VLCM Valcom (MM)

Volcom, Inc. (NASDAQ:VLCM) today announced financial results for the fourth quarter and full year ended December 31, 2010. The company also said it has signed a definitive agreement to purchase the assets related to the operation of the 10 existing Volcom outlet stores from a licensee.

For the 2010 fourth quarter, total consolidated revenues increased 22.4% to $78.6 million, compared with $64.2 million in the fourth quarter of 2009. Total revenues in the company’s U.S. segment were $54.3 million, compared with $46.0 million in the prior-year period. Total revenues in the company’s Europe segment were $12.8 million, compared with $12.9 million in the same period in 2009. Total revenues in the company’s Electric segment were $6.4 million, compared with $5.3 million in 2009. Total revenues in the company’s Australia segment were $5.1 million.

“Our results for the fourth quarter and full year were on target and reflect a commendable year for the Volcom and Electric teams,” said Richard Woolcott, Volcom’s chairman and chief executive officer. “We made significant gains throughout 2010 driving revenue growth and capturing market share for our brands on a global basis as we further positioned ourselves to compete in the years ahead. Volcom and Electric have solid growth opportunities that are achievable and centered on our abilities to develop innovative, quality products rooted in our heritage sports and lifestyle. As we attack 2011, I am confident in our plan and very proud of our dedicated and growing team.”

Consolidated gross profit for the 2010 fourth quarter was $35.3 million, equal to 45.0% of total revenues, compared with $31.6 million, equal to 49.2% of total revenues, in the fourth quarter of 2009. The decrease in consolidated gross margin reflected lower gross margin in the U.S. segment, offset somewhat by higher gross margin in the company’s Electric segment.

Selling, general and administrative expenses on a consolidated basis were $34.0 million in the 2010 fourth quarter versus $28.1 million in the comparable period in 2009.

Net income for the 2010 fourth quarter was $1.6 million, or $0.07 per diluted share, compared with $3.4 million, or $0.14 per diluted share, in the fourth quarter of 2009.

At December 31, 2010 the company had cash, cash equivalents and short-term investments totaling $90.3 million, and no long-term debt. Total stockholders’ equity was $217.0 million at year-end.

Volcom to Purchase Outlet Stores

As part of the company’s direct to consumer strategy, Volcom has signed a definitive agreement to terminate the current Volcom outlet license agreement and purchase the assets related to the operation of the 10 existing Volcom outlet stores, which are located in California (4), Nevada (3), Washington (2) and Utah (1). The company anticipates completing the transaction by mid-2011. Terms of the transaction were not disclosed.

2011 First Quarter and Full Year Financial Outlook

For the 2011 first quarter, the company currently expects total consolidated revenue of approximately $83 million to $86 million (representing year-over-year growth of between 7% to 11%), and fully diluted earnings per share amounts in the range of $0.16 to $0.19.

In casting its financial outlook for the full year, Volcom noted it expects total consolidated revenue of approximately $366 million to $371 million (representing year-over-year growth of between 13% to 15%), and fully diluted earnings per share in the range of $1.08 to $1.14.

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, March 4. Listeners should call (800) 642-1687 (domestic) or (706) 645-9291 (international) and use reservation number 39610702.

About Volcom, Inc.

Volcom is an innovative designer, marketer and distributor of premium quality young men's and women's 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 2011 First Quarter and Full Year 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, 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

December 31,

Year Ended

December 31,

  2010     2009   2010     2009 Revenues: Product revenues $ 78,218 $ 63,495 $ 321,414 $ 278,598 Licensing revenues   340   693   1,767   2,041 Total revenues 78,558 64,188 323,181 280,639 Cost of goods sold   43,227   32,612   164,161   139,844 Gross profit 35,331 31,576 159,020 140,795 Selling, general and administrative expenses   34,010   28,137   128,667   110,847 Operating income 1,321 3,439 30,353 29,948 Other income: Interest income, net 42 129 314 358 Gain on investment in unconsolidated investee 59 — 98 — Foreign currency gain   885   543   2,065   1,534 Total other income   986   672   2,477   1,892 Income before provision for income taxes 2,307 4,111 32,830 31,840 Provision for income taxes   672   714   10,540   10,096 Net income $ 1,635 $ 3,397 $ 22,290 $ 21,744   Net income per share: Basic $ 0.07 $ 0.14 $ 0.91 $ 0.89 Diluted $ 0.07 $ 0.14 $ 0.91 $ 0.89 Weighted average shares outstanding: Basic 24,401,368 24,356,362 24,390,705 24,352,146 Diluted 24,475,529 24,369,761 24,442,807 24,363,544  

VOLCOM, INC. AND SUBSIDIARIES

 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

    December 31, 2010 December 31, 2009 Assets Current assets: Cash and cash equivalents $ 80,300 $ 76,180 Short-term investments 9,987 35,000 Accounts receivable — net of allowances 66,542 53,792 Inventories 41,449 33,250 Prepaid expenses and other current assets 5,997 4,353 Income taxes receivable 1,170 725 Deferred income taxes   9,326   7,700 Total current assets   214,771   211,000 Property and equipment — net 26,652 26,348 Investment in unconsolidated investee --- 330 Deferred income taxes 2,651 3,545 Intangible assets — net 10,872 9,784 Goodwill 1,610 1,291 Other assets   1,003   735 Total assets $ 257,559 $ 253,033   Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 22,902 $ 22,788 Accrued expenses and other current liabilities 16,162 9,957 Current portion of capital lease obligations   19   50 Total current liabilities   39,083   32,795 Long-term capital lease obligations 23 --- Other long-term liabilities 1,261 1,203 Income taxes payable – non-current 131 68 Deferred income taxes – non-current 103 --- Stockholders’ equity: Common stock 24 24 Additional paid-in capital 94,733 92,192 Retained earnings 121,555 123,679 Accumulated other comprehensive income   646   3,072 Total stockholders’ equity   216,958   218,967 Total liabilities and stockholders’ equity $ 257,559 $ 253,033  

VOLCOM, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

Year Ended

December 31,

      2010       2009   Cash flows from operating activities: Net income $ 22,290 $ 21,744 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,336 6,360 Gain on investment in unconsolidated investee (98 ) — Provision for doubtful accounts 703 2,490 Excess tax benefits related to exercise of stock options (54 ) — Loss on disposal of property and equipment 26 77 Asset impairments 41 134 Stock-based compensation 1,940 1,795 Deferred income taxes (609 ) (2,277 ) Changes in operating assets and liabilities, net of effects of acquisition: Accounts receivable (9,691 ) 5,241 Inventories (6,414 ) (5,838 ) Prepaid expenses and other current assets (732 ) (1,759 ) Income taxes receivable/payable (312 ) 2,485 Other assets (208 ) 103 Accounts payable (318 ) 7,126 Accrued expenses and other current liabilities 4,857 (1,623 ) Other long-term liabilities   80     151   Net cash provided by operating activities   17,837     36,209     Cash flows from investing activities: Purchase of property and equipment (5,882 ) (4,798 ) Business acquisitions, net of cash acquired (3,322 ) (890 ) Purchase of short-term investments (29,987 ) (74,932 ) Sale of short-term investments 55,000 39,932 Proceeds from sale of property and equipment   125     18   Net cash provided by (used in) investing activities   15,934     (40,670 )   Cash flows from financing activities: Principal payments on capital lease obligations (16 ) (83 ) Payment of dividends to stockholders (24,414 ) — Proceeds from exercise of stock options 548 — Excess tax benefits related to exercise of stock options   54     —   Net cash used in financing activities   (23,828 )   (83 )   Effect of exchange rate changes on cash   (5,823 )   1,111     Net increase (decrease) in cash and cash equivalents 4,120 (3,433 ) Cash and cash equivalents — Beginning of period   76,180     79,613   Cash and cash equivalents — End of period $ 80,300   $ 76,180    

VOLCOM, INC. AND SUBSIDIARIES

 

OPERATING SEGMENT INFORMATION (UNAUDITED)

(in thousands)

  Three Months Ended

December 31,

Year Ended

December 31,

  2010       2009     2010     2009   Total revenues: United States $ 54,297 $ 46,017 $ 217,811 $ 188,856 Europe 12,809 12,872 70,229 70,686 Electric 6,387 5,299 27,488 21,097 Australia   5,065     ---     7,653   ---   Consolidated $ 78,558   $ 64,188   $ 323,181 $ 280,639     Gross profit: United States $ 23,028 $ 22,482 $ 100,437 $ 92,356 Europe 6,437 6,309 39,048 36,766 Electric 3,678 2,785 16,184 11,673 Australia   2,188     ---     3,351   ---   Consolidated $ 35,331   $ 31,576   $ 159,020 $ 140,795   Operating income (loss): United States $ 1,713 $ 4,030 $ 13,337 $ 17,831 Europe (502 ) 223 14,223 13,529 Electric (201 ) (814 ) 2,397 (1,412 ) Australia   311     ---     396   ---   Consolidated $ 1,321   $ 3,439   $ 30,353 $ 29,948