Volcom Reports 2009 Third Quarter Financial Results

October 29, 2009 4:05 PM EDT

COSTA MESA, Calif.--(BUSINESS WIRE)-- Volcom, Inc. (NASDAQ: VLCM) today announced financial results for the third quarter ended September 30, 2009.

For the 2009 third quarter, total consolidated revenues were $93.9 million compared with $111.7 million in the third 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 $56.8 million compared with $72.8 million in the prior-year period. Total revenues in the company's Europe segment were $30.2 million compared with $31.0 million in the same period in 2008. Total revenues in the company's Electric segment were $6.9 million compared with $7.9 million last year.

"We have worked diligently to capitalize on our company initiatives to create outstanding product and a cohesive brand message aimed toward capturing more market share," said Richard Woolcott, Volcom's chairman and chief executive officer. "We have relied on the strength of the Volcom brand, global marketing programs and sound capital structure to endure the past year and believe we have become a stronger organization. We are ready to compete and maintain our leadership position whatever pace or shape the economic recovery takes."

Consolidated gross profit for the 2009 third quarter was $48.5 million, equal to 51.6% of total revenues, compared with $55.2 million, or 49.4% of total revenues, in the third quarter of 2008.

Selling, general and administrative expenses on a consolidated basis were $28.8 million in the 2009 third quarter versus $30.3 million in the comparable period in 2008.

Total operating income for the third quarter of 2009 on a consolidated basis was $19.7 million, compared with operating income of $24.9 million in the same period a year ago.

The company's consolidated effective tax rate for the 2009 third quarter was 34% compared with 35.5% for the third quarter of 2008.

Consolidated net income for the 2009 third quarter was $13.3 million, or $0.54 per diluted share, compared with $16.3 million, or $0.67 per diluted share in the comparable period in 2008.

At September 30, 2009, the company had approximately $99.3 million in cash, cash equivalents and short-term investments, no significant debt and stockholders' equity of approximately $216.1 million. Net cash provided by operating activities for the nine-month period ended September 30, 2009 was approximately $19.4 million compared with $13.8 million in the prior year period.

2009 Fourth Quarter Financial Outlook

In putting forth its financial guidance for the 2009 fourth quarter, the company noted the myriad complexities in accurately assessing the current state of the global retail environment amid this year's economic weakness. As such, the company currently expects total consolidated revenues for the 2009 fourth quarter of approximately $59 million to $62 million and earnings per diluted share in the range of $0.01 to $0.04 per share.

As a result of the company's current outlook for the 2009 fourth quarter, Volcom is summarizing its 2009 full year consolidated revenue expectation of between $275 million to $278 million. This translates to diluted earnings per share for 2009 in the range of $0.76 to $0.79.

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, November 5, 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 Fourth Quarter Financial Outlook and Mr. Woolcott's comments regarding being "ready to compete and maintain our leadership position whatever pace or shape the economic recovery takes" 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.

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,

                     2009          2008             2009          2008

Revenues:

Product revenues     $ 93,356      $ 111,124        $ 215,103     $ 263,027

Licensing revenues     560           545              1,348         1,651

Total revenues         93,916        111,669          216,451       264,678

Cost of goods sold     45,433        56,458           107,232       132,527

Gross profit           48,483        55,211           109,219       132,151

Selling, general
and administrative     28,825        30,305           82,710        85,985
expenses

Operating income       19,658        24,906           26,509        46,166

Other income:

Interest income,       127           162              229           886
net

Foreign currency       222           (70        )     991           (47        )
gain (loss)

Total other income     349           92               1,220         839

Income before
provision for          20,007        24,998           27,729        47,005
income taxes

Provision for          6,750         8,726            9,381         16,547
income taxes

Net income           $ 13,257      $ 16,272         $ 18,348      $ 30,458

Net income per
share:

Basic                $ 0.54        $ 0.67           $ 0.75        $ 1.25

Diluted              $ 0.54        $ 0.67           $ 0.75        $ 1.25

Weighted average
shares outstanding:

Basic                  24,354,208    24,344,584       24,350,725    24,334,743

Diluted                24,367,464    24,357,539       24,361,034    24,358,762

VOLCOM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

                                          September 30, 2009   December 31, 2008

Assets

Current assets:

Cash and cash equivalents                 $ 59,329             $ 79,613

Short-term investments                      39,989               --

Accounts receivable -- net of               69,752               60,914
allowances

Inventories                                 22,425               27,086

Prepaid expenses and other current          3,021                2,596
assets

Income taxes receivable                     ---                  3,309

Deferred income taxes                       5,908                4,947

Total current assets                        200,424              178,465

Property and equipment -- net               26,525               26,716

Investments in unconsolidated investees     330                  330

Deferred income taxes                       4,024                4,028

Intangible assets -- net                    10,520               10,578

Goodwill                                    668                  665

Other assets                                820                  841

Total assets                              $ 243,311            $ 221,623

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable                          $ 9,835              $ 15,291

Accrued expenses and other current          13,436               12,027
liabilities

Income taxes payable                        3,479                ---

Current portion of capital lease            35                   71
obligations

Total current liabilities                   26,785               27,389

Long-term capital lease obligations         ---                  23

Other long-term liabilities                 327                  414

Income taxes payable - non-current          70                   94

Stockholders' equity:

Common stock                                24                   24

Additional paid-in capital                  91,641               90,456

Retained earnings                           120,283              101,935

Accumulated other comprehensive income      4,181                1,288

Total stockholders' equity                  216,129              193,703

Total liabilities and stockholders'       $ 243,311            $ 221,623
equity

VOLCOM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

                                                       Nine Months Ended

                                                       September 30,

                                                       2009          2008

Cash flows from operating activities:

Net income                                             $ 18,348      $ 30,458

Adjustments to reconcile net income to net cash
provided by operating activities:

Depreciation and amortization                            5,034         5,280

Provision for doubtful accounts                          2,434         1,056

Excess tax benefits related to exercise of stock         --            (34     )
options

Loss on disposal of property and equipment               3             18

Stock-based compensation                                 1,246         739

Deferred income taxes                                    (963    )     (137    )

Changes in operating assets and liabilities, net of
effects of acquisition:

Accounts receivable                                      (13,574 )     (21,375 )

Inventories                                              5,032         (1,054  )

Prepaid expenses and other current assets                (407    )     (534    )

Income taxes receivable/payable                          6,683         3,112

Other assets                                             31            55

Accounts payable                                         (5,445  )     (4,476  )

Accrued expenses                                         1,040         887

Other long-term liabilities                              (96     )     (184    )

Net cash provided by operating activities                19,366        13,811

Cash flows from investing activities:

Purchase of property and equipment                       (3,406  )     (4,498  )

Business acquisitions, net of cash acquired              (897    )     (28,892 )

Purchase of intangible assets                            --            (305    )

Purchase of short-term investments                       (64,933 )     (284    )

Sale of short-term investments                           24,944        284

Purchase of additional shares in cost method             --            (32     )
investee

Proceeds from sale of property and equipment             6             --

Net cash used in investing activities                    (44,286 )     (33,727 )

Cash flows from financing activities:

Principal payments capital lease obligations             (65     )     (108    )

Proceeds from government grants                          --            470

Proceeds from exercise of stock options                  --            273

Excess tax benefits related to exercise of stock         --            34
options

Net cash (used in) provided by financing activities      (65     )     669

Effect of exchange rate changes on cash                  4,701         (391    )

Net decrease in cash and cash equivalents                (20,284 )     (19,638 )

Cash and cash equivalents -- Beginning of period         79,613        92,962

Cash and cash equivalents -- End of period             $ 59,329      $ 73,324

VOLCOM, INC. AND SUBSIDIARIES

OPERATING SEGMENT INFORMATION (UNAUDITED)

(in thousands)

                          Three Months Ended    Nine Months Ended

                          September 30,         September 30,

                          2009      2008        2009         2008

Total revenues:

United States             $ 56,769  $ 72,797    $ 142,839    $ 182,197

Europe                      30,250    31,020      57,814       62,083

Electric                    6,897     7,852       15,798       20,398

Consolidated              $ 93,916  $ 111,669   $ 216,451    $ 264,678

Gross profit:

United States             $ 28,350  $ 33,637    $ 69,874     $ 85,290

Europe                      16,016    17,156      30,457       35,226

Electric                    4,117     4,418       8,888        11,635

Consolidated              $ 48,483  $ 55,211    $ 109,219    $ 132,151

Operating income (loss):

United States             $ 9,017   $ 14,083    $ 13,801     $ 28,261

Europe                      9,730     10,439      13,306       17,230

Electric                    911       384         (598    )    675

Consolidated              $ 19,658  $ 24,906    $ 26,509     $ 46,166

    Source: Volcom, Inc.

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