VLCM Valcom (MM)

Volcom, Inc. (NASDAQ:VLCM) today announced financial results for the second quarter ended June 30, 2009.

For the 2009 second quarter, total consolidated revenues were $54.2 million compared with $72.5 million in the second quarter of 2008. 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 $43.6 million compared with $60.2 million in the prior-year period. Total revenues in the company’s Europe segment were $5.9 million compared with $5.9 million in the same period in 2008. Total revenues in the company’s Electric segment were $4.7 million compared with $6.4 million last year.

“Despite the continued macro economic challenges in the second quarter, our focus and drive to maintain the strength of the Volcom brand is resolute and propelled by our high quality and innovative products,” said Richard Woolcott, Volcom’s chairman and chief executive officer. “Our global presence is stronger than ever, and that, coupled with the sound management of our balance sheet, uniquely provides us with the solid foundation to position our company as a leader in the action sports industry.”

Consolidated gross profit for the 2009 second quarter was $26.4 million, equal to 48.6% of total revenues, compared with $34.8 million, or 48.0% of total revenues, in the second quarter of 2008.

Selling, general and administrative expenses on a consolidated basis were $25.9 million in the 2009 second quarter versus $27.9 million in the comparable period in 2008.

Total operating income for the second quarter of 2009 on a consolidated basis was $504,000, compared with operating income of $6.9 million in the same period a year ago.

The company’s consolidated effective tax rate for the 2009 second quarter was 28.8% compared with 33.5% for the second quarter of 2008.

Consolidated net income for the 2009 second quarter was $872,000, or $0.04 per diluted share, compared with $4.8 million, or $0.20 per diluted share in the comparable period in 2008.

At June 30, 2009, the company had approximately $96.2 million in cash, cash equivalents and short-term investments, no significant debt and stockholders’ equity of approximately $199.2 million. Net cash provided by operating activities for the six-month period ended June 30, 2009 was approximately $16.3 million compared with $5.8 million in the prior year period.

2009 Third Quarter Financial Outlook

In putting forth its financial guidance for the 2009 third quarter, the company noted a sluggish global retail environment amid continued economic weakness. As such, the company currently expects total consolidated revenues for the 2009 third quarter of approximately $82 million to $85 million and earnings per diluted share in the range of $0.35 per share to $0.38 per share.

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 will also be available until 11:59 p.m. ET, Thursday, August 6, 2009. Listeners should call (800) 642-1687 (domestic) or (706) 645-9291 (international) and use reservation: 19614002.

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 Third Quarter Financial Outlook. 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, changes in fashion trends and consumer preferences, general economic conditions, the impact of 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

June 30,

Six Months Ended

June 30,

2009   2008 2009   2008 Revenues: Product revenues $ 53,804 $ 71,917 $ 121,748 $ 151,904 Licensing revenues   412   539   787   1,106

Total revenues

54,216 72,456 122,535 153,010 Cost of goods sold   27,862   37,690   61,799   76,069 Gross profit 26,354 34,766 60,736 76,941 Selling, general and administrative expenses   25,850   27,903   53,884   55,680 Operating income 504 6,863 6,852 21,261 Other income: Interest income, net 69 254 101 723 Foreign currency gain   651   180   769   23 Total other income   720   434   870   746 Income before provision for income taxes 1,224 7,297 7,722 22,007 Provision for income taxes   352   2,451   2,631   7,821 Net income $ 872 $ 4,846 $ 5,091 $ 14,186   Net income per share: Basic $ 0.04 $ 0.20 $ 0.21 $ 0.58 Diluted $ 0.04 $ 0.20 $ 0.21 $ 0.58 Weighted average shares outstanding: Basic 24,350,071 24,333,482 24,348,972 24,329,771 Diluted 24,361,971 24,387,605 24,359,564 24,359,323   VOLCOM, INC. AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)     June 30, 2009 December 31, 2008 Assets Current assets: Cash and cash equivalents $ 51,244 $ 79,613 Short-term investments 44,933 — Accounts receivable — net of allowances 48,487 60,914 Inventories 30,160 27,086 Prepaid expenses and other current assets 3,509 2,596 Income taxes receivable 4,037 3,309 Deferred income taxes   5,275   4,947 Total current assets   187,645   178,465 Property and equipment — net 25,852 26,716 Investments in unconsolidated investees 330 330 Deferred income taxes 4,026 4,028 Intangible assets — net 10,575 10,578 Goodwill 629 665 Other assets   762   841 Total assets $ 229,819 $ 221,623   Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 17,875 $ 15,291 Accrued expenses and other current liabilities 12,213 12,027 Current portion of capital lease obligations   62   71 Total current liabilities   30,150   27,389 Long-term capital lease obligations 1 23 Other long-term liabilities 347 414 Income taxes payable – non-current 96 94 Deferred income taxes Stockholders’ equity: Common stock 24 24 Additional paid-in capital 91,103 90,456 Retained earnings 107,026 101,935 Accumulated other comprehensive income   1,072   1,288 Total stockholders’ equity   199,225   193,703 Total liabilities and stockholders’ equity $ 229,819 $ 221,623   VOLCOM, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)  

 

Six Months Ended

June 30,

  2009   2008 Cash flows from operating activities: Net income $ 5,091 $ 14,186 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,496 3,449 Provision for doubtful accounts 2,527 816 Excess tax benefits related to exercise of stock options — (28 ) Loss on disposal of property and equipment 3 27 Stock-based compensation 672 494 Deferred income taxes (318 ) (175 ) Changes in operating assets and liabilities, net of effects of acquisition: Accounts receivable 6,638 1,443 Inventories (2,922 ) (11,614 ) Prepaid expenses and other current assets (936 ) (946 ) Income taxes receivable/payable (724 ) (971 ) Other assets 68 63 Accounts payable 2,715 1,910 Accrued expenses 42 (2,709 ) Other long-term liabilities   (63 )   (150 ) Net cash provided by operating activities   16,289     5,795     Cash flows from investing activities: Purchase of property and equipment (1,717 ) (3,248 ) Business acquisitions, net of cash acquired (824 ) (26,864 ) Purchase of intangible assets — (306 ) Purchase of short-term investments (44,933 ) (286 ) Sale of short-term investments — 286 Purchase of additional shares in cost method investee — (32 ) Proceeds from sale of property and equipment   2     —   Net cash used in investing activities   (47,472 )   (30,450 )   Cash flows from financing activities: Principal payments capital lease obligations (37 ) (77 ) Proceeds from government grants — 473 Proceeds from exercise of stock options — 219 Excess tax benefits related to exercise of stock options   —     28   Net cash (used in) provided by financing activities   (37 )   643     Effect of exchange rate changes on cash   2,851     1,639     Net decrease in cash and cash equivalents (28,369 ) (22,373 ) Cash and cash equivalents — Beginning of period   79,613     92,962   Cash and cash equivalents — End of period $ 51,244   $ 70,589     VOLCOM, INC. AND SUBSIDIARIES   OPERATING SEGMENT INFORMATION (UNAUDITED) (in thousands)     Three Months Ended

June 30,

Six Months Ended

June 30,

2009   2008 2009   2008 Total revenues: United States $ 43,650 $ 60,175 $ 86,070 $ 109,400 Europe 5,886 5,910 27,564 31,063 Electric   4,680     6,371     8,901     12,547 Consolidated $ 54,216   $ 72,456   $ 122,535   $ 153,010   Gross profit: United States $ 21,249 $ 27,747 $ 41,523 $ 51,654 Europe 2,634 3,401 14,442 18,070 Electric   2,471     3,618     4,771     7,217 Consolidated $ 26,354   $ 34,766   $ 60,736   $ 76,941 Operating income: United States $ 3,313 $ 9,199 $ 4,784 $ 14,178 Europe (2,215 ) (2,247 ) 3,577 6,792 Electric   (594 )   (89 )   (1,509 )   291 Consolidated $ 504   $ 6,863   $ 6,852   $ 21,261