VLCM Valcom (MM)

Volcom, Inc. (NASDAQ: VLCM) today announced financial results for the second quarter ended June 30, 2010.

For the 2010 second quarter, total consolidated revenues were $62.5 million, compared with $54.2 million in the second quarter of 2009. 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 $50.8 million, compared with $43.6 million in the prior-year period. Total revenues in the company’s Europe segment were $5.1 million, compared with $5.9 million in the same period in 2009. Total revenues in the company’s Electric segment were $6.6 million, compared with $4.7 million in 2009.

“On a consolidated basis, our business in the second quarter was right in line with our plan,” said Richard Woolcott, Volcom’s chairman and chief executive officer. “The strength of the Volcom and Electric brands is clearly evident, and there is good momentum underway. Our teams are working hard to maximize every opportunity and align the company to continue to gain market share. I am very pleased with Volcom’s current position and believe we are on track to achieve our short and long term goals.”

Consolidated gross profit for the 2010 second quarter was $29.8 million, equal to 47.7% of total revenues, compared with $26.4 million, equal to 48.6% of total revenues, in the second quarter of 2009.

Selling, general and administrative expenses on a consolidated basis were $29.8 million in the 2010 second quarter versus $25.9 million in the comparable period in 2009.

Net income for the 2010 second quarter was $68,000, or breakeven per diluted share, compared with $872,000, or $0.04 per diluted share, in the second quarter of 2009.

At June 30, 2010 the company had cash, cash equivalents and short-term investments totaling $110 million, and no long-term debt.

2010 Third Quarter Financial Outlook

For the 2010 third quarter, the company currently expects total consolidated revenues of approximately $102 million to $105 million and fully diluted earnings per share amounts to range of $0.47 to $0.51.

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, August 5. Listeners should call (800) 642-1687 (domestic) or (706) 645-9291 (international) and use reservation number 82808859.

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 2010 Third Quarter Financial Outlook and Mr. Woolcott’s comments indicating that “there is good momentum underway” and his belief that the company is “on track to achieve our short and long term goals.” 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.

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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,

  2010     2009   2010     2009 Revenues: Product revenues $ 62,148 $ 53,804 $ 138,983 $ 121,748 Licensing revenues   396     412   982     787 Total revenues 62,544 54,216 139,965 122,535 Cost of goods sold   32,712     27,862   68,137     61,799 Gross profit 29,832 26,354 71,828 60,736 Selling, general and administrative expenses   29,765     25,850   60,773     53,884 Operating income 67 504 11,055 6,852 Other income: Interest income, net 98 69 206 101 Foreign currency (loss) gain   (66 )   651   (76 )   769 Total other income   32     720   130     870 Income before provision for income taxes 99 1,224 11,185 7,722 Provision for income taxes   31     352   3,583     2,631 Net income $ 68   $ 872 $ 7,602   $ 5,091   Net income per share: Basic $ 0.00 $ 0.04 $ 0.31 $ 0.21 Diluted $ 0.00 $ 0.04 $ 0.31 $ 0.21 Weighted average shares outstanding: Basic 24,377,509 24,350,071 24,367,242 24,348,972 Diluted 24,457,442 24,361,971 24,417,266 24,359,564   VOLCOM, INC. AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)     June 30, 2010   December 31, 2009 Assets Current assets: Cash and cash equivalents $ 84,783 $ 76,180 Short-term investments 25,000 35,000 Accounts receivable — net of allowances 50,284 53,792 Inventories 34,752 33,250 Prepaid expenses and other current assets 8,251 4,353 Income taxes receivable 2,414 725 Deferred income taxes   8,152     7,700 Total current assets   213,636     211,000 Property and equipment — net 25,601 26,348 Investments in unconsolidated investees 330 330 Deferred income taxes 3,512 3,545 Intangible assets — net 9,436 9,784 Goodwill 1,284 1,291 Other assets   945     735 Total assets $ 254,744   $ 253,033   Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 21,063 $ 22,788 Accrued expenses and other current liabilities 10,044 9,957 Current portion of capital lease obligations   1     50 Total current liabilities   31,108     32,795 Other long-term liabilities 1,218 1,203 Income taxes payable – non-current 66 68 Stockholders’ equity: Common stock 24 24 Additional paid-in capital 93,887 92,192 Retained earnings 131,281 123,679 Accumulated other comprehensive (loss) income   (2,840 )   3,072 Total stockholders’ equity   222,352     218,967 Total liabilities and stockholders’ equity $ 254,744   $ 253,033   VOLCOM, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)  

 

 

Six Months Ended

June 30,

  2010       2009   Cash flows from operating activities: Net income $ 7,602 $ 5,091 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,981 3,496 Provision for doubtful accounts 15 2,527 Excess tax benefits related to exercise of stock options (51 ) — Loss on disposal of property and equipment 55 3 Stock-based compensation 1,117 672 Deferred income taxes (387 ) (318 ) Changes in operating assets and liabilities, net of effects of acquisition: Accounts receivable 1,254 6,638 Inventories (2,417 ) (2,922 ) Prepaid expenses and other current assets (4,117 ) (936 ) Income taxes receivable/payable (1,429 ) (724 ) Other assets (216 ) 68 Accounts payable (523 ) 2,715 Accrued expenses and other current liabilities 442 42 Other long-term liabilities   53     (63 ) Net cash provided by operating activities   4,379     16,289     Cash flows from investing activities: Purchase of property and equipment (3,222 ) (1,717 ) Business acquisitions, net of cash acquired (824 ) Purchase of short-term investments (20,000 ) (44,933 ) Sale of short-term investments 30,000 — Proceeds from sale of property and equipment   18     2   Net cash provided by (used in) investing activities   6,796     (47,472 )   Cash flows from financing activities: Principal payments capital lease obligations (8 ) (37 ) Proceeds from exercise of stock options 528 — Excess tax benefits related to exercise of stock options   51     —   Net cash provided by (used in) financing activities   571     (37 )   Effect of exchange rate changes on cash   (3,143 )   2,851     Net increase (decrease) in cash and cash equivalents 8,603 (28,369 ) Cash and cash equivalents — Beginning of period   76,180     79,613   Cash and cash equivalents — End of period $ 84,783   $ 51,244     VOLCOM, INC. AND SUBSIDIARIES   OPERATING SEGMENT INFORMATION (UNAUDITED) (in thousands)     Three Months Ended

June 30,

  Six Months Ended

June 30,

  2010       2009   2010     2009   Total revenues: United States $ 50,847 $ 43,650 $ 99,026 $ 86,070 Europe 5,122 5,886 28,748 27,564 Electric   6,575     4,680     12,191   8,901   Consolidated $ 62,544   $ 54,216   $ 139,965 $ 122,535     Gross profit: United States $ 23,923 $ 21,249 $ 48,148 $ 41,523 Europe 2,363 2,634 16,640 14,442 Electric   3,546     2,471     7,040   4,771   Consolidated $ 29,832   $ 26,354   $ 71,828 $ 60,736     Operating income (loss): United States $ 2,525 $ 3,313 $ 5,270 $ 4,784 Europe (2,905 ) (2,215 ) 5,072 3,577 Electric   447     (594 )   713   (1,509 ) Consolidated $ 67   $ 504   $ 11,055 $ 6,852