $0.46 per share. This charge was identified in connection with the company�s annual impairment test and relates to its 2008 acquisitions of Electric Visual and two Laguna Surf and Sport retail stores, which had impairment charges of $14.8 million and $1.4 million, respectively.

Additionally, the company reported a foreign exchange loss in the 2008 fourth quarter of $1.4 million, or approximately $0.04 per share, related to the strengthened U.S. dollar against the company�s Canadian dollar denominated receivables.

Adjusted consolidated net income for the 2008 fourth quarter, which excludes the above-mentioned non-cash impairment charge and the foreign exchange loss on the company�s Canadian dollar denominated receivables, was $3.3 million, or $0.14 per diluted share. Including the impairment charge and foreign exchange loss on the company�s Canadian dollar denominated receivables, consolidated net loss for the fourth quarter of 2008 was $8.7�million, or $0.36 per share. The company reported net income of $7.1 million, or $0.29 per diluted share, in fourth quarter of 2007.

Management believes that including adjusted net income and adjusted net income per diluted share for the current period provides a useful and relevant measure for comparative year-over-year operating performance. Refer to the attached reconciliation table for details regarding the basis for the adjusted net income per diluted share calculation.

2009 Financial Outlook

In putting forth its financial guidance for the 2009 first quarter, the company noted it continues to operate in a weak economic environment. As such, the company currently expects total consolidated revenues for the 2009 first quarter of approximately $62 million to $65 million, and fully diluted earnings per share are expected to be in the range of $0.13 to $0.16.

Due to the uncertainty of the global economy and the lack of visibility into future business and market trends compared to that which has historically been available to the company, Volcom is currently suspending its practice of providing annual revenue and earnings guidance until such time when it has better clarity into its business.

Conference Call Information

The company will host a conference call today at approximately 4:30 p.m. ET 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. A telephone playback of the conference call also will be available through 11:59 p.m. ET, Thursday February 26. Listeners should call (800) 642-1687 (domestic) or (706) 645-9291 (international) and use reservation number 83908166.

About Volcom, Inc.

Volcom is an innovative designer, marketer and distributor of premium quality young mens and womens 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 Volcom�s future operations, opportunities or financial performance. In particular, statements regarding the company�s guidance and future financial performance contained under the section entitled 2009 Financial Outlook and Mr. Woolcott�s statements regarding the company�s underlying strength, product line-up for 2009, and confidence in Volcom�s �ability to ride this period out and prevail as an even stronger company.�

These forward-looking statements are based on management�s current expectations but they involve a number of risks and uncertainties. Volcom�s 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 increasing sourcing costs, and additional factors which are detailed in our filings with the Securities and Exchange Commission, including the Risk Factors contained in the company�s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the �SEC�) and the 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,

� 2008 � � � 2007 � 2008 � � � 2007 Revenues: Product revenues $ 69,082 $ 68,352 $ 332,110 $ 265,193 Licensing revenues � 543 � � 717 � 2,194 � � 3,420 Total revenues 69,625 69,069 334,304 268,613 Cost of goods sold � 38,682 � � 39,093 � 171,208 � � 138,570 Gross profit 30,943 29,976 163,096 130,043 Operating expenses: Selling, general and administrative expenses 26,478 19,282 112,464 79,411 Asset impairments � 16,230 � � � � 16,230 � � � Total operating expenses � 42,708 � � 19,282 � 128,694 � � 79,411 Operating (loss) income (11,765 ) 10,694 34,402 50,632 Other income: Interest income, net 15 830 901 3,973 Foreign currency (loss) gain � (1,760 ) � 123 � (1,807 ) � 401 Total other (loss) income � (1,745 ) � 953 � (906 ) � 4,374 (Loss) income before provision for income taxes (13,510 ) 11,647 33,496 55,006 Provision for income taxes � (4,761 ) � 4,532 � 11.787 � � 21,671 Net (loss) income $ (8,749 ) $ 7,115 $ 21,709 � $ 33,335 � Net (loss) income per share: Basic $ (0.36 ) $ 0.29 $ 0.89 $ 1.37 Diluted $ (0.36 ) $ 0.29 $ 0.89 $ 1.37 Weighted average shares outstanding: Basic 24,347,362 24,325,058 24,337,923 24,302,893 Diluted 24,347,362 24,413,164 24,357,652 24,419,802 VOLCOM, INC. AND SUBSIDIARIES � CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands) � � December 31, 2008 December 31, 2007 Assets Current assets: Cash and cash equivalents $ 79,613 $ 92,962 Accounts receivable � net of allowances 60,914 58,270 Inventories 27,086 20,440 Prepaid expenses and other current assets 2,596 1,720 Income taxes receivable 3,309 326 Deferred income taxes � 4,947 � 2,956 Total current assets � 178,465 � 176,674 Property and equipment � net 26,716 24,427 Investments in unconsolidated investees 330 298 Deferred income taxes 4,028 268 Intangible assets � net 10,578 363 Goodwill 665 � Other assets � 841 � 464 Total assets $ 221,623 $ 202,494 � Liabilities and Stockholders� Equity Current liabilities: Accounts payable $ 15,291 $ 18,694 Accrued expenses and other current liabilities 12,027 10,561 Current portion of capital lease obligations � 71 � 72 Total current liabilities � 27,389 � 29,327 Long-term capital lease obligations 23 33 Other long-term liabilities 414 190 Income taxes payable � non-current 94 89 Stockholders� equity: Common stock 24 24 Additional paid-in capital 90,456 89,185 Retained earnings 101,935 80,226 Accumulated other comprehensive income � 1,288 � 3,420 Total stockholders� equity � 193,703 � 172,855 Total liabilities and stockholders� equity $ 221,623 $ 202,494 VOLCOM, INC. AND SUBSIDIARIES � CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) �

�

Year Ended

December 31,

� � � 2008 � � � 2007 � Cash flows from operating activities: Net income $ 21,709 $ 33,335 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 7,315 2,895 Provision for doubtful accounts 2,332 831 Excess tax benefits related to exercise of stock options (34 ) (444 ) Loss on disposal of property and equipment 1 24 Asset impairment 16,230 161 Stock-based compensation 985 934 Deferred income taxes (6,349 ) (191 ) Changes in operating assets and liabilities, net of effects of acquisition: Accounts receivable (3,114 ) (23,736 ) Inventories (1,844 ) (6,789 ) Prepaid expenses and other current assets (499 ) (311 ) Income taxes receivable/payable (3,021 ) (339 ) Other assets (306 ) (242 ) Accounts payable (8,096 ) 9,396 Accrued expenses (425 ) 3,791 Other long-term liabilities � (212 ) � (36 ) Net cash provided by operating activities � 24,672 � � 19,279 � � Cash flows from investing activities: Purchase of property and equipment (5,915 ) (14,989 ) Business acquisitions, net of cash acquired (32,138 ) � Purchase of intangible assets (589 ) � Purchase of short-term investments (278 ) � Sale of short-term investments 278 � Purchase of additional shares in cost method investee (32 ) � Proceeds from sale of property and equipment � 15 � � 16 � Net cash used in investing activities � (38,659 ) � (14,973 ) � Cash flows from financing activities: Principal payments capital lease obligations (127 ) (78 ) Proceeds from government grants 455 229 Proceeds from exercise of stock options 273 1,028 Excess tax benefits related to exercise of stock options � 34 � � 444 � Net cash provided by financing activities � 635 � � 1,623 � � Effect of exchange rate changes on cash � 3 � � 1,619 � � Net (decrease) increase in cash and cash equivalents (13,349 ) 7,548 Cash and cash equivalents � Beginning of period � 92,962 � � 85,414 � Cash and cash equivalents � End of period $ 79,613 � $ 92,962 � VOLCOM, INC. AND SUBSIDIARIES � OPERATING SEGMENT INFORMATION (UNAUDITED) (in thousands) � � Three Months Ended

December 31,

Year Ended

December 31,

� 2008 � � � 2007 � � 2008 � � � 2007 Total revenues: United States $ 54,912 $ 58,860 $ 237,109 $ 228,494 Europe 10,922 10,209 73,005 40,119 Electric � 3,791 � � � � � 24,190 � � � Consolidated $ 69,625 � $ 69,069 � $ 334,304 � $ 268,613 � Gross profit: United States $ 23,737 $ 26,140 $ 109,028 $ 110,412 Europe 5,355 3,836 40,582 19,631 Electric � 1,851 � � � � � 13,486 � � � Consolidated $ 30,943 � $ 29,976 � $ 163,096 � $ 130,043 Operating (loss) income: United States $ 4,758 $ 11,141 $ 33,019 $ 45,790 Europe 240 (447 ) 17,470 4,842 Electric � (16,763 ) � � � � (16,087 ) � � Consolidated $ (11,765 ) $ 10,694 � $ 34,402 � $ 50,632 VOLCOM, INC. AND SUBSIDIARIES � GAAP TO NON-GAAP RECONCILIATION (UNAUDITED) (in thousands, except share and per share data) � Three Months Ended

December 31, 2008

Year Ended

December 31, 2008

� (Loss) income before provision for income taxes $ (13,510 ) $ 33,496 Asset impairments 16,230 16,230 Foreign currency loss on Canadian receivables � 1,387 � � 1,503 Adjusted income before provision for income taxes 4,107 51,229 Adjusted provision for income taxes � 791 � � 17,339 Adjusted net income $ 3,316 � $ 33,890 � Adjusted net income per share: Basic $ 0.14 $ 1.39 Diluted $ 0.14 $ 1.39 Weighted average shares outstanding: Basic 24,347,362 24,337,923 Diluted 24,354,217 24,357,652 Three Months Ended

December 31, 2008

Year Ended

December 31, 2008

� (Loss) income before provision for income taxes $ (13,510 ) $ 33,496 Asset impairments � 16,230 � � 16,230 Adjusted income before provision for income taxes 2,720 49,726 Adjusted provision for income taxes � 207 � � 16,754 Adjusted net income $ 2,513 � $ 32,972 � Adjusted net income per share: Basic $ 0.10 $ 1.35 Diluted $ 0.10 $ 1.35 Weighted average shares outstanding: Basic 24,347,362 24,337,923 Diluted 24,354,217 24,357,652

This press release contains non-GAAP financial measures, as defined in Regulation G promulgated by the Securities and Exchange Commission, with respect to the three and twelve month periods ended December 31, 2008. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company�s historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the company or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. Pursuant to the requirements of Regulation G, Volcom has provided reconciliations herein of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Specifically, the non-GAAP financial measures disclosed in this press release are �adjusted consolidated net income� and �adjusted consolidated net income per diluted share.� Volcom believes its presentation of historical non-GAAP financial measures provides useful supplementary information to investors regarding its operational performance because it enhances an investor�s overall understanding of the financial performance and prospects for the future of Volcom�s core business activities by providing a basis for the comparison of results of core business activities between current and past periods. The presentation of historical non-GAAP financial measures is not meant to be considered in isolation from or as a substitute for results prepared in accordance with accounting principles generally accepted in the United States.