Volcom Sees Sales and Earning Jump in Q2

Volcom, Inc. posted a total revenue increase of 28.0% to $46.1 million for the second quarter, up from $35.9 million in the same period last year. Gross profit as a percentage of total revenues for the second quarter was 49.8%, compared with 52.1% in the second quarter of 2005.

“Our brand continues to perform well at retail, as is evident in our second quarter results,” said Richard Woolcott, Volcom’s president and chief executive officer. “We remain focused on leveraging this strength while staying true to our core principles of quality, integrity and creativity. In terms of the future, I believe were in a great position and I am excited about the growth and brand development before us.”

Operating income for the second quarter of 2006 increased 26.8% to $9.7 million, compared with $7.6 million for the second quarter of 2005. Operating margin was 21.0% for the second quarter of 2006, compared with 21.3% in the second quarter of 2005.

Net income for the second quarter of 2006 increased 41.0% to $6.5 million, compared with $4.6 million for the second quarter of 2005. Diluted earnings per share increased to 27 cents from 24 cents in the year-ago period This increase in net income reflects the continued strong growth of the company’s revenues and the sustained leveraging of the company’s selling, general and administrative expenses.

2006 Outlook

Based on current visibility regarding the remainder of the fiscal year, the company reiterated its previously issued diluted earnings per share guidance for 2006 of a range of $1.12 to $1.14. The company’s 2006 earnings per share guidance includes non-cash stock-based compensation expense of approximately $0.02 cents per share. The company also reaffirmed its 2006 revenue guidance of an increase of 25% to 27% over 2005, equating to total revenues of a range of $200 to $203 million. For the third quarter of 2006, the company currently expects revenues to increase 16% to 17% over the prior year period. The company also said that it expects third quarter fully diluted earnings per share to be 38 cents to 39 cents.

                  VOLCOM, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
            (in thousands, except share and per share data)


                           Three Months Ended      Six Months Ended
                                June 30,               June 30,
                         ---------------------- ----------------------
                             2006       2005        2006       2005
                         ---------------------- ----------------------
Revenues:
 Product revenues           $45,492    $35,478     $86,005    $66,163
 Licensing revenues             559        375       1,642      1,381
                         ---------------------- ----------------------
  Total revenues             46,051     35,853      87,647     67,544
Cost of goods sold           23,137     17,156      43,211     32,440
                         ---------------------- ----------------------
Gross profit                 22,914     18,697      44,436     35,104
Selling, general and
 administrative expenses     13,224     11,057      28,060     21,420
                         ---------------------- ----------------------
Operating income              9,690      7,640      16,376     13,684
Other income (expense):
 Interest income
  (expense), net                977         --       1,715         (2)
 Dividend income from
  cost method investee            3         11           3         11
 Foreign currency gain
  (loss)                        259        (93)        262       (117)
                         ---------------------- ----------------------
  Total other income
   (expense)                  1,239        (82)      1,980       (108)
                         ---------------------- ----------------------
Income before provision
 for income taxes            10,929      7,558      18,356     13,576
Provision for income
 taxes                        4,397      2,926       7,398      3,015
                         ---------------------- ----------------------
Net income before equity
 in earnings of investee      6,532      4,632      10,958     10,561
Equity in earnings of
 investee                        --         --          --        331
                         ---------------------- ----------------------
Net income                   $6,532     $4,632     $10,958    $10,892
                         ====================== ======================

Net income per share:
 Basic                        $0.27      $0.24       $0.45      $0.57
 Diluted                      $0.27      $0.24       $0.45      $0.56