Volcom, Inc. said total consolidated revenues for the fourth quarter ended Dec. 31, 2008 were $69.6 million compared with $69.1 million in the fourth quarter of 2007. Total revenues in the companys U.S. segment, which includes revenues from the U.S., Canada, Japan and most other international territories outside of Europe, as well as the companys branded retail stores, were $54.9 million compared with $58.9 million in the prior year period. Total revenues in the companys Europe segment were $10.9 million compared with $10.2 million in the same period in 2007. Total revenues in the companys Electric segment, which Volcom acquired in January 2008, were $3.8 million.
“While the ongoing global macroeconomic turmoil affected our results for the 2008 fourth quarter and full year, the underlying strength of Volcom is well intact,” said Richard Woolcott, Volcoms chairman and CEO. “In the face of this economic uncertainty, we are working to maintain a healthy balance between being aggressive when we see opportunities and pulling back where we can, including reducing our cost structure. We have a solid cash position and a strong global brand with a devout following. Further, we believe that our product line-up for 2009 is one of our best ever. We plan to approach the year with discipline, commitment and focus, and we remain confident in our ability to ride this period out and prevail as an even stronger company.”
The company noted that as part of its cost reduction measures it has recently concluded a cutback of approximately 8% of its domestic, in-house workforce, including its Electric subsidiary; announced decreased salaries throughout the company; and, implemented company-wide spending cuts.
Consolidated gross profit for the 2008 fourth quarter was $30.9 million, equal to 44.4% of total revenues, compared with $30.0 million, or 43.4% of total revenues, in the fourth quarter of 2007.
Selling, general and administrative expenses on a consolidated basis were $26.5 million in the 2008 fourth quarter versus $19.3 million in the comparable period in 2007.
The company reported a pre-tax, non-cash impairment charge on goodwill and intangible assets amounting to $16.2 million, or approximately 46 cents per share. This charge was identified in connection with the companys annual impairment test and relates to its 2008 acquisitions of Electric Visual and two Laguna Surf and Sport retail stores, which had impairment charges of $14.8 million and $1.4 million, respectively.
Additionally, the company reported a foreign exchange loss in the 2008 fourth quarter of $1.4 million, or approximately 4 cents per share, related to the strengthened U.S. dollar against the companys Canadian dollar denominated receivables.
Adjusted consolidated net income for the 2008 fourth quarter, which excludes the above-mentioned non-cash impairment charge and the foreign exchange loss on the companys Canadian dollar denominated receivables, was $3.3 million, or 14 cents per diluted share. Including the impairment charge and foreign exchange loss on the companys Canadian dollar denominated receivables, consolidated net loss for the fourth quarter of 2008 was $8.7 million, or 36 cents per share. The company reported net income of $7.1 million, or 29 cents per diluted share, in fourth quarter of 2007.
Management believes that including adjusted net income and adjusted net income per diluted share for the current period provides a useful and relevant measure for comparative year-over-year operating performance. Refer to the attached reconciliation table for details regarding the basis for the adjusted net income per diluted share calculation.
2009 Financial Outlook
In putting forth its financial guidance for the 2009 first quarter, the company noted it continues to operate in a weak economic environment. As such, the company currently expects total consolidated revenues for the 2009 first quarter of approximately $62 million to $65 million, and fully diluted earnings per share are expected to be in the range of 13 cents to 16 cents.
Due to the uncertainty of the global economy and the lack of visibility into future business and market trends compared to that which has historically been available to the company, Volcom is currently suspending its practice of providing annual revenue and earnings guidance until such time when it has better clarity into its business.
| 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, | ||||||||||||
| 2008 | 2007 | 2008 | 2007 | ||||||||||
| Revenues: | |||||||||||||
| Product revenues | $ | 69,082 | $ | 68,352 | $ | 332,110 | $ | 265,193 | |||||
| Licensing revenues | 543 | 717 | 2,194 | 3,420 | |||||||||
| Total revenues | 69,625 | 69,069 | 334,304 | 268,613 | |||||||||
| Cost of goods sold | 38,682 | 39,093 | 171,208 | 138,570 | |||||||||
| Gross profit | 30,943 | 29,976 | 163,096 | 130,043 | |||||||||
| Operating expenses: | |||||||||||||
| Selling, general and administrative expenses | 26,478 | 19,282 | 112,464 | 79,411 | |||||||||
| Asset impairments | 16,230 | – | 16,230 | – | |||||||||
| Total operating expenses | 42,708 | 19,282 | 128,694 | 79,411 | |||||||||
| Operating (loss) income | (11,765 | ) | 10,694 | 34,402 | 50,632 | ||||||||
| Other income: | |||||||||||||
| Interest income, net | 15 | 830 | 901 | 3,973 | |||||||||
| Foreign currency (loss) gain | (1,760 | ) | 123 | (1,807 | ) | 401 | |||||||
| Total other (loss) income | (1,745 | ) | 953 | (906 | ) | 4,374 | |||||||
| (Loss) income before provision for income taxes | (13,510 | ) | 11,647 | 33,496 | 55,006 | ||||||||
| Provision for income taxes | (4,761 | ) | 4,532 | 11.787 | 21,671 | ||||||||
| Net (loss) income | $ | (8,749 | ) | $ | 7,115 | $ | 21,709 | $ | 33,335 | ||||
| Net (loss) income per share: | |||||||||||||
| Basic | $ | (0.36 | ) | $ | 0.29 | $ | 0.89 | $ | 1.37 | ||||
