Volcom Reports 58 Percent Increase in Operating Income to $15.4 Million on Record Quarterly Revenues of $51.2 Million.COSTA MESA Costa Mesa (kŏs`tə mā`sə), city (1990 pop. 96,357), Orange co., S Calif., on the Pacific south of Santa Ana; inc. 1953. It is a transportation, residential, and light industrial center. , Calif. -- Volcom | foundation = California (April 1, 1991) | location = Costa Mesa, California, USA | key_people = Richard Woolcott, Founder, CEO Douglas P. Collier, CFO Jason W. Steris, COO Troy C. Eckert, VP Marketing Tom D. , Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :VLCM) today announced that for the third quarter ended September September: see month. 30, 2005, total revenues increased 38% to $51.2 million, compared with $37.2 million in the third quarter of 2004. Gross profit as a percentage of total revenues increased to 51% for the third quarter of 2005 from 48% in the third quarter of 2004. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. for the third quarter of 2005 increased 58% to $15.4 million, compared with $9.8 million for the third quarter of 2004. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased to 30% for the third quarter of 2005 from 26% in the third quarter of 2004 and 21% in the second quarter of 2005. Considering the change in tax status described below, the company believes that evaluating operating income for quarter-over-quarter comparisons is more reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of its performance than are net income comparisons. In connection with the completion of its initial public offering, the company changed its tax status from an S corporation to a C corporation. As a result, the company recorded a provision for income taxes for the third quarter of 2005 using a 29.8% tax rate, which reflects the rate necessary to bring the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. provision for income taxes in line with the company's estimated annual effective tax rate of 27.3%. The 29.8% tax rate for the third quarter of 2005 compares to a 1.5% tax rate for the third quarter of 2004 when the company was treated as an S corporation. Net income for the third quarter of 2005, which includes a provision for income taxes using a 29.8% tax rate, increased to $11.3 million, or $0.47 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. Net income for the third quarter of 2004, which includes a provision for income taxes using a 1.5% tax rate, totaled $10.1 million, or $0.52 per diluted share. Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a Woolcott, Volcom's president and chief executive officer, said, "The third quarter was a great quarter for Volcom. We continued our momentum during the quarter and are pleased to report both strong sales growth and margin." Woolcott added, "We continue to focus our efforts on building our brand worldwide, supporting our core boardsport Boardsports are sports that are played with some sort of board as the primary equipment. Surfing, first mastered in the Pacific islands, was the first board sport. Eventually, it was expanded to land applications, often with the addition of wheels. retailers and delivering quality products on time." 2005 Outlook Based on the company's results for the first three quarters of 2005 and current visibility on the balance of the year, the company has increased its guidance for full year revenue growth. The company now expects 2005 annual revenue growth of 39% to 41%, compared with 2004, up from the previous guidance of 34% to 37% growth announced at the end of the second quarter. The company also expects an annual operating margin of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 24% for 2005. Volcom currently plans to address 2006 guidance when it reports its fourth quarter and full year 2005 financial results. In putting forth this outlook, the company reminds investors of the complexity of accurately assessing future revenue growth given the difficulty in predicting fashion trends and consumer preferences, boardsports popularity and participation rates, general economic conditions, and the impact of trade safeguards with China. The company anticipates the total shares outstanding at December December: see month. 31, 2005, will be approximately 24.4 million. 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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and internationally. Volcom's news announcements and SEC filings are available through the company's website at www.volcom.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Certain statements in this press release and oral statements made from time to time by representatives of the company are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, including statements in connection with or related to any discussion of or reference to our future operations, opportunities or financial performance. In particular, statements regarding our guidance, outlook for future business, financial performance, customer demand, growth and profitability all constitute forward-looking statements. In some cases, you can identify forward-looking statements by terminology The terminology used in the computer and telecommunications field adds tremendous confusion not only for the lay person, but for the technicians themselves. What many do not realize is that terms are made up by anybody and everybody in a nonchalant, casual manner without any regard or such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. These forward-looking statements are based on management's current expectations but they involve a number of risks and uncertainties. Our 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, changes in fashion trends and consumer preferences, boardsports popularity and participation rates, general economic conditions and the impact of trade safeguards with China, and additional factors which are detailed in our filings with the Securities and Exchange Commission, including the Risk Factors contained in our Form 10-Q Form 10-Q See 10-Q. for the quarter ended June June: see month. 30, 2005, available at www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . 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 SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2005 2004 2005 2004
-----------------------------------------------
Revenues:
Product revenues $50,096 $36,285 $116,259 $80,861
Licensing revenues 1,096 928 2,477 1,956
----------- ----------- ----------- -----------
Total revenues 51,192 37,213 118,736 82,817
Cost of goods sold 25,082 19,312 57,522 42,343
----------- ----------- ----------- -----------
Gross profit 26,110 17,901 61,214 40,474
Selling, general and
administrative
expenses 10,669 8,107 32,090 22,440
----------- ----------- ----------- -----------
Operating income 15,441 9,794 29,124 18,034
Other (expense)
income:
Interest expense, net 463 (1) 461 (5)
Dividend income from
cost method investee -- -- 11 --
Foreign currency gain
loss 171 18 54 (52)
----------- ----------- ----------- -----------
Total other (expense)
income 634 17 526 (57)
----------- ----------- ----------- -----------
Income before
provision for income
taxes 16,075 9,811 29,650 17,977
Provision for income
taxes 4,783 139 7,797 271
----------- ----------- ----------- -----------
Net income before
equity in earnings of
investee 11,292 9,672 21,853 17,706
Equity in earnings of
investee -- 431 331 663
----------- ----------- ----------- -----------
Net income $11,292 $10,103 $22,184 $18,369
=========== =========== =========== ===========
Net income per share:
Basic $0.47 $0.53 $1.07 $0.96
Diluted $0.47 $0.52 $1.06 $0.94
Weighted average
shares outstanding:
Basic 23,939,141 19,170,705 20,762,988 19,132,694
Diluted 24,065,665 19,535,137 20,998,798 19,534,364
Pro forma net income
data:
Income before
provision for income
taxes, as reported $16,075 $9,811 $29,650 $17,977
Pro forma provision
for income taxes 6,551 3,998 12,217 7,596
----------- ----------- ----------- -----------
Pro forma net income
before equity in
earnings of investee 9,524 5,813 17,433 10,381
Equity in earnings of
investee -- 431 331 663
----------- ----------- ----------- -----------
Pro forma net income $9,524 $6,244 $17,764 $11,044
=========== =========== =========== ===========
Pro forma net income
per share:
Basic $0.40 $0.33 $0.86 $0.58
Diluted $0.40 $0.32 $0.85 $0.57
Pro forma weighted
average shares
outstanding:
Basic 23,939,141 19,170,705 20,762,988 19,132,694
Diluted 24,065,665 19,535,137 20,998,798 19,534,364
VOLCOM, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data)
September 30, December 31,
2005 2004
---------------- --------------
Assets
Current assets:
Cash and cash equivalents $65,687 $10,359
Accounts receivable -- net of
allowances 27,781 16,680
Inventories 11,566 5,620
Prepaid expenses and other current
assets 942 483
Deferred income taxes 540 9
---------------- --------------
Total current assets 106,516 33,151
---------------- --------------
Property and equipment -- net 3,402 1,063
Investments in unconsolidated
investees 298 1,627
Other assets 98 45
---------------- --------------
Total assets $110,314 $35,886
================ ==============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $6,906 $4,893
Accrued expenses and other current
liabilities 3,026 1,132
Income taxes payable 4,466 --
Current portion of capital lease
obligations 71 85
---------------- --------------
Total current liabilities 14,469 6,110
---------------- --------------
Long-term capital lease obligations 202 256
Deferred income taxes 121 18
Stockholders' equity:
Common stock 24 19
Additional paid-in capital 84,385 1,081
Retained earnings 11,113 28,133
Other comprehensive income -- 269
---------------- --------------
Total stockholders' equity 95,522 29,502
---------------- --------------
Total liabilities and stockholders'
equity $110,314 $35,886
================ ==============
VOLCOM, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Nine Months Ended
June 30,
-------------------------------
2005 2004
---------------- --------------
Cash flows from operating activities:
Net income $22,184 $18,369
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 406 230
Equity in earnings of investee (331) (436)
Provision for doubtful accounts 89 65
Loss on disposal of property and
equipment 30 --
Tax benefits related to exercise of
stock options 2,833 --
Stock-based compensation 145 23
Deferred income taxes (428) 2
Changes in operating assets and
liabilities:
Accounts receivable (11,190) (8,549)
Inventories (5,946) (1,537)
Prepaid expenses and other current
assets (459) (296)
Other assets (53) (9)
Accounts payable 2,013 927
Accrued expenses 1,894 1,222
Income taxes payable 4,466 (15)
---------------- --------------
Net cash provided by operating
activities 15,653 9,996
---------------- --------------
Cash flows from investing activities:
Purchase of property and equipment (2,775) (478)
Proceeds from sale of equity method
investee 1,391 --
Purchase of additional shares in cost
method investee -- (261)
---------------- --------------
Net cash used in investing
activities (1,384) (739)
---------------- --------------
Cash flows from financing activities:
Principal payments capital lease
obligations (68) (43)
Proceeds from initial public offering,
net of offering costs 80,131 --
Proceeds from exercise of stock
options 200 5
Distributions to stockholders (39,204) (11,375)
--------------- --------------
Net cash provided by (used in)
financing activities 41,059 (11,413)
---------------- --------------
Net decrease in cash and cash
equivalents 55,328 (2,156)
Cash and cash equivalents -- Beginning
of period 10,359 5,079
---------------- --------------
Cash and cash equivalents -- End of
period $65,687 $2,923
================ ==============
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