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Tiffany Montgomery
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Volcom cuts 8 percent of workforce, reduces salaries

The Volcom booth at Surf Expo
The Volcom booth at Surf Expo
By Tiffany Montgomery
February 19, 2009 1:15 PM

Volcom said today during its Q4 and year-end earnings conference call that it cut 28 positions at its Volcom and Electric brands.

Earlier, in a press release, Volcom said the cuts totaled 8 percent of its domestic workforce and that it reduced salaries as part of a cost reduction initiative.

Fourth quarter sales were essentially flat, while full year sales rose 25 percent. 

More details are below in the press release. I'll also have more to report after listening to the conference call this afternoon. 

Volcom Reports Financial Results for 2008 Fourth Quarter and Full Year

Thursday February 19, 4:05 pm ET

COSTA MESA, Calif.--(BUSINESS WIRE)--Volcom, Inc. (NASDAQ: VLCM - News) today announced financial results for the fourth quarter ended December 31, 2008.

For the 2008 fourth quarter, total consolidated revenues were $69.6 million compared with $69.1 million in the fourth quarter of 2007. Total revenues in the company's U.S. segment, which includes revenues from the U.S., Canada, Japan and most other international territories outside of Europe, as well as the company's branded retail stores, were $54.9 million compared with $58.9 million in the prior year period. Total revenues in the company's Europe segment were $10.9 million compared with $10.2 million in the same period in 2007. Total revenues in the company's 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, Volcom's chairman and chief executive officer. "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 company's 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 company's 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 company's Canadian dollar denominated receivables, was $3.3 million, 14 cents per diluted share. Including the impairment charge and foreign exchange loss on the company's 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.

Conference Call Information

The company will host a conference call today at approximately 4:30 p.m. ET to discuss its financial results and outlook in further detail. The conference call will be available to interested parties through a live audio Internet broadcast at www.volcom.com. A telephone playback of the conference call also will be available through 11:59 p.m. ET, Thursday February 26. Listeners should call (800) 642-1687 (domestic) or (706) 645-9291 (international) and use reservation number 83908166.

About Volcom, Inc.

Volcom is an innovative designer, marketer and distributor of premium quality young mens and womens 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 and internationally. Volcom's news announcements and SEC filings are available through the company's website at www.volcom.com.


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