Volcom, Inc. fourth quarter revenues increased 35.8% to $41.2 million, compared with $30.4 million in the fourth quarter of 2004. Gross profit as a percentage of total revenues increased to 48.8% for the fourth quarter of 2005 from 47.8% in the fourth quarter of 2004.
Total revenues for the full year 2005 increased 41.3% to $160.0 million from $113.2 million in 2004. Gross profit as a percentage of total revenues increased to 50.8% for 2005 from 48.6% in 2004.
“Volcom has become a premier international action sports brand, and our financial results for 2005 are testament to the strength of our company and our ability to remain connected to our core consumer base,” said Richard Woolcott, Volcom's president and chief executive officer. “We intend to continue this momentum by maintaining our focus on running the business and carefully executing our plan for growth in the U.S. and abroad, while carrying on our commitment to staying true to the Volcom heritage.”
Operating income for the fourth quarter of 2005 increased 45.7% to $9.3 million, compared with $6.4 million for the fourth quarter of 2004. Operating margin increased to 22.5% for the fourth quarter of 2005 from 20.9% in the fourth quarter of 2004. Considering the change in tax status described below, the company believes that evaluating operating income for quarter-over-quarter comparisons is more reflective of its performance than are net income comparisons. Operating income for 2005 increased 57.4% to $38.4 million, compared with $24.4 million for 2004. Operating margin increased to 24.0% for 2005, compared with 21.5% in 2004.
Net income for the fourth quarter of 2005, which includes a provision for income taxes using a 27.2% tax rate, increased to $7.2 million, or 29 cents per diluted share. Net income for the full year 2005, which includes a provision for income taxes using a 26.3% tax rate, totaled $29.3 million, or $1.34 per diluted share.
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 fourth quarter of 2005 using a 27.2% tax rate, which reflects the rate necessary to bring the year-to-date provision for income taxes in line with the company's annual tax rate of 26.3%. The tax rates for the fourth quarter and full year of 2005 compare to a 1.5% tax rate for the fourth quarter and full year of 2004, when the company was treated as an S corporation.
VOLCOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except share and per share data)
Three Months Ended Years Ended
December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Revenues:
Product revenues $40,457 $29,740 $156,716 $110,601
Licensing revenues 758 618 3,235 2,574
----------- ----------- ----------- -----------
Total revenues 41,215 30,358 159,951 113,175
Cost of goods sold 21,110 15,862 78,632 58,205
----------- ----------- ----------- -----------
Gross profit 20,105 14,496 81,319 54,970
Selling, general and
administrative
expenses 10,849 8,145 42,939 30,585
----------- ----------- ----------- -----------
Operating income 9,256 6,351 38,380 24,385
Other income (expense):
Interest income
(expense), net 575 (1) 1,036 (6)
Dividend income from
cost method investee -- -- 11 --
Foreign currency gain
(loss) (1) 52 54 --
----------- ----------- ----------- -----------
Total other income
(expense) 574 51 1,101 (6)
----------- ----------- ----------- -----------
Income before provision
for income taxes 9,830 6,402 39,481 24,379
Provision for income
taxes 2,677 103 10,475 374
----------- ----------- ----------- -----------
Net income before
equity in (loss)
earnings of investee 7,153 6,299 29,006 24,005
Equity in (loss)
earnings of investee -- (75) 331 588
----------- ----------- ----------- -----------
Net income $7,153 $6,224 $29,337 $24,593
=========== =========== =========== ===========
Net income per share:
Basic $0.30 $0.32 $1.36 $1.28
Diluted $0.29 $0.32 $1.34 $1.26
Weighted average shares
outstanding:
Basic 24,194,120 19,170,705 21,627,821 19,142,275
Diluted 24,330,546 19,535,603 21,839,626 19,534,945
Pro forma net income
data:
Income before provision
for income taxes, as
reported $9,830 $6,402 $39,481 $24,379
Pro forma provision for
income taxes 4,006 2,578 16,223 10,178
----------- ----------- ----------- -----------
Pro forma net income
before equity in
(loss) earnings of
investee 5,824 3,824 23,258 14,201
Equity in (loss)
earnings of investee -- (75) 331 588
----------- ----------- ----------- -----------
Pro forma net income $5,824 $3,749 $23,589 $14,789
=========== =========== =========== ===========
Pro forma net income
per share:
Basic $0.24 $0.20 $1.09 $0.77
Diluted $0.24 $0.19 $1.08 $0.76
Pro forma weighted
average shares
outstanding:
Basic 24,194,120 19,170,705 21,627,821 19,142,275
Diluted 24,330,546 19,535,603 21,839,626 19,534,945
