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.
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