Volcom, Inc. moved closer to the actualization of the company's IPO by releasing its expected list price in an amended S-1 filed with the SEC. Volcom expects to sell its shares in a range of $15 to $17 per share. The company is offering 4,187,500 shares up for sale with an additional 500,00 shares being offered by company shareholders. Volcom expects to net approximately $60.7 million from the IPO.
Volcom, Inc. revenues were $31.7 million for the three months ended March 31, 2005, an increase of $10.5 million, or 49.3%, compared to $21.2 million for the three months ended March 31, 2004. Revenues from the company's top five customers were $13.3 million for the three months ended March 31, 2005, an increase of $6.2 million, or 87.9%, compared to $7.1 million for the three months ended March 31, 2004, with Pacific Sunwear accounting for $4.3 million of the $6.2 million increase.

Product revenues were $30.7 million for the three months ended March 31, 2005, an increase of $10.1 million, or 49.0%, compared to $20.6 million for the three months ended March 31, 2004. Of the $10.1 million increase in product revenues, increases in mens products and girls products accounted for $9.7 million of that increase. Revenues from mens products increased $5.0 million, or 39.2%, to $17.8 million for the three months ended March 31, 2005, compared to $12.8 million for the three months ended March 31, 2004, and revenues from girls products increased $4.7 million, or 70.9%, to $11.4 million for the three months ended March 31, 2005 compared to $6.6 million for the three months ended March 31, 2004.

Licensing revenues increased 57.2% to $1.0 million for the three months ended March 31, 2005 from $0.6 million for the three months ended March 31, 2004. The increase in licensing revenues was a result of increased sales by the company's international licensees, particularly those in Europe and Australia.

Product revenues in the United States were $24.1 million, or 78.6%, of total product revenues for the three months ended March 31, 2005, compared to $16.1 million, or 78.2%, of total product revenues for the three months ended March 31, 2004. Product revenues in the rest of the world consist primarily of product revenues from sales in Canada and Japan and do not include sales by international licensees. Such product revenues in the rest of the world were $6.6 million, or 21.4%, for the three months ended March 31, 2005, compared to $4.5 million, or 21.8%, of total product revenues for the three months ended March 31, 2004.


Gross Profit

Gross profit increased $6.0 million, or 57.7%, to $16.4 million for the three months ended March 31, 2005, compared to $10.4 million for the three months ended March 31, 2004. Gross profit as a percentage of revenues increased 2.8% to 51.8% for the three months ended March 31, 2005 compared to 49.0% for the three months ended March 31, 2004. Gross margin related specifically to product revenues increased 2.8% to 50.2% for the three months ended March 31, 2005 compared to 47.4% for the three months ended March 31, 2004. The gross margin increase was largely driven by the WTO’s elimination of the quota system on the company's imports from China and India effective January 1, 2005, as well as more accurate demand forecasting and better inventory management, which decreased the need to sell products at discount or close-out prices.


Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $2.8 million, or 36.8%, to $10.4 million for the three months ended March 31, 2005 compared to $7.6 million for the three months ended March 31, 2004. The increase in absolute dollars was due primarily to increased payroll and payroll-related expenses of $0.7 million due to expenditures on infrastructure and personnel, increased sales commission expenses of $0.4 million resulting from our increased product revenues, increased accounting and legal costs of $0.4 million associated with preparing to operate as a public company and increased advertising and marketing expenses of $0.6 million. Also included in selling, general and administrative expenses for the three months ended March 31, 2005 are $0.2 million of outside legal fees related to a lawsuit brought against the company by a former customer, an increase of $0.2 million over the $55,000 in outside legal fees recorded for the same lawsuit for the three months ended March 31, 2004. As a percentage of revenues, selling, general and administrative expenses decreased to 32.7% for the three months ended March 31, 2005 from 35.7% for the three months ended March 31, 2004, in part due to leveraging of our fixed costs over increased revenues. The company expects selling, general and administrative expenses to increase in absolute dollars as they hire additional personnel and incur increased costs related to the growth of the business and its operation as a public company.


Operating Income

As a result of the factors above, operating income for the three months ended March 31, 2005 increased $3.2 million to $6.0 million compared to $2.8 million for the three months ended March 31, 2004. Operating income as a percentage of revenue increased to 19.1% for the three months ended March 31, 2005 from 13.3% for the three months ended March 31, 2004.


Other (Expense) Income

Other expense includes net interest expense and foreign currency gains and losses. Interest expense for the three months ended March 31, 2005 was $2,000 and remained consistent with interest expense for the three months ended March 31, 2004. Foreign currency gain (loss) decreased to a $23,000 loss for the three months ended March 31, 2005 compared to an $8,000 gain for the three months ended March 31, 2004 due to fluctuations in the Canadian exchange rate.


Net Income

As a result of the factors above, net income increased $3.2 million, or 98.8%, to $6.3 million for the three months ended March 31, 2005 from $3.1 million for the three months ended March 31, 2004.