On Oct. 26, Volcom (NASDAQ:VLCM), which retails clothing to the skateboard crowd, released third-quarter earnings for the period ended Sept. 30, 2006.

  • Revenues and earnings per share beat analyst estimates.
  • Revenues rose by 19.3%, but net profit dropped on lower margins. Selling, general, and administrative expenses alone increased 43%.
  • Free cash flow declined by 3.6% because of increased capital spending, partially offset by a rise in cash from operations.
  • Management raised high-end guidance for FY 2006 EPS to $1.17 from $1.14.

(Figures in thousands, except per-share data)

Income Statement Highlights

Avg. Est.

Q3 2006

Q3 2005

Change

Sales

$59,595

$61,049

$51,192

19.3%

Net Profit*

--

$10,163

$11,292

(10.0%)

EPS

$0.39

$0.42

$0.47

(10.6%)

Diluted Shares

--

24,235

24,066

0.7%

*Net profit does not include income from discontinued operations.

Get back to basics with a look at the income statement.

Margin Checkup

Q3 2006

Q3 2005

Change*

Gross Margin

50.63%

51.00%

(0.37)

Operating Margin

25.49%

30.16%

(4.67)

Net Margin

16.65%

22.06%

(5.41)

*Expressed in percentage points

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q3 2006

Q3 2005

Change

Cash + ST Invest.

$84,561

$65,678

28.8%

Accounts Rec.

$35,978

$27,781

29.5%

Inventory

$12,706

$11,566

9.9%



Liabilities

Q3 2006

Q3 2005

Change

Accounts Payable

$11,042

$6,906

59.9%

Capital Leases

$125

$202

(38.1%)



Learn the ways of the balance sheet.

Cash Flow Highlights

YTD 2006

YTD 2005

Change

Cash From Ops.

$18,104

$15,653

15.7%

Capital Expenditures

$5,693

$2,775

105.2%

Free Cash Flow

$12,411

$12,878

(3.6%)



Find out why Fools always follow the money.

Related companies:

  • Zumiez (NASDAQ:ZUMZ)
  • Pacific Sunwear (NASDAQ:PSUN)
  • Quicksilver (NYSE:ZQK)
  • Wolverine World Wide (NYSE:WWW)

Related Foolishness:

Volcom and Zumiez are Motley Fool Hidden Gems recommendations. Pacific Sunwear is a Motley Fool Stock Advisor selection.For a fun new way to do research on stocks, check out CAPS, the Fool's new investment community.

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