VLCM Valcom (MM)

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

For the 2010 third quarter, total consolidated revenues were $104.7 million, compared with $93.9 million in the third 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 $64.5 million, compared with $56.8 million in the prior-year period. Total revenues in the company’s Europe segment were $28.7 million, compared with $30.2 million in the same period in 2009. Total revenues in the company’s Electric segment were $8.9 million, compared with $6.9 million in 2009. Total revenues in the company’s Australia segment were $2.6 million.

“Our results for the third quarter are in line with our plan and reinforce our strategy to gain market share on a global level,” said Richard Woolcott, Volcom’s chairman and chief executive officer. “During the first nine-months of this year, we have experienced solid revenue growth in our mens and boys categories, and our business with our core retailers remains very healthy. In other activities, we have launched major branding initiatives, acquired our Australian licensee, acquired distribution operations in Spain, and launched our e-commerce business. We are encouraged by the momentum thus far and I am proud of our team’s focus and dedication to building Volcom into a world brand.”

Woolcott also noted that given the company’s continued cash flow from operations, strong balance sheet and no long-term debt, Volcom’s Board of Directors has determined that a special cash dividend was appropriate and supports the company’s commitment to providing shareholder value.

Consolidated gross profit for the 2010 third quarter was $51.9 million, equal to 49.6% of total revenues, compared with $48.5 million, equal to 51.6% of total revenues, in the third quarter of 2009.

Selling, general and administrative expenses on a consolidated basis were $33.9 million in the 2010 third quarter versus $28.8 million in the comparable period in 2009.

Net income for the 2010 third quarter was $13.1 million, or $0.53 per diluted share, compared with $13.3 million, or $0.54 per diluted share, in the third quarter of 2009.

At September 30, 2010 the company had cash, cash equivalents and short-term investments totaling $105 million, and no long-term debt.

Special Dividend

The company also announced that on October 27, the Board of Directors approved a special cash dividend of $1.00 per share payable on each share of the company’s outstanding common stock, including any unvested shares of restricted common stock. The special dividend will be payable on November 19, 2010 to stockholders of record at the close of business on November 8, 2010. In accordance with NASDAQ rules, the company’s common stock will start trading on an ex-dividend basis beginning November 4, 2010. The aggregate amount of payments to be made in connection with the special dividend will be approximately $24.4 million.

2010 Fourth Quarter Financial Outlook

For the 2010 fourth quarter, the company currently expects total consolidated revenues of approximately $76 million to $79 million, and fully diluted earnings per share amounts in the range of $0.04 to $0.07.

Giving effect to the company’s current outlook for the 2010 fourth quarter, Volcom’s full year consolidated revenue expectation is between $321 million and $324 million. This translates to diluted earnings per share for 2010 in the range of $0.89 to $0.92.

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, Friday, November 5. Listeners should call (800) 642-1687 (domestic) or (706) 645-9291 (international) and use reservation number 15128955.

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 Fourth Quarter Financial Outlook are forward-looking statements. 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   Nine Months Ended September 30, September 30, 2010   2009 2010   2009 Revenues: Product revenues $ 104,213 $ 93,356 $ 243,196 $ 215,103 Licensing revenues   445   560   1,426   1,348 Total revenues 104,658 93,916 244,622 216,451 Cost of goods sold   52,797   45,433   120,933   107,232 Gross profit 51,861 48,483 123,689 109,219 Selling, general and administrative expenses   33,884   28,825   94,657   82,710 Operating income 17,977 19,658 29,032 26,509 Other income: Interest income, net 66 127 272 229 Gain on investment in unconsolidated investee 39 — 39 — Foreign currency gain   1,256   222   1,179   991 Total other income   1,361   349   1,490   1,220 Income before provision for income taxes 19,338 20,007 30,522 27,729 Provision for income taxes   6,285   6,750   9,868   9,381 Net income $ 13,053 $ 13,257 $ 20,654 $ 18,348   Net income per share: Basic $ 0.54 $ 0.54 $ 0.85 $ 0.75 Diluted $ 0.53 $ 0.54 $ 0.85 $ 0.75 Weighted average shares outstanding: Basic 24,396,899 24,354,208 24,377,222 24,350,725 Diluted 24,431,095 24,367,464 24,421,970 24,361,034   VOLCOM, INC. AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands)     September 30, 2010   December 31, 2009 Assets Current assets: Cash and cash equivalents $ 104,950 $ 76,180 Short-term investments --- 35,000 Accounts receivable — net of allowances 81,821 53,792 Inventories 37,024 33,250 Prepaid expenses and other current assets 9,404 4,353 Income taxes receivable --- 725 Deferred income taxes   8,212   7,700 Total current assets   241,411   211,000 Property and equipment — net 26,543 26,348 Investment in unconsolidated investee --- 330 Deferred income taxes 3,535 3,545 Intangible assets — net 10,235 9,784 Goodwill 1,341 1,291 Other assets   1,134   735 Total assets $ 284,199 $ 253,033   Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 24,328 $ 22,788 Accrued expenses and other current liabilities 15,168 9,957 Income taxes payable 3,422 --- Current portion of capital lease obligations   17   50 Total current liabilities   42,935   32,795 Long-term capital lease obligations 27 --- Other long-term liabilities 1,257 1,203 Income taxes payable – non-current 23 68 Stockholders’ equity: Common stock 24 24 Additional paid-in capital 94,279 92,192 Retained earnings 144,334 123,679 Accumulated other comprehensive income   1,320   3,072 Total stockholders’ equity   239,957   218,967 Total liabilities and stockholders’ equity $ 284,199 $ 253,033   VOLCOM, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)     Nine Months Ended September 30,   2010       2009   Cash flows from operating activities: Net income $ 20,654 $ 18,348 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,645 5,034 Gain on investment in unconsolidated investee (39 ) — Provision for doubtful accounts 173 2,434 Excess tax benefits related to exercise of stock options (51 ) — Loss on disposal of property and equipment 35 3 Stock-based compensation 1,514 1,246 Deferred income taxes (487 ) (963 ) Changes in operating assets and liabilities, net of effects of acquisition: Accounts receivable (24,562 ) (13,574 ) Inventories 376 5,032 Prepaid expenses and other current assets (4,149 ) (407 ) Income taxes receivable/payable 4,182 6,683 Other assets (351 ) 31 Accounts payable 800 (5,445 ) Accrued expenses and other current liabilities 4,035 1,040 Other long-term liabilities   72     (96 ) Net cash provided by operating activities   6,847     19,366     Cash flows from investing activities: Purchase of property and equipment (4,286 ) (3,406 ) Business acquisitions, net of cash acquired (2,304 ) (897 ) Purchase of short-term investments (20,000 ) (64,933 ) Sale of short-term investments 55,000 24,944 Proceeds from sale of property and equipment   38     6   Net cash provided by (used in) investing activities   28,448     (44,286 )   Cash flows from financing activities: Principal payments capital lease obligations (12 ) (65 ) Proceeds from exercise of stock options 523 — Excess tax benefits related to exercise of stock options   51     —   Net cash provided by (used in) financing activities   562     (65 )   Effect of exchange rate changes on cash   (7,087 )   4,701     Net increase (decrease) in cash and cash equivalents 28,770 (20,284 ) Cash and cash equivalents — Beginning of period   76,180     79,613   Cash and cash equivalents — End of period $ 104,950   $ 59,329     VOLCOM, INC. AND SUBSIDIARIES   OPERATING SEGMENT INFORMATION (UNAUDITED) (in thousands)     Three Months Ended   Nine Months Ended September 30, September 30, 2010   2009 2010     2009   Total revenues: United States $ 64,487 $ 56,769 $ 163,513 $ 142,839 Europe 28,672 30,250 57,420 57,814 Electric 8,911 6,897 21,101 15,798 Australia   2,588   ---   2,588   ---   Consolidated $ 104,658 $ 93,916 $ 244,622 $ 216,451     Gross profit: United States $ 29,261 $ 28,350 $ 77,409 $ 69,874 Europe 15,971 16,016 32,611 30,457 Electric 5,466 4,117 12,506 8,888 Australia   1,163   ---   1,163   ---   Consolidated $ 51,861 $ 48,483 $ 123,689 $ 109,219     Operating income (loss): United States $ 6,354 $ 9,017 $ 11,624 $ 13,801 Europe 9,653 9,730 14,725 13,306 Electric 1,885 911 2,598 (598 ) Australia   85   ---   85   ---   Consolidated $ 17,977 $ 19,658 $ 29,032 $ 26,509