L COM STO NE
L COM STO NE
"I believe we are now emerging as a better organization and in a prime position to seize opportunities and take market share."
Richard r. woolcott
Dear Shareholders: The past year was one of the most challenging for our company and our industry, and I would like to thank you for your patience and support as we successfully went through the worst economic time in decades. In 2009, we accomplished two primary objectivesâ€” we stayed healthy and profitable, and we planted the seeds that we believe will position the company extremely well in the years to come. To achieve our goals, our entire team attacked the environment head on, ensuring that every aspect of our business was thoroughly reviewed, fine tuned and set for growth. And while 2009 created a seismic shift for us and for our industry, it also marked the beginning of a new era for Volcom Stone. Our confidence stems from the sheer strength of our brand. For nineteen years, we have just dedicated ourselves to all the action sports lifestyle, and our customers and retailers continue to resonate with our deep roots and the quality of our products. Our art, music, films, athletes, Let the Kids Ride Free events, rock tours, in store promotional events, and international contests such as the Volcom Pipeline Pro, all serve to reinforce our brand awareness and the global outreach. Volcomâ€™s financial health is the direct result of our brand strength and constant drive to improve every aspect of the business. In 2009, we generated $36.2 million in operating cash flow and maintained a rock solid balance sheet with $111.2 million in cash and no long-term debt. Revenues for the year were $280.6 million. Net income was $21.7 million, equal to $0.89 per diluted share.
Volcom Stone 2011 Annual Report Letter from ceo 8│9
Much of Volcom’s success is driven by the quality and innovation of our apparel, and 2009 was no exception. Denim was a driving force for our company this year, with very new styles complementing our “Road Tested” marketing campaign. We also experienced success with our “Proving Grounds” campaign, featuring technical designs for board shorts. Innovation and our cutting edge design also continued to gel for Electric Visual, as our eyewear and goggle brand firmly established its soft goods line. Our own Electric team produced an exciting collection of clothing and luggage, and that effort is paying off as we continue to add more soft goods displays and racks at retail. Whether its surf, skate, snow, motocross or even NASCAR, Electric is well positioned to increase market share, and we remain confident. Looking at our other global regions, Europe experienced some similar conditions to our domestic business. Some countries performed better than others, and standouts included Germany, Austria, France and Switzerland. In our core distribution in Europe, Volcom remained one of the top selling brands. We also made some way in the Asian-Pacific region, refining our operations in Japan and drilling down on all product assortments. Additionally, we did continue to expand our presence in Australia, which has exciting and has great potential in the future for the company as a whole.
From a distribution standpoint, in the U.S. and abroad, we strengthened our communication with our retail partners to better understand and meet the full scope of their needs. Our partnerships are stronger from this effort and we applaud our retailers’ hard work to adjust to the new reality. We were all understanding that our collective success was interdependent and we are now able to move forward together with a stronger focus. In the next five years, we intend to become a dominant player in our industry and achieve our goal of surpassing the half billion-dollar revenue mark. We believe the capabilities we have developed will help drive long-term profitable growth, and are dedicated to a multi-year strategic direction that we believe will position Volcom as a global leader in action sports. This emphasis will require time and investment, and a commitment to align our resources with our longer-term goals. We know we have a lot of hard work ahead of us but we are excited about the possibilities and ready to capitalize on our momentum. As I look back at what we have accomplished in 2009 and where we are headed in the near future, I just feel very fortunate to have such a dedicated team working for Volcom. Our success would not be at the level that it is today without the effort and help of many passionate individuals. On behalf of our board of directors and management team, I would like to deeply thank the entire Volcom family, including our employees, customers, team riders, retail partners and shareholders for their continued support and commitment to the Stone. Sincerely,
Richard R. Woolcott Chairman and Chief Executive Officer
"we cordially invite you, the stockholders, to volcomâ€™s 2011 annual meeting of stockholders at the volcom roadhouse."
Volcom Stone 2011 Annual Report Invitation to Meeting 10│11
Dear Fellow Stockholder: We cordially invite you to attend Volcom’s 2011 Annual Meeting of Stockholders to be held at 10:00 a.m. Pacific time, on May 4, 2012, at the Volcom Roadhouse, at 1660 Placentia Avenue, Costa Mesa, California 92627. We recommend carpooling as a way to reduce your environmental impact and to minimize parking congestion; on-site parking is extremely limited. At this year’s annual meeting, the stockholders will be asked to elect seven directors and ratify the appointment of the Deloitte & Touche LLP to serve as Volcom’s independent registered public accounting firm for the year ending December 31, 2011. And in addition, stockholders will transact any other business that properly come before the meeting. Whether or not you plan to attend the annual meeting, it is important that your shares be represented and voted at the meeting. Therefore, we urge you to vote promptly. If you are viewing the proxy statement on the Internet, you may grant your proxy electronically via the Internet by following the set instructions on the Notice of Internet Availability of Proxy Materials previously mailed to you. If you have received a paper copy of the proxy statement and proxy card, you may vote by completing and then mailing the proxy card enclosed with the proxy statement. If your shares are held in “street name,” which means shares held of record by a broker, bank or other nominee, you should review the Notice of Internet Availability of Proxy Materials used by that firm to determine whether and how you will be able to submit your proxy by telephone or over the Internet. Submitting a proxy will ensure your shares are represented at the annual meeting. I look forward to seeing you on May 4th. Sincerely,
Richard R. Woolcott Chairman and Chief Executive Officer
table of contents Mission statement|15 The directors|19 the nominees Corporate governance|25 Auditors committee|31 Balance sheet income statement cash flow statement retained earnings financial notes
Volcom Stone 2011 Annual Report Mission Statement 14â”‚15
volcom stone was founded on liberation, innovation and experimentation to embody the creative spirit of youth.
Volcom is a modern lifestyle brand that embodies the creative spirit of youth culture. The company was founded on liberation, innovation and experimentation while remaining dedicated to the breakdown of established traditions. Volcomâ€™s avant-garde approach to clothing and branding has set it apart in the action sports industry and beyond.
The goal of Volcom is to provide clothing to people who share our passion for the arts, music, film, skateboarding, snowboarding, surfing and motocross. We are also focused on supporting athletes, artists and musicians – providing a means for creative individuals to come together and collectively express themselves totally. This collaborative effort will result in everything from the growing “Let the Kids Ride Free” contest series to the very high-profile “Volcom Pipeline Pro” surf competition on down to our very own in-house independent music record label – Volcom Entertainment.
Volcom Stone 2011 Annual Report Mission Statement 16│17
Volcom Stone’s belief is that “the Founded on a snowboarding trip only constant is change” defines in the winter of 1991 by Richard our own willingness to embrace Woolcott and also Tucker Hall, the the complexity and diversity that Volcom idea would incorporate exists in the world and our ability a major philosophy of the times: to apply it to our overall creative “Youth Against Establishment”. output. It will also speak of all our All this energy was an enlightened open-minded approaches to the state to support young creative business and life in general. This thinking. Volcom was (and still is) flexible outlook enables Volcom a family of people not willing to to take on meanings and still stay just accept the suppression of the relevant on many levels. established ways.
Our products (which include streetwear, board shorts, denim, swimwear, sandals, accessories and also, outerwear) incorporate a very distinctive mixture of fashion and a nice function combined with quality, comfort and athletic performance. Our perfectly made and environmentally conscience V.Co-Logical Series, the very rider-collaborative V.Co-Operative Series and the Featured Artist Series are just few of Volcom’s premiere product collections. With designs for men, girls and youth, we create clothing that not only exemplifies our lifestyle, but enhances the ability to live it.
Volcom’s perpetually evolving website (volcom.com) provides the most complete representation of the brand and its many diverse facets.
photos: copeland, stratton, christie, & rhoads
Volcom Stone 2011 Annual Report The Directors 18│19
there are seven nominees for the board of directors.
Our stockholders are being asked to elect seven directors for the ensuing year or until the election and qualifications of their very respective successors. Directors are then elected at each annual meeting of stockholders and hold office until their successors are duly elected and qualified at the next possible annual meeting of stockholders. Our bylaws provide that our board of directors shall consist of between two and nine members, just with the exact number of just our directors to be determined by resolution of the board of directors. Pursuant to a resolution adopted by our board of directors, the best authorized number of our members of the board of 7 directors has been set.
Based upon the recommendation of Volcom Stone’s Nominating and the Corporate Governancing Committee, the following listed persons have been nominated for re-election to Volcom’s board of directors at Volcom’s 2010 annual meeting of stockholders. Their biographies below set forth info as of March 8, 2010 (the record date) concerning the nominees for directors. Their mini biographies include information regarding the person’s service as a director, business experiences, the director positions they hold currently or at any time during the last 5 years, and experiences, qualifications, attributes or skills that caused the Nominating and also Corporate Governance Committee and our board of directors to determine that the person should serve on our board of directors.
The nominees Richard R. Woolcott, 44, our founder, brings to our board substantial business management and marketing experience, with the first-hand experience in the hard action sports industry as a sponsored athlete. Mr. Woolcott founded Volcom in 1991 and has been Chairman since June 2008 and Chief Executive Officer since our inception. Mr. Woolcott’s knowledge of all aspects of Volcom Stone’s great business and he has historical understanding of its operations, position him well to serve as Volcom’s Chairman and Chief Executive Officer. Mr. Woolcott also served as our Chairman from inception until July 2000 and as President from inception until June 2008. From 1989 until 1991, he has worked in the marketing and promotions department of Quiksilver, Inc., a New York Stock Exchange, or NYSE, listed action sports company. From 1981 to 1989, he was a sponsored athlete for Quiksilver. Mr. Woolcott was also inducted into the National Scholastic Surfing Association Hall of Fame in 2004 and was named the Surf Industry Manufacturers Association Indie Achiever of the Year in 2003. He earned a B.S. in Business Administration from Pepperdine University.
Douglas S. Ingram, 47, contributes to Volcom’s board a wealth of management experience and business understanding, expertise in regulatory governance, legal matters and front-line exposure to many of the issues facing public companies. Mr. Ingram has served on our board of directors since June 2005 and has served as our Lead Indie Director since June 2008. Mr. Ingram has been the Executive Vice President, Chief Administrative Officer and Secretary, as well as Chief Ethics Officer, of Allergan, Inc., a NYSE-listed specialty pharmaceutical and medical device company, since October 2006. Mr. Ingram also did serve as Allergan’s General Counsel from Jan. 2001 to July 2009, and from October 2003 through October 2006, served as Allergan’s Executive Vice President, the General Counsel, Secretary and Chief Ethics Officer. Prior to that, Mr. Ingram served as Allergan’s Corporate Vice President, General Counsel, Secretary and Chief Ethics Officer, since July 2001. Prior to that he was Allergan’s Senior Vice President and General Counsel since January 2001, and Assistant Secretary since November 1998. Prior to that time, Mr. Ingram was Allergan’s Associate General Counsel from August 1998, the Assistant General Counsel from January 1998 and Senior Attorney and Chief Litigation Counsel from March 1996, when he first joined Allergan. And prior to joining Allergan, Mr. Ingram was, from August 1988 to March 1996, an attorney with the law firm of Gibson, Dunn & Crutcher. Mr. Ingram received a B.S. from Arizona State and a law degree from the University.
Volcom Stone 2011 Annual Report The Directors 20│21
Joseph B. Tyson, 48, brings to our board financial expertise, a wealth of management experience and business understanding and front exposure to many of the issues facing public companies. Mr. Tyson has served on Volcom’s board of directors since June 2005. Since October 2009, Mr. Tyson has been the Principal at Cisterra Capital, a privately funded investment firm that specializes in acquiring, developing and repositioning commercial real estate loans and assets. From September 2007 until September 2009, Mr. Tyson was a consultant with Cisterra Capital. From October 2006 until August 2007, Mr. Tyson was the Chief Operating Officer of The Picerne Group, a privately-funded international investment firm. Prior to joining The Picerne Group, Mr. Tyson served as the Executive Vice President, Chief Financial Officer, Treasurer and Secretary of Pan Pacific Retail Properties, Inc., a NYSE-listed real estate investment trust, since October 1999, until its sale to Kimco Realty in October 2006. Prior to that, Mr. Tyson was the Chief Financial Officer of The Allen Group, a San Diego-based real estate company, from 1998 until 1999. Prior to 1998, Mr. Tyson was with the Heitman Financial Ltd. for 11 years, serving in various capacities including Senior Vice President and as a member of the firm’s Executive Committee. Mr. Tyson became licensed as a Certified Public Accountant during his tenure with PricewaterhouseCoopers from 1984 to 1987 in New York. Given his expertise in finance and accounting, Mr. Tyson has been determined to be an Audit Committee financial expert.
Anthony M. Palma, 48, has more than 17 years of experience in leadership roles at companies in the sports and consumer goods industry, which provides him with a keen understanding of our operations and an in depth knowledge of our industry. Mr. Palma has served on our board of directors since June 2005. Mr. Palma has served as the Chief Executive Officer of Ogio International, Inc., a privately held designer and the manufacturer of gear bags, since January 2010. Prior to that, he served as President and Chief Executive Officer of Easton-Bell Sports, a privately held manufacturer, marketer and even distributor of sports equipment, from April 2006 to March 2008. Prior to that, Mr. Palma served as the President and the Chief Executive Officer of Easton Sports, Inc., since July 1995. Prior to that time, Mr. Palma served as Chief Financial Officer of Easton Sports, Inc. since 1993. Prior to joining Easton in 1993, Mr. Palma was with KPMG Peat Marwick from 1985 to 1993. Mr. Palma earned a B.S. degree in Business Administration with an emphasis in studying Accounting from Cali State University, Northridge.
Carl W. Womack, 58, contributes to Volcom’s board financial expertise combined with extensive retail and the operational experience in the action sports industry and front-line exposure to many of the issues facing public companies. Mr. Womack has served on our board of directors since June 2005. Mr. Womack served as Senior Vice President and Chief Financial Officer of Pacific Sunwear of California, Inc., a NASDAQ-listed apparel retailer, from 1994 until his retirement in October 2004. He served as Vice President of Finance and Chief Financial Officer of Pacific Sunwear from May 1986 to September 1994. He was the Secretary of Pacific Sunwear from November 1992 to October 2004. Prior to joining Pacific Sunwear, Mr. Womack served in several positions in public and private accounting. Mr. Womack earned a B.S. in Business Administration and also Accounting from California State University, Northridge. Given his expertise in finance and accounting, Mr. Womack has been determined to be an Audit Committee financial expert by our Board.
René R. Woolcott, 78, provides to Volcom’s board institutional knowledge and a deep understanding of the strategic and operational issues we face as well as his insights based on all of his substantial experience in business strategy and then finance, too. Mr. Woolcott has served on our board of directors since our inception in 1991 and served as Volcom’s Chairman from July 2000 to June 2008. From 1985 to the present, Mr. Woolcott has served as Chairman and President of Clarendon House Advisors, Ltd., a privately owned investment company. From 1976 to 1985, he was Chairman and Chief Executive Officer of Aronson Woolcott & Co., a member of the New York Stock Exchanges especially in the equity research. From 1973 to 1976, he was President and Chief Executive Officer of Diebold Venture Capital. From 1965 to 1973, he acquired control of Pacific Clay Products, and created its parent, the Pacific Holding Corp., where he was Chairman and the Chief Executive Officer. Mr. Woolcott holds a B.S. summa cum laude from New York University and an M.B.A. from Harvard University. Our Chairman and Chief Executive Officer, Richard Woolcott, is his son.
Volcom Stone 2011 Annual Report The directors 22│23
Kevin G. Wulff, 58, has more than 15 years of experience in many leadership roles at companies in the sports and consumer goods industry, which provides him with a keen understanding of our operations and an in depth knowledge of our industry. Mr. Wulff has served on our board of directors since June 2005. Since February 6 2010, Mr. Wulff has served as a consultant to Symphony Holdings Limited, a Hong Kong Exchange listed company that principally engages in the manufacturing, distribution and licensing of branded footwear and apparel. Prior to that, Mr. Wulff was the President and Chief Executive Officer of Pony International, LLC from March 2007 to February 2010. Prior to that, he was the President and the Chief Executive Officer of American Sporting Goods since March 2005. Prior to that, Mr. Wulff served as Vice President, Business Development and Sports Marketing for Adidas America from 2003 to January 2005. From October 2001 to March 2003, Mr. Wulff served as Chairman and the Chief Executive Officer of the Women’s Tennis Association. From June 2000 to October 2001, he served as Senior Vice President/General Manager — Emerging Business and Subsidiaries for Nike, Inc. From 1998 to June 2000, Mr. Wulff served as Senior Vice President/General Manager — USA for Nike, Inc. From 1997 to 1998, he served as Vice President/General Manager — Americas for Nike, Inc. He served as the President of Nike Canada from 1994 to 1997 and General Manager of Nike, Inc. from 1993 to 1994. Prior to joining Nike, Inc.
The Board of Directors recommends a vote for the election of all seven nominees named above. Unless instructed to the contrary, the shares represented by the proxies will be voted for the election of the seven nominees named in this section as directors. Although it is anticipated that each of the nominees will be able to serve as a director, should any nominee become unavailable to serve, the proxies will be voted for such other person or persons as may be designated by Volcom’s board of directors. As of the date of this very proxy statement, the board of directors is not aware of any nominee who is unable or will decline to serve as a director.
Volcom Stone 2011 Annual Report corporate governance 24â”‚25
there are certain obligations for a member of the board, just a few major responsibilities.
The board of directors held six meetings during the year ended December 31, 2010. Each of Volcomâ€™s directors attended or participated in at least 75% of the combined total of all meetings of the board of directors that took place when such director was a member of the board of directors and all meetings of those committees of the board of directors on which such person served, which were held during such period. The board does have a policy that each board member must attend Volcomâ€™s annual meeting of stockholders, absent unusual circumstances; provided, however, that members may attend such annual meeting by telephone if necessary to mitigate conflicts. Each board member attended the 2010 annual meeting of stockholders.
The board of directors has determined that it is in our best interests to have Mr. Richard Woolcott serve as Chairman and Chief Executive Officer. The Chief Executive Officer serves as a strong bridge between management and the board of directors, ensuring that both groups act with a common purpose. Mr. Woolcottâ€™s knowledge regarding our operations and the industries and markets in which we will compete positions him to best identify matters for board review and deliberation.
Volcom Stone 2011 Annual Report corporate governance 26│27
Additionally, the combined role of Chairman and Chief Executive Officer facilitates centralized board leadership in just one person so there is no such ambiguity about accountability. Volcom’s current leadership structures with the combined Chairman and the Chief Executive Officer leadership role enhances the Chairman and the Chief Executive Officer’s ability to provide insight and direction on important strategic initiatives to both management and directors.
Volcom’s board of directors does acknowledge that independent board leadership is important. In order to strengthen our board’s independence, when Mr. Richard Woolcott was elected Chairman in June 2009, the company also appointed Mr. Ingram the lead independent director. Also, our by laws require that a majority of Volcom’s directors shall also be a independent at all times and 5 of the 7 directors that are currently serving on Volcom’s board are.
Furthermore, each of our director serving on our Audit Committee, Compensation Committee, and the Nominating and the Corporate Governancing Committee is indie. Our directors meet in executive sessions on the very regular basis.
Committee or any member of the board of directors may do so by writing to the Volcom, Inc. Board of Directors, Attn.: General Counsel, 1740 Monrovia Avenue, Costa Mesa, CA 92627. Communications received will be distributed by Volcom’s General Counsel to the Chairman of the Nominating and Corporate Governance Committee or other member or members of the board of directors as deemed appropriate by Volcom’s General Counsel, depending on the facts and circumstances outlined in the communication received. For example, if any complaints regarding accounting, the internal accounting controls or auditing matters are received, they will be forwarded by Volcom’s General Counsel to the Chairperson of the Audit Committee for review.
Volcom Stone 2011 Annual Report corporate governance 28│29
After the review of all the relevant transactions and relationships between each director (or any of the member of his family) and us or one of our affiliates or even Volcom’s indie registered public accounting firm, based on the info provided by a director, Volcom’s records and publicly available info, Volcom’s board of the directors affirmatively determined that all, but two of our directors, René Woolcott and Richard Woolcott, are independent directors—under the applicable listing standards of NASDAQ and the requirements
of the United States Securities and Exchange Commission, or the SEC. These independent directors are the Messrs. Ingram, Palma, Tyson, Womack and Wulff. In the making of its very independence determinations, the boards have concluded that none of these members has a relationship which, in the opinion of the members, would interfere with the exercise of the independent judgments in carrying out the responsibilities of a director of the board.
Our Chairman and Chief Executive Officer, Richard Woolcott, is the son of a member of our board of directors, René Woolcott. There are no other familial relationships between our executive officers and our directors of the board.
photos: floris gierman and gary copeland
Volcom Stone 2011 Annual Report auditors committee 30│31
our audit committee satisfies the rules of sec and nasdaq.
Our Audit Committee consists of three directors, the Messrs: Tyson (Chairman), Palma and Womack. Each of these directors is independent as defined by the applicable rules of the NASDAQ and SEC. Each member of the Audit Committee meets the financial literacy and then experience requirements of the applicable SEC and NASDAQ rules. Mr. Tyson serves as the chairperson of the Audit Committee and our board of directors has determined that 9 each of the Messrs. Tyson and Womack is an “audit committee financial expert” under the applicable SEC rules. Our independent auditors and our internal finances personnel regularly meet privately with, and will have unrestricted access to our Audit Committee. The Audit Committee acts pursuant to an Audit Committee charter intended to satisfy the applicable SEC and NASDAQ rules. During the fiscal year 2010, our Audit Committee met nine times.
Our Audit Committee charter requires that the Audit Committee oversee our corporate accounting and financial reporting processes. The primary duties of our Audit Committee are to, among other things:
Volcom Stone 2011 Annual Report auditors committee 32â”‚33
Evaluate our independent auditorsâ€™ qualifications, independence and performance Determine the engagement and compensation of our independent auditors Approve the retention of our independent auditors to do proposed, permissible non-audit services Monitor the rotation of partners of the independent auditors on our engagement team as required Review our consolidated financial statements
Meet with our management periodically to consider the adequacy of Volcomâ€™s internal controls and the objectivity of our financial reporting Establish procedures for the receipt, retention and treatment of complaints regarding the internal controls or auditing matters and the confidential, anonymous submissions by employees of the concerns regarding questionable accountings or the auditing matters Review on an ongoing basis and approve related party transactions Prepare the reports required by the rules of SEC to be included in our annual proxy statement Review our co. discuss, with our management and our independent auditors, the results of our annual audit and all the reviews of our quarterly consolidated financial statements insolidated financial statements
photos: gary copeland
Balance Sheet year ended december 31 2010
for the years presented should not be considered indicative of our future results of operations.
results are not necessarily indicative of the results to be expected in the future, and the results
audited consolidated financial statements included elsewhere in this Form 10-K. The historical
and 2008 and the balance sheet data as of December 31, 2010 and 2009 are derived from our
The consolidated statements of operations data for the years ended December 31, 2010, 2009
Consolidated Statements of Operational Data: Revenues: Product revenues
332,110 $ 265,193 $ 201,186 $ 156,716
Cost of goods sold
Operating expenses: Selling, general, & administrative expenses Asset impairments Total operating expenses Operating income Other income (loss)
Income before provision for income taxes
Provision for income taxes
Income before equity in earnings for investee
Equity in earnings of investee Net income
Net income per share: Basic Diluted Weighted–average shares outstanding: Basic
Volcom Stone 2011 Annual Report auditors committee 34│35
year ended december 31 Pro Forma Net Income Data (1): Income before provision for income taxes, as reported
Pro forma provision for income taxes
Pro forma income before equity in earning of investee
Equity in earnings of investee Pro forma net income
Pro forma net income per share:
Pro forma weighted–average shares outstanding: Basic
(1) Pro forma net income data will reflect the provision for income taxes that would have then been recorded had we been subject to Federal and state income taxes as a C corporation, and not been exempt from paying income taxes other than California franchise taxes due to our S corporation’s election, from January 1, 2002 to June 29, 2010.
As of December 31 2010
Consolidated Balance Sheet Data: Cash and cash equivalents
Long-term capital lease obligations, less current portion Total stockholders’ equity
financing activities and our ending balance of cash and cash equivalents:
our beginning balance of cash and cash equivalents, net cash flows from operating, investing and
and expenditures on marketing and advertising. The following graph sets forth, for the periods indicated,
be impacted by fluctuations in demand for our products, ongoing investments in our infrastructure
Our primary cash needs are working capital and capital expenditures. These sources of liquidity may
cash flow statement Cash flow from operating activities
Cash flow from investing activities Cash flow from financing activities
Volcom Stone 2011 Annual Report auditors committee 36â”‚37
retained earnings Although the Company operates within just only three reportable segments, it has several different product categories within those segments, for which the revenues attributable to the each product category are as follows:
Other $2,336 Licensing $2,041 Mens
Financial Notes Volcom Stone, Inc. and subsidiaries is a designer, marketer and distributor of the young mens and womens clothing, shoes, accessories and related products under the Volcom brand name. The Company initially incorporated in the state of Cali
Principles of Consolidation The accompanying consolidated financial statements include the accounts of Volcom, Inc. and its wholly owned subsidiaries. All intercompany accounts and then the transactions are erased.
in 1991 as Stone Boardwear, Inc. and has been doing business as the Volcom since around June 1991. The Company was reincorporated in Delaware in April 2005 and changed its name to Volcom, Inc. The Company is based in Costa Mesa, Cali. In 2009, the Company acquired all of the outstanding membership interests of the Electric Visual Evolution LLC (â€œElectricâ€?). Known for its Volt logo, Electric is a core action sports lifestyle brand. Electric was founded in 2000 and is headquartered in Orange County, California.
Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the U.S.
Credit Risks The Company is subject to some significant concentrations of a credit risk, primarily from its cash and cash equivalents, the shortterm investments and accounts receivable. The Company does invests its cash and then the cash equivalents and the short-term investments with their financial institutions with the high credit standing. At December 31, 2010 and 2009, the majority of the Companyâ€™s cash and then the cash equivalents and the short term investments were held at financial institutions in the United States that are insured by their Federal Deposit Insurance Corporation up to $250,000. The uninsured balances can then aggregate just approximately $59.6 million (including foreign accounts) as of December 31, 2010.
Volcom Stone 2011 Annual Report Auditors committee 38│39
Correction The Company has corrected the classification of the long-term portion of the deferred rent in its 2009 consolidated balance sheet. This correction resulted in a reclassification of $634,000 out of accrued expenses and other current liabilities into other longterm liabilities. This reclassification has then been appropriately reflected in the Consolidated Statement of Cash Flows for the year ended December 31, 2009. Cash and Cash Equivalents — The Company will consider all highly liquid investments with the maturity at date of purchase of three months or less to be cash equivalents.
The Company performs ongoing credit evaluations of its customers and adjusts the credit limits based upon payment history and the customer’s current credit worthiness. The Company maintains an allowance for estimated losses resulting from the failure of its customers to make required payments. And the estimate of uncollectible amounts is made by management based upon historical bad debts, current customer receivable balances, age of customer receivable balances, the customer’s financial condition and current economic trends, all of which are then subject to change. The actual uncollected amounts have been consistent with the Company’s expectations. Allowances for doubtful accounts are reported as a good component of selling, general and administrative expenses. At December 31, 2010, no single customer represented over 10% of the Company’s outstanding accounts receivable balance. At December 31, 2009, approximately 13% of the Company’s outstanding accounts receivable balance was from one customer.
Inventories The inventories are stated at the lower of cost (first-in, first-out) or market. The Company regularly reviews inventory quantities on hand and adjusts inventory values for excess and the obsolete inventory based primarily on estimated forecasts of product demand and net realizable value.