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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission
    file number:
    000-51382
      Volcom, Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware

33-0466919(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)1740 Monrovia Avenue

92627Costa Mesa, California(Address of principal
    executive offices)

(Zip Code)   (949) 646-2175
    (Registrants telephone number, including area code)
    Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon stock, $0.001 par value

The NASDAQ Global Select Market   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting
    company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





TABLE OF
    CONTENTS
  
  PagePART I.Item 1.


Business


1Item 1A.


Risk Factors


13Item 1B.


Unresolved Staff Comments


21Item 2.


Properties


21Item 3.


Legal Proceedings


22Item 4.


Submission of Matters to a Vote of Security
    Holders


22PART II.Item 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


22Item 6.


Selected Financial Data


25Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


27Item 7A.


Quantitative and Qualitative Disclosures about
    Market Risk


41Item 8.


Financial Statements and Supplementary Data


42Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


42Item 9A.


Controls and Procedures


42Item 9B.


Other Information


45PART III.Item 10.


Directors, Executive Officers and Corporate
    Governance


45Item 11.


Executive Compensation


45Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


45Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


45Item 14.


Principal Accounting Fees and Services


45PART IV.Item 15.


Exhibits, Financial Statement Schedules


45EXHIBIT 21.1EXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32   i




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Cautionary
    Note Regarding Forward-Looking Statements
  Form 10-K
  Form 10-K
 PART I  ITEM 1.
    BUSINESS




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www.sec.gov www.volcom.com
  Products
   2




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##### Table of Contents



T-Shirts and Fleece.
  Tops and Jackets.
  Bottoms.
  Denim.
  Boardshorts.
  Outerwear. ®
  Accessories.
  Creedlers.
  Swim.
 3




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##### Table of Contents



V.co-Operative. V.co-Operative,
  Music and Film.
  Electric.
  Product
    Design
        Manufacturing
    and Sourcing
     4




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back-up
    Imports
    and Import Restrictions
       5




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Distribution
    and Sales
          case-by-case
   6




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Licensing
        Licensee

Expiration Date

Extension Termination DateAustralia

June 30, 2012

N/ABrazil

December 31, 2008

December 31, 2013South Africa

December 31, 2011

N/AIndonesia

December 31, 2009

December 31, 2014     Advertising
    and Promotion
   7




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##### Table of Contents



Athlete
    Sponsorship
      Skateboarding
  
    Geoff Rowley  Geoff won the prestigious Thrasher
    Skater of the Year in 2001 and has been on the cover of many
    major skateboard publications. He remains one of the highest
    profile skateboarders at the core level on our team.
    Mark Appleyard  Mark was named the Transworld Street
    Skater of the Year in 2007 and 2003. Mark was also the Thrasher
    Skater of the Year in 2003 and won the Transworld Readers
    Choice Award for 2004.
    Ryan Sheckler  Ryan turned professional in 2003 at
    the age of thirteen. Since turning professional, he has been
    crowned the overall winner of the Dew Action Sports Tour in the
    skateboard park event and the athlete of the year for the entire
    tour in 2007, 2006 and 2005, placed first at the Vans Triple
    Crown in 2005, the Slam City Jam in Vancouver, Canada in 2003,
    the 2003 X Games Park Final, the Gravity Games in 2003 and the
    LG Action Sports Contest in 2004. He also placed second at the
    2005 World Globe Cup. Ryan is featured in the most recent
    version of Tony Hawks video game Project 8. In
    addition, Ryan won the 2006 Champion of Globes Global
    Assault skateboard contest in Australia. Ryan was also selected
    as one of Sport Illustrateds Top 10 Crowd Pleasers of
    2005. Fuel TV crowned Ryan the 2006 Skateboarder and Rider of
    the Year at the Arbys Action Sports Awards. Ryan also
    stars in his own hit TV show on MTV called Life of
    Ryan.
    Rune Glifberg  Rune won a total of seven contests in
    2007 and was quoted by World Cup Skateboardings website as
    the undisputed King of concrete comps. His victories
    include Bondi
    Bowl-A-Rama
    in Australia; Vans Pro-tec Pool Party in Orange County,
    California; Quiksilver Bowlriders in Malmo, Sweden; The
    Copenhagen Pro in Denmark; the 2007 Vert World Championship in
    Germany; Oregons Trifecta; and Volcom Stones Mini
    Ramp Big Gig in Orlando, Florida.  Snowboarding
  
    Terje Haakonsen  Terjes championships include,
    among others, two-time Air & Style Champion,
    three-time U.S. Open Half-Pipe Champion, three-time
    International Snowboard Federation World Half-Pipe Champion,
    six-time Mt. Baker Banked Slalom Champion and five-time European
    Half-Pipe Champion. Recently, Terje set the world record (9.8
    meters) for the biggest backside 360 at the 2007 Arctic
    Challenge. In 2008, Terje released a television show on Fuel TV
    featuring six episodes of his travels around the globe.
    Bjorn Leines  Bjorn placed fourth in Slopestyle at
    the 2005 X Games, won the 2003 Red Bull Heavy Metal, has twice
    been ranked second by Snowboarder magazine for Rider of the
    Year, is a featured rider in Xbox games Amped and Amped 2 and
    has been a Transworld Snowboarding Magazine Readers Choice
    Award nominee.
    Kevin Pearce  Kevin won his first major international
    event during the 2006/2007 season at the Toyota Big Air in
    Sapporo, Japan. Also during the 2006/2007 season, he went on to
    win the Nippon Open Slopestyle, The Artic Challenge quarter-pipe
    contest, and received second place at the Abominable Snow Jam in
    both half-pipe and quarter-pipe. Kevin finished the 2006/2007
    season ranked 4th in the Ticket To Ride (TTR) world
    rankings for the 2006/2007 season. In the 2007/2008 season,
    Kevin won the worlds largest snowboard 8




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event, The Munich Air and Style, landing a cab 1260 in front of
    30,000 fans. Kevin has also landed 3rd on the podium at the
    X-Trial quarter-pipe in Tokyo, Japan, and won the European Open
    half-pipe in Laax, Switzerland. At the 2008 Winter X-Games in
    Aspen, Colorado, Kevin earned 2nd in Big Air, 2nd in
    Slopestyle and 3rd in Super-Pipe. Kevin also won the Air
    and Style quarter-pipe contest in Innsbruck, Austria, as well as
    the 2008 Arctic Challenge in Norway. He is currently ranked
    1st in the world on the TTR World Snowboard Tour.  
    Janna Meyen  Janna is a 2006, 2005 and 2004 X Games
    gold medalist and was crowned the 2004 Womens Rider of the
    Year by Transworld Snowboarding Magazine. Her abilities range
    from big mountain riding to halfpipe, slopestyle and handrails.
    Elena Hight  Elena was the youngest member of the
    2006 U.S. Winter Olympic Snowboarding team and placed sixth
    at the Winter Olympic Halfpipe event. Elena won the Vans Cup
    snowboard halfpipe competition in 2007. She also won the Overall
    Burton Abominable Snow Jam in 2006, placed second at the first
    two Grand Prix of Snowboarding events of the 2006/2007 season
    and placed third at the Winter X Games in 2007. She was voted
    Womens 2006 Rookie of the Year by Transworld Snowboarding
    Magazine and the 2006 Grom of the Year at the Fuel Action Sports
    TV Awards.  Surfing
  
    Bruce Irons  Bruce is beginning his fifth year of the
    Association of Surfing Professionals, or ASP, World Championship
    Tour, or WCT. Bruce won the 2005 Eddie Aikau Big Wave
    Invitational at Waimea Bay in Hawaii and the Mr. Price Pro,
    a six-star WQS event. Bruce has also won the prestigious WCT
    Pipemasters event, held at the Banzai Pipeline on the North
    Shore of Oahu. Bruce was voted ASP Rookie of the Year for the
    2004 WCT season and finished in fifth place in the 2007 Surfer
    Magazine Readers Choice Poll. In 2008, he finished a close
    second in the prestigious Backdoor Shootout in massive surf at
    Pipeline.
    Dean Morrison  Dean is one of the top surfers in the
    world and is a major player on ASPs WCT. Dean finished
    second at the WCT Pipemasters event in December 2007. This
    massive result rocketed him into ninth place on ASPs WCT
    tour in 2007. Dean also received his first cover of Surfer
    Magazine in 2007. He won the WCT event at his home break at
    Snapper Rock, Australia in 2003.
    Ozzie Wright  Ozzie is one of the worlds most
    unique and talented free surfers. The combination of his talent,
    including surfing, art and music, has proven that he is one of
    the most marketable athletes in the sport. Ozzie pushes the
    sport of surfing with his innovative and progressive approach.
    In 2007, he was featured on the cover of Surfing Magazine. Most
    recently, he is at the forefront of pushing some of
    surfings newest tricks, including a kickflip, which is a
    skateboard maneuver that has never been completed on a surfboard.      Volcom
    Branded Events
   9




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Print
    Advertisements
    Music
      Film
    Alive We Ride, The
    Garden, Subjekt: Haakonsen, Magnaplasm, Chichagof The
    Bruce Movie. The Dawn of the Stone
    Age
 10




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Lets Live, Escramble. X-Dance
  Featured
    Artist Series
    Retail
    The
    Volcom Pipehouse
  up-and-coming
  Online
    Marketing
  www.volcom.com sign-up Form 10-K.
 11




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Competition
      
    maintain our reputation as a popular lifestyle brand among the
    skateboarding, snowboarding and surfing community and others who
    associate themselves with the action sports youth lifestyle;
    continue to develop and respond to global fashion and lifestyle
    trends in our target market;
    advance our brand as an authentic,
    anti-establishment brand while continuing to grow as
    a global business;
    design stylish, high-quality products at appropriate prices for
    our target market; and
    continue to convey our lifestyle message to our target market
    worldwide.  Principal
    Customers
    Credit
    and Collection
    Trademarks
   12




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Government
    Regulation
    Management
    Information Systems
    Employees
    ITEM 1A.
    RISK
    FACTORS  Before deciding to purchase, hold or sell our common stock,
    you should carefully consider the risks described below in
    addition to the other cautionary statements and risks described
    elsewhere, and the other information contained, in this Report
    and in our other filings with the SEC, including our subsequent
    reports on
    Forms 10-Q
    and 8-K. The
    risks and uncertainties described below are not the only ones we
    face. Additional risks and uncertainties not presently known to
    us or that we currently deem immaterial may also affect our
    business. If any of these known or unknown risks or
    uncertainties actually occurs with material adverse effects on
    us, our business, financial condition and results of operations
    could be seriously harmed. In that event, the market price for
    our common stock will likely decline, and you may lose all or
    part of your investment.
  One
    retail customer represents a material amount of our revenues,
    and the loss of this retail customer or reduced purchases from
    this retail customer may have a material adverse effect on our
    operating results.
   13




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The
    current uncertainty surrounding the United States economy
    coupled with cyclical economic trends in apparel retailing could
    have a material adverse effect on our results of
    operations.
    If we
    are unable to successfully implement our new distribution center
    and warehouse management system, our financial condition could
    be materially affected.
    If the
    United States continues to impose tariffs and import quota
    restrictions on products manufactured in China and we are unable
    to obtain sufficient product from countries other than China or
    from domestic sources, or if the products we obtain from these
    other countries or domestic sources are of insufficient quality,
    it could materially affect our gross margin and financial
    performance.
   14




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If we
    are required to establish new manufacturing relationships due to
    the termination of current key manufacturing relationships with
    large contractors such as Ningbo Jehson Textiles and Dragon
    Crowd, we would likely experience increased costs, disruptions
    in the manufacture and shipment of our products and a loss of
    revenue.
    If our
    new product initiatives are not accepted by our customers or if
    we are unable to maintain our margins, it could materially
    affect our financial performance.
    If our
    marketing efforts do not effectively maintain and expand our
    brand name recognition, we may not be able to achieve our growth
    strategy.
    If we
    are unable to continue to develop innovative and stylish
    products, demand for our products may decrease and our brand
    image may be harmed.
   15




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Changes
    in the mix of retailers to whom we distribute our products could
    impact our gross margin and brand image, which could have a
    material adverse effect on our results of
    operations.
    If we
    are unable to successfully integrate the operations of Electric,
    our business and earnings may be negatively
    affected.
    As a
    result of our acquisition of Electric, we face greater
    challenges in managing an additional brand and related
    products.
    We may
    be unable to sustain our past growth or manage our future
    growth, which may have a material adverse effect on our future
    operating results.
   16




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Our
    business could be harmed if we fail to maintain proper inventory
    levels.
    Fluctuations
    in foreign currency exchange rates could harm our results of
    operations.
    If we
    are unable to maintain and expand our endorsements by
    professional athletes, our ability to market and sell our
    products may be harmed.
     17




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If we
    fail to secure or protect our intellectual property rights,
    counterfeiters may be able to copy and sell imitations of our
    products and competitors may be able to use our designs, each of
    which could harm our reputation, reduce our revenues and
    increase our costs.
      Our
    current executive officers and management personnel are critical
    to our success, and the loss of these individuals could harm our
    business, brand and image.
    Our
    ability to attract and retain qualified design and sales and
    marketing personnel is critical to our success, and any
    inability to attract and retain such personnel could harm our
    business.
    We do
    not have long-term contracts with any of our retailers, and the
    loss of orders for our products from our retailers may have a
    material adverse effect on our operating results.
   18




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Any
    inability to receive timely deliveries from our manufacturers
    could harm our business.
    Any
    shortage of raw materials could impair our ability to ship
    orders of our products in a cost-efficient manner or could cause
    us to miss the delivery requirements of our customers, which
    could harm our business.
    Our
    business could suffer if any of our or our licensees key
    manufacturers fails to use acceptable labor
    practices.
    We may
    not be able to compete effectively, which could cause our
    revenues and market share to decline.
     19




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We may
    be adversely affected by the financial condition of our
    retailers.
    Our
    revenues and operating income fluctuate on a seasonal basis and
    decreases in sales or margins during our peak seasons could have
    a disproportionate effect on our overall financial condition and
    results of operations.
    We
    face business, political, operational, financial and economic
    risks because a portion of our revenues are from international
    customers, substantially all of our products are sourced
    overseas and our licensees operate outside of the United
    States.
    
    difficulties obtaining domestic and foreign export, import and
    other governmental approvals, permits and licenses, and
    compliance with foreign laws, which could halt, interrupt or
    delay our operations if we cannot obtain such approvals, permits
    and licenses;
    difficulties encountered by our international licensees or us in
    staffing and managing foreign operations or international sales;
    transportation delays and difficulties of managing international
    distribution channels;
    longer payment cycles for, and greater difficulty collecting,
    accounts receivable and royalty payments;
    trade restrictions, higher tariffs, currency fluctuations or the
    imposition of additional regulations relating to import or
    export of our products, especially in China, where a large
    portion of our products are manufactured, which could force us
    to seek alternate manufacturing sources or increase our expenses;
    unexpected changes in regulatory requirements, royalties and
    withholding taxes that restrict the repatriation of earnings and
    effects on our effective income tax rate due to profits
    generated or lost in foreign countries;
    political and economic instability, including wars, terrorism,
    political unrest, boycotts, curtailment of trade and other
    business restrictions; and
    natural disasters.   20




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If the
    ownership of our common stock continues to be highly
    concentrated, it may prevent you and other stockholders from
    influencing significant corporate decisions and may result in
    conflicts of interest that could cause our stock price to
    decline.
    The
    market price of our common stock is highly volatile and may
    result in investors selling shares of our common stock at a
    loss.
    
    actual or anticipated variations in quarterly operating results;
    changes in financial estimates by securities analysts;
    conditions or trends in the fashion and boardsports
    industries; and
    changes in the market valuations of similar companies.  class-action
  ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES      Location

Use

Term

Square FeetCosta Mesa, California

Global headquarters

July 2014


104,000Irvine, California

Distribution center

September 2017


164,000Anglet,
    France(1)

European headquarters

May 2036


34,000     (1)
    
    We own the facilities located on
    the leased land in Anglet, France. 21




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ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES  Market
    Information and Holders
    Price Range ofCommon StockHigh


LowYear Ended December 31, 2007First Quarter (March 31, 2007)

$
37.55


$
28.13Second Quarter (June 30, 2007)

$
51.00


$
34.14Third Quarter (September 30, 2007)

$
50.64


$
33.83Fourth Quarter (December 31, 2007)

$
45.00


$
21.51Year Ended December 31, 2006First Quarter (March 31, 2006)

$
40.71


$
31.80Second Quarter (June 30, 2006)

$
37.78


$
27.13Third Quarter (September 30, 2006)

$
32.16


$
18.52Fourth Quarter (December 31, 2006)

$
33.25


$
23.91       Dividend
    Policy
    Unregistered
    Sale of Equity Securities and Issuer Purchases of Equity
    Securities
   22




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Equity
    Compensation Plans
    Number of SecuritiesRemaining AvailableNumber of Securities





for Future Issuanceto be Issued upon


Weighted Average


under EquityExercise of


Exercise Price of


Compensation PlansOutstanding Options,


Outstanding Options,


(Excluding SecuritiesWarrants and Rights


Warrants and Rights


Reflected in Column (a))Plan Category

(a)


(b)


(c)Equity compensation plans approved by security holders


442,400


$
19.52



2,638,665Equity compensation plans not approved by security holders


N/A



N/A



N/ATotal


442,400


$
19.52



2,638,665     Use of
    Proceeds
  Form S-1 No. 333-124498)
 23




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Performance
    Graph1
    
  Annual
    Percentage Return
  06/29/05


12/31/05


12/31/06


12/31/07Volcom, Inc



100.00




179.00




155.63




115.95NASDAQ Composite



100.00




107.89




120.20




131.33S&P Apparel, Accessories & Luxury Goods



100.00




105.53




136.92




95.22     1
 24




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ITEM 6.
    SELECTED
    FINANCIAL DATA  Form 10-K. Form 10-K.
  Year Ended December 31,2007


2006


2005


2004


2003(In thousands, except share and per share data)Consolidated Statements of Operations Data:Revenues:Product revenues

$
265,193


$
201,186


$
156,716


$
110,601


$
74,389Licensing revenues


3,420



4,072



3,235



2,574



1,877Total revenues


268,613



205,258



159,951



113,175



76,266Cost of goods sold


138,570



103,237



78,632



58,205



39,384Gross profit


130,043



102,021



81,319



54,970



36,882Selling, general and administrative expenses


79,411



58,417



42,939



30,585



22,919Operating income


50,632



43,604



38,380



24,385



13,963Other income (expense)


4,374



4,069



1,101



(6
)


106Income before provision for income taxes


55,006



47,673



39,481



24,379



14,069Provision for income taxes(1)


21,671



18,920



10,475



374



214Income before equity in earnings of investee


33,335



28,753



29,006



24,005



13,855Equity in earnings of investee










331



588



407Net income

$
33,335


$
28,753


$
29,337


$
24,593


$
14,262Net income per share:Basic

$
1.37


$
1.19


$
1.36


$
1.28


$
0.75Diluted

$
1.37


$
1.18


$
1.34


$
1.26


$
0.73Weighted average shares outstanding:Basic


24,302,893



24,227,845



21,627,821



19,142,275



19,054,109Diluted


24,419,802



24,304,627



21,839,626



19,534,945



19,530,873     (1)
    
    For Federal and state income tax
    purposes we had elected to be treated as an S corporation from
    January 1, 2002 until our initial public offering on
    June 29, 2005, and during that period we were not subject
    to Federal or state income taxes, other than California
    franchise taxes of 1.5% on our corporate income. For all periods
    from and after June 29, 2005, we have become subject to the
    Federal and state income taxes applicable to a C corporation. As
    a result, our provision for income taxes, net income and net
    income per share data for 2004, and 2003 are not comparable to
    our provision for income taxes, net income and net income per
    share data for 2007, 2006 and 2005.  25




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Year Ended December 31,2005


2004


2003(In thousands, except per share data)Pro Forma Net Income Data(1):Income before provision for income taxes, as reported

$
39,481


$
24,379


$
14,069Pro forma provision for income taxes


16,223



10,178



5,909Pro forma income before equity in earnings of investee


23,258



14,201



8,160Equity in earnings of investee


331



588



407Pro forma net income

$
23,589


$
14,789


$
8,567Pro forma net income per share:Basic

$
1.09


$
0.77Diluted

$
1.08


$
0.76Pro forma weighted average shares outstanding:Basic


21,627,821



19,142,275Diluted


21,839,626



19,534,945   As of December 31,2007


2006


2005


2004


2003(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents

$
92,962


$
85,414


$
71,712


$
10,359


$
5,079Working capital


147,347



121,069



98,470



27,041



16,595Total assets


202,494



149,748



111,381



35,886



22,601Long-term capital lease obligations, less current portion


33



106



183



256



160Total stockholders equity


172,855



133,997



102,680



29,502



18,044     (1)
    
    Pro forma net income data reflects
    the provision for income taxes that would have 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
    election, from January 1, 2002 to June 29, 2005. 26




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ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  The following discussion of our financial condition and
    results of operations should be read in conjunction with our
    consolidated financial statements and related notes included
    elsewhere in this
    Form 10-K.
    This discussion contains forward-looking statements that involve
    risks and uncertainties. Our actual results may differ
    materially from those anticipated in these forward-looking
    statements due to known and unknown risks, uncertainties and
    other factors, including those risks discussed in Item 1A.
    Risk Factors and elsewhere in this
    Form 10-K.
    Those risk factors expressly qualify all subsequent oral and
    written forward-looking statements attributable to us or persons
    acting on our behalf. We do not have any intention or obligation
    to update forward-looking statements included in this
    Form 10-K
    after the date of this
    Form 10-K,
    except as required by law.
  Overview
         27




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Critical
    Accounting Policies
    Revenue
    Recognition
  case-by-case
    Accounts
    Receivable
   29




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##### Table of Contents



Inventories
    
    changes in consumer preferences;
    buying patterns of our retailers;
    unseasonable weather; and
    weakened economic conditions.    Goodwill
    and Intangible Assets
  Goodwill and Intangible Assets.
  Long-Lived
    Assets
    Investments
    in Unconsolidated Investees
   30




---



##### Table of Contents



Athlete
    Sponsorships
    Income
    Taxes
      Accounting for Uncertainty in Income Taxes
 31




---



##### Table of Contents



Stock-Based
    Compensation
  Share-Based Payment.
  Foreign
    Currency Translation
      General
     32




---



##### Table of Contents



Results
    of Operations
    Year Ended December 31,2007


2006


2005Revenues


100.0
%


100.0
%


100.0
%Cost of goods sold


51.6



50.3



49.2Gross profit


48.4



49.7



50.8Selling, general and administrative expenses


29.6



28.5



26.8Operating income


18.8



21.2



24.0Other income (expense)


1.7



2.0



0.7Income before provision for income taxes


20.5



23.2



24.7Provision for income taxes


8.1



9.2



6.5Income before equity in earnings of investee


12.4



14.0



18.2Equity in earnings of investee


0.0



0.0



0.1Net income


12.4
%


14.0
%


18.3
%   Year
    Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
  Revenues
     33




---



##### Table of Contents



Gross
    Profit
    Selling,
    General and Administrative Expenses
    Operating
    Income
    Other
    Income
   34




---



##### Table of Contents



Provision
    for Income Taxes
      Net
    Income
    Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Revenues
          Gross
    Profit
   35




---



##### Table of Contents



Selling,
    General and Administrative Expenses
    Operating
    Income
    Other
    Income
    Provision
    for Income Taxes
        Net
    Income
   36




---



##### Table of Contents



Liquidity
    and Capital Resources
      Year Ended December 31,2007


2006


2005(In thousands)Cash and cash equivalents at beginning of period

$
85,414


$
71,712


$
10,359Cash flow from operating activities


19,279



20,956



22,985Cash flow from investing activities


(14,973
)


(9,229
)


(2,657
)Cash flow from financing activities


1,623



1,703



41,041Effect of exchange rate changes on cash


1,619



272



(16
)Cash and cash equivalents at end of period

$
92,962


$
85,414


$
71,712       (In thousands)


Attributable to$
(10,488
)

Decrease in cash flows from accounts receivable due to increased
    sales and timing of collections and increased sales volumes and
    corresponding accounts receivable balances as a result of the
    direct distribution of product in Europe beginning in 2007(4,454
)

Decrease in cash flows from inventory due to higher inventory
    levels in Europe as a result of the direct distribution of
    product beginning in 2007(1,525
)

Increase in cash flows from income tax receivable/payable due to
    timing of payments made for income taxes7,298


Increase in cash flows from accounts payable and accrued
    expenses due to timing of payments and increased payroll
    accruals and other liabilities4,582


Increase in net income3,629


Increase in non-cash depreciation, provision for doubtful
    accounts, stock-based compensation and deferred income taxes(719
)

Net decrease in cash flows from all other operating activities$
(1,677
)

Total    37




---



##### Table of Contents



Credit
    Facilities
    Contractual
    Obligations and Commitments
    Payments Due by PeriodTotal


2008


2009


2010


2011


2012


Thereafter(In thousands)Operating lease obligations

$
18,805


$
3,552


$
2,936


$
2,732


$
2,554


$
1,846


$
5,185Capital lease obligations


109



75



34















Professional athlete sponsorships


9,859



4,743



3,073



1,793



130



120



Contractual letters of credit


1,377



1,377



















Total

$
30,150


$
9,747


$
6,043


$
4,525


$
2,684


$
1,966


$
5,185        38




---



##### Table of Contents



Seasonality
      Backlog
    Inflation
    Vulnerability
    Due to Concentrations
   39




---



##### Table of Contents



Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement
    No. 109.
  No. 06-03, How Taxes Collected from Customers and Remitted to
    Governmental Authorities Should Be Presented in the Income
    Statement (that is, Gross versus Net Presentation). EITF 06-03 EITF 06-03
  Fair Value Measurements.
  The
    Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of
    SFAS No. 115 instrument-by-instrument
  Business Combinations
 40




---



##### Table of Contents



EITF 95-3
  Noncontrolling Interest in Consolidated Financial
    Statements an amendment of ARB
    No. 51
  ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Foreign
    Currency Risk
          Interest
    Rate Risk
   41




---



##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA    ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  Disclosure
    Controls and Procedures
        Internal
    Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
 42




---



##### Table of Contents



Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f). Internal Control
     Integrated Framework Internal
    Control  Integrated Framework
    President and Chief Executive Officer
    (Principal Executive Officer)
  Chief Financial Officer, Secretary and Treasurer
    (Principal Financial Officer)
   43




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    ON INTERNAL CONTROL OVER FINANCIAL REPORTING
     Internal Control  Integrated Framework Managements Report on Internal Control Over Financial
    Reporting
        Internal Control  Integrated Framework
    
   44




---



##### Table of Contents



ITEM 9B.
    OTHER
    INFORMATION   PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE    ITEM 11.
    EXECUTIVE
    COMPENSATION    ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE    ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  page F-1
     45




---



##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReport of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2007 and 2006


F-3Consolidated Statements of Operations for the
    years ended December 31, 2007, 2006 and 2005


F-4Consolidated Statements of Stockholders
    Equity and Comprehensive Income for the years ended
    December 31, 2007, 2006 and 2005


F-5Consolidated Statements of Cash Flows for the
    years ended December 31, 2007, 2006 and 2005


F-6Notes to Consolidated Financial Statements


F-8  F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           Internal Control 
    Integrated Framework
  
   F-2




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
 CONSOLIDATED
    BALANCE SHEETS  As of December 31,2007


2006(In thousands, except share data)AssetsCurrent assets:Cash and cash equivalents

$
92,962


$
85,414Accounts receivable  net of allowances of $2,783
    (2007) and $1,323 (2006)


58,270



34,175Inventories


20,440



13,185Prepaid expenses and other current assets


1,720



1,383Income taxes receivable


326



Deferred income taxes


2,956



2,353Total current assets


176,674



136,510Property and equipment  net


24,427



11,527Investments in unconsolidated investees


298



298Deferred income taxes


268



660Intangible assets  net


363



386Goodwill






158Other assets


464



209Total assets

$
202,494


$
149,748Liabilities and Stockholders EquityCurrent liabilities:Accounts payable

$
18,694


$
8,764Accrued expenses and other current liabilities


10,561



6,175Income taxes payable






424Current portion of capital lease obligations


72



78Total current liabilities


29,327



15,441Long-term capital lease obligations


33



106Other long-term liabilities


190



204Income taxes payable  non-current


89



Commitments and contingencies (Note 9)Stockholders equity:Common stock, $.001 par value 
    60,000,000 shares authorized; 24,349,520 (2007) and
    24,295,420 (2006) shares issued and outstanding


24



24Additional paid-in capital


89,185



86,773Retained earnings


80,226



47,019Accumulated other comprehensive income


3,420



181Total stockholders equity


172,855



133,997Total liabilities and stockholders equity

$
202,494


$
149,748    F-3




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF OPERATIONS  Year Ended December 31,2007


2006


2005(In thousands, except share and per share data)Revenues:Product revenues

$
265,193


$
201,186


$
156,716Licensing revenues


3,420



4,072



3,235Total revenues


268,613



205,258



159,951Cost of goods sold


138,570



103,237



78,632Gross profit


130,043



102,021



81,319Selling, general and administrative expenses


79,411



58,417



42,939Operating income


50,632



43,604



38,380Other income:Interest income, net


3,973



3,833



1,036Dividend income from cost method investee






3



11Foreign currency gain


401



233



54Total other income


4,374



4,069



1,101Income before provision for income taxes and equity in earnings
    of investee


55,006



47,673



39,481Provision for income taxes


21,671



18,920



10,475Income before equity in earnings of investee


33,335



28,753



29,006Equity in earnings of investee










331Net income

$
33,335


$
28,753


$
29,337Net income per share:Basic

$
1.37


$
1.19


$
1.36Diluted

$
1.37


$
1.18


$
1.34Weighted average shares outstanding:Basic


24,302,893



24,227,845



21,627,821Diluted


24,419,802



24,304,627



21,839,626Pro forma net income data (unaudited):Income before provision for income taxes and equity in earnings
    of investee, as reported









$
39,481Pro forma provision for income taxes










16,223Pro forma income before equity in earnings of investee










23,258Equity in earnings of investee










331Pro forma net income









$
23,589Pro forma net income per share (unaudited):Basic









$
1.09Diluted









$
1.08Pro forma weighted average shares outstanding (unaudited):Basic










21,627,821Diluted










21,839,626    F-4




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE
    INCOME  AccumulatedAdditional





OtherCommon Stock


Paid-In


Retained


Comprehensive


ComprehensiveShares


Amount


Capital


Earnings


Income


Income


Total(In thousands, except share data)Balance at January 1, 2005


19,170,705


$
19


$
1,081


$
28,133


$
269






$
29,502Initial public offering, net of offering costs


4,640,625



4



80,127















80,131Stock-based compensation










178















178Issuance of restricted stock


20,000























Exercise of stock options


382,790



1



199















200Tax benefits related to exercise of stock options










2,833















2,833Distributions














(39,204
)










(39,204
)Comprehensive income:Net income














29,337






$
29,337



29,337Foreign currency translation of equity method investee


















(269
)


(269
)


(269
)Foreign currency translation adjustment


















(28
)


(28
)


(28
)Comprehensive income





















$
29,040Balance at December 31, 2005


24,214,120



24



84,418



18,266



(28
)






102,680Stock-based compensation










812















812Issuance of restricted stock


15,000























Exercise of stock options


66,300







1,261















1,261Tax benefits related to exercise of stock options










282















282Comprehensive income:Net income














28,753






$
28,753



28,753Foreign currency translation adjustment


















209



209



209Comprehensive income





















$
28,962Balance at December 31, 2006


24,295,420



24



86,773



47,019



181







133,997FIN No. 48 Adjustment














(128
)










(128
)Stock-based compensation










934















934Issuance of restricted stock


























Exercise of stock options


54,100







1,028















1,028Tax benefits related to exercise of stock options










450















450Comprehensive income:Net income














33,335






$
33,335



33,335Foreign currency translation adjustment, net of tax


















3,239



3,239



3,239Comprehensive income





















$
36,574Balance at December 31, 2007


24,349,520


$
24


$
89,185


$
80,226


$
3,420






$
172,855    F-5




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
 CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Year Ended December 31,2007


2006


2005(In thousands)Cash flows from operating activities:Net income

$
33,335


$
28,753


$
29,337Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


2,895



1,423



623Equity in earnings of investee, net of dividends received










(331
)Provision for doubtful accounts


831



588



68Loss on disposal of property and equipment


24



64



30Asset impairment


161







Excess tax benefits related to exercise of stock options


(444
)


(303
)


2,833Stock-based compensation


934



812



178Deferred income taxes


(191
)


(1,983
)


(1,150
)Changes in operating assets and liabilities:Accounts receivable


(23,736
)


(13,248
)


(4,219
)Inventories


(6,789
)


(2,335
)


(5,025
)Prepaid expenses and other current assets


(311
)


12



(867
)Income taxes receivable/payable


(339
)


1,186



(479
)Other assets


(242
)


(97
)


(54
)Accounts payable


9,396



2,912



799Accrued expenses


3,791



2,977



1,242Other long-term liabilities


(36
)


195



Net cash provided by operating activities


19,279



20,956



22,985Cash flows from investing activities:Purchase of property and equipment


(14,989
)


(9,063
)


(2,933
)Proceeds from sale of property and equipment


16



2



Proceeds from sale of equity method investee










1,391Business acquisition, net of cash acquired






(168
)


(1,115
)Net cash used in investing activities


(14,973
)


(9,229
)


(2,657
)Cash flows from financing activities:Principal payments on capital lease obligations


(78
)


(71
)


(86
)Proceeds from government grants


229



210



Proceeds from initial public offering, net of offering costs










80,131Proceeds from the exercise of stock options


1,028



1,261



200Excess tax benefits related to exercise of stock options


444



303



Distributions to stockholders










(39,204
)Net cash provided by financing activities


1,623



1,703



41,041Effect of exchange rate changes on cash


1,619



272



(16
)Net increase in cash and cash equivalents


7,548



13,702



61,353Cash and cash equivalents Beginning of period


85,414



71,712



10,359Cash and cash equivalents End of period

$
92,962


$
85,414


$
71,712Supplemental disclosures of cash flow information:Cash paid during the period for:Interest

$
35


$
14


$
21Income taxes


22,799



19,619



9,274    F-6




---



##### Table of Contents



Supplemental
    disclosures of noncash investing and financing
    activities:
    Accounting for Uncertainty in
    Income Taxes
     F-7




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
 NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS  1.
    Organization
    and Summary of Significant Accounting Policies            Principles of Consolidation 
  Basis of Presentation
  Initial Public Offering
  Cash and Cash Equivalents
  Concentration of Credit Risks
   F-8




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Inventories (first-in,
  Property and Equipment
  Furniture and fixtures

3 to 5 yearsOffice equipment

3 to 5 yearsComputer equipment

3 yearsLeasehold improvements

3 to 10 yearsBuilding

15 to 30 years   Investments in Unconsolidated Investees
    Long-Lived Assets Accounting for the
    Impairment or Disposition of Long-Lived Assets.
  Goodwill and Intangible Assets Goodwill and Intangible Assets.
 F-9




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Fair Value of Financial Instruments Disclosures about Fair Value of
    Financial Instruments,
  Revenue Recognition
    Shipping and Handling
  Significant Concentrations
    Advertising and Promotion
  Income Taxes
 F-10




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Accounting for Uncertainty in Income
    Taxes
  Foreign Currency Translation
    S Corporation Distributions
  Comprehensive Income
    Net Income Per Share Earnings Per Share.
 F-11




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year Ended December 31,2007


2006


2005(In thousands, except share data)Numerator  Net income applicable to common
    stockholders

$
33,335


$
28,753


$
29,337Denominator:Weighted average common stock outstanding for basic earnings per
    share


24,302,893



24,227,845



21,627,821Effect of dilutive securities:Stock options and restricted stock


116,909



76,782



211,805Adjusted weighted average common stock and assumed conversions
    for diluted earnings per share


24,419,802



24,304,627



21,839,626     Stock-Based Compensation Share-Based Payment
  Related-Party Transactions
  Use of Estimates in the Preparation of the Financial
    Statements
  Recent Accounting Pronouncements Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement
    No. 109.
  No. 06-03, How Taxes Collected from Customers and Remitted to
    Governmental Authorities Should Be Presented in the Income
    Statement (that is, Gross versus Net Presentation). EITF 06-03
 F-12




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  EITF 06-03
  Fair Value Measurements.
  The
    Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of
    SFAS No. 115 instrument-by-instrument
  Business Combinations EITF 95-3
  Noncontrolling Interest in Consolidated Financial
    Statements an amendment of ARB
    No. 51
 F-13




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  2.
    Allowances
    for Doubtful Accounts and Product Returns  Allowance for


Allowance forDoubtful Accounts


Product Returns


Total(In thousands)Balance, January 1, 2005

$
146


$
232


$
378Provision


68



2,139Deductions


(24
)


(1,831
)Balance, December 31, 2005


190



540



730Provision


588



4,196Deductions


(283
)


(3,908
)Balance, December 31, 2006


495



828



1,323Provision


831



5,903Deductions


(67
)


(5,207
)Balance, December 31, 2007

$
1,259


$
1,524


$
2,783     3.
    Inventories    As of December 31,2007


2006(In thousands)Finished goods

$
19,849


$
12,959Work-in-process


214



41Raw materials


377



185$
20,440


$
13,185    F-14




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  4.
    Property
    and Equipment    As of December 31,2007


2006(In thousands)Furniture and fixtures

$
3,547


$
1,869Office equipment


1,724



1,180Computer equipment


4,959



2,173Leasehold improvements


7,379



1,241Building


7,489



254Land


4,723



1,750Construction in progress


30



5,70929,851



14,176Less accumulated depreciation


(5,424
)


(2,649
)Property and equipment  net

$
24,427


$
11,527         5.
    Investment
    in Unconsolidated Investees  Volcom Europe
 F-15




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Volcom Australia
    6.
    Goodwill
    and Intangible Assets        As of December 31, 2007


As of December 31, 2006Gross Carrying


Accumulated


Gross Carrying


AccumulatedAmount


Amortization


Amount


Amortization(In thousands)Customer relationships

$
336


$
73


$
310


$
36Non-compete agreements


43



9



40



5Reacquired license rights


84



18



84



7$
463


$
100


$
434


$
48    F-16




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    7.
    Accrued
    Expenses and Other Current Liabilities    As of December 31,2007


2006(In thousands)Payroll and related accruals

$
4,000


$
3,785Other


6,561



2,390$
10,561


$
6,175   8.
    Line of
    Credit    9.
    Commitments
    and Contingencies  Operating Leases
    Year Ending December 31,2008


3,5522009


2,9362010


2,7322011


2,5542012


1,846Thereafter


5,185$
18,805    F-17




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Capital Leases
  Year Ending December 31,2008


752009


34Total payments including interest


109Less interest portion


(4
)Total principal payments remaining at December 31, 2007

$
105Current portion of capital lease obligation

$
72Long-term portion of capital lease obligation


33Total capital lease obligation at December 31, 2007

$
105   Professional Athlete Sponsorships
  Year Ending December 31,2008

$
4,7432009


3,0732010


1,7932011


1302012


120$
9,859     Litigation
 F-18




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Indemnities and Guarantees
  10.
    Stockholders
    Equity  Accounting for Stock Issued to
    Employees Accounting for Stock-Based
    Compensation  Transition and Disclosure 
    an amendment of FASB Statement No. 123
  No. 123R-3,
     F-19




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Year EndedDecember 31, 2005(In thousands,except per share data)Net income:As reported

$
29,337Add: Stock-based employee compensation expense included in
    reported net income, net of related tax effects


33Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects


(849
)Pro forma

$
28,521Basic net income per share:As reported

$
1.36Pro forma

$
1.32Diluted net income per share:As reported

$
1.34Pro forma

$
1.31     Stock Compensation Plans
 F-20




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Stock Option Awards
      Years Ended December 31,2007


2006


2005Weighted-





Weighted-





Weighted-Average





Average





AverageNumber of


Exercise


Number of


Exercise


Number of


ExerciseOptions


Price


Options


Price


Options


PriceOutstanding, beginning of year


487,700


$
19.00



576,000


$
19.00






$
Granted


10,000



42.07











586,526



19.00Exercised


(54,100
)


19.00



(66,300
)


19.00



(10,526
)


19.00Canceled or forfeited


(1,200
)


19.00



(22,000
)


19.00







Outstanding, end of year


442,400


$
19.52



487,700


$
19.00



576,000


$
19.00Options exercisable, end of year


228,700


$
19.00



214,900


$
19.00



185,000


$
19.00Weighted average fair value of options granted during the year





$
14.25






$







$
7.97     Options Outstanding


Options ExercisableWeighted-


Weighted-





Weighted-Average


Average





AverageNumber of


Remaining


Exercise


Number of


ExerciseOptions


Life (yrs)


Price


Options


Price$19.00


432,400



7.5


$
19.00



228,700


$
19.00$42.07


10,000



9.4


$
42.07






$
42.07    F-21




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##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
      Weighted-AverageNumber of


Grant-DateOptions


Fair ValueUnvested at January 1, 2007


272,800


$
9.14Granted


10,000



14.25Vested


(67,900
)


9.14Canceled or forfeited


(1,200
)


9.14Unvested at December 31, 2007


213,700


$
9.38     Restricted Stock Awards
        Weighted-AverageShares of


Grant-DateRestricted Stock


Fair ValueOutstanding restricted stock at January 1, 2007


31,000


$
30.09Granted






Vested


(7,000
)


30.43Canceled or forfeited






Outstanding restricted stock at December 31, 2007


24,000


$
30.00    F-22




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##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  Nonemployee Share-Based Compensation
  No. 96-18, Accounting for Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services
    11.
    Retirement
    Savings Plan   F-23




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    12.
    Licensing        Licensee

Expiration Date


Extension Termination DateEurope


December 31, 2006



N/AAustralia


June 30, 2012



N/ABrazil


December 31, 2008



December 31, 2013South Africa


December 31, 2011



N/AIndonesia


December 31, 2009



December 31, 2014   13.
    Income
    Taxes     F-24




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Years Ended December 31,2007


2006


2005(In thousands)Current

$
21,882


$
20,903


$
11,625Deferred


(211
)


(1,983
)


(1,150
)$
21,671


$
18,920


$
10,475     Years Ended December 31,2007


2006


2005Provision for taxes at U.S. Federal statutory rate


35.0
%


35.0
%


35.0
%State income taxes, net of Federal income tax benefit


4.2



4.8



4.1Effect of S corporation tax status










(11.8
)Equity in earnings of investee










0.3Foreign tax credit


(0.4
)


(0.7
)


Other


0.6



0.6



(1.1
)Effective income tax rate


39.4
%


39.7
%


26.5
%     2007


2006(In thousands)Deferred tax assets:Accrued liabilities

$
475


$
301State income taxes


1,062



1,198Allowances for doubtful accounts and product returns


795



517Foreign net operating losses


107



700Stock based compensation


597



309Other


243



55Total deferred tax assets


3,279



3,080Deferred tax liabilities:Intangible assets


(55
)


(67
)Net deferred tax assets

$
3,224


$
3,013        F-25




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    and/or
      Unrecognized tax benefits balance at January 1, 2007

$
126,000Gross increases  tax positions in prior years


23,000Gross decreases  tax positions in prior years


(66,000
)Unrecognized tax benefits balance at December 31, 2007

$
83,000   14.
    Segment
    Information   F-26




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    2007


2006


2005(In thousands)Total revenues:United States

$
228,494


$
200,735


$
159,684Europe


40,119



4,523



267Consolidated

$
268,613


$
205,258


$
159,951Gross profit:United States

$
110,412


$
100,879


$
81,254Europe


19,631



1,142



65Consolidated

$
130,043


$
102,021


$
81,319Operating income (loss):United States

$
45,790


$
45,918


$
38,420Europe


4,842



(2,314
)


(40
)Consolidated

$
50,632


$
43,604


$
38,380Identifiable assets:United States

$
187,780


$
137,581


$
110,137Europe


14,714



12,167



1,244Consolidated

$
202,494


$
149,748


$
111,381     Year Ended December 31,2007


2006


2005(In thousands)Mens

$
133,073


$
102,734


$
87,254Girls


77,326



67,250



51,463Snow


22,243



15,408



9,455Boys


20,023



11,860



7,133Footwear


6,127



1,573



Girls swim


3,734







Other


2,667



2,361



1,411Subtotal product categories


265,193



201,186



156,716Licensing revenues


3,420



4,072



3,235Total consolidated revenues

$
268,613


$
205,258


$
159,951    F-27




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
    Year Ended December 31,2007


2006


2005(In thousands)United States

$
174,254


$
157,581


$
128,159Canada


31,041



23,925



15,774Asia Pacific


8,434



7,230



6,622Europe


40,119



4,523



267Other


11,345



7,927



5,894$
265,193


$
201,186


$
156,716   15.
    Subsequent
    Event (Unaudited)    16.
    Pro Forma
    Information (Unaudited)    Year EndedDecember 31, 2005(In thousands)Federal income taxes at the statutory rate

$
13,818State income taxes  net of Federal benefit


2,268Equity in earnings of investee


116Other


21Total pro forma income tax provision

$
16,223  F-28




---



##### Table of Contents



VOLCOM,
    INC. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
    (Continued)
  17.  Quarterly
    Financial Data (Unaudited)
    Quarter EndedMarch 31


June 30


September 30


December 31Year ended December 31, 2007Total revenues

$
50,818


$
57,681


$
91,045


$
69,069Gross profit


26,407



27,793



45,867



29,976Operating income


8,062



8,849



23,027



10,694Net income


5,482



6,220



14,518



7,115Net income per share, basic

$
0.23


$
0.25


$
0.60


$
0.29Net income per share, diluted

$
0.22


$
0.25


$
0.59


$
0.29Year ended December 31, 2006Total revenues

$
41,596


$
46,051


$
61,049


$
56,562Gross profit


21,522



22,914



30,908



26,677Operating income


6,686



9,690



15,560



11,668Net income


4,426



6,532



10,163



7,632Net income per share, basic

$
0.18


$
0.27


$
0.42


$
0.31Net income per share, diluted

$
0.18


$
0.27


$
0.42


$
0.31    F-29




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Richard
    R. Woolcott   President and Chief Executive Officer
      Signature

Title

Date/s/  Richard
    R. WoolcottRichard
    R. Woolcott

Chief Executive Officer 
    (Principal Executive Officer)

February 29, 2008/s/  Douglas
    P. CollierDouglas
    P. Collier

Chief Financial Officer 
    (Principal Financial Officer)

February 29, 2008/s/  René
    R. WoolcottRené
    R. Woolcott

Chairman of Board of Directors

February 29, 2008/s/  Douglas
    S. IngramDouglas
    S. Ingram

Director

February 29, 2008/s/  Anthony
    M. PalmaAnthony
    M. Palma

Director

February 29, 2008/s/  Joseph
    B. TysonJoseph
    B. Tyson

Director

February 29, 2008/s/  Carl
    W. WomackCarl
    W. Womack

Director

February 29, 2008/s/  Kevin
    G. WulffKevin
    G. Wulff

Director

February 29, 2008  F-30




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##### Table of Contents



EXHIBIT INDEX
  Number

Description2
.1

Agreement of Purchase and Sale, dated as of January 15, 2008, by
    and among Volcom, Inc., a Delaware corporation, Skelly
    Acquisition Corp., a Delaware corporation and a wholly--owned
    subsidiary of Volcom, Inc., Electric Visual Evolution LLC, a
    California limited liability company, and each of the members of
    Electric Visual Evolution LLC (incorporated herein by reference
    to the Companys Current Report on Form 8-K filed on
    January 18, 2008).3
.1*

Restated Certificate of Incorporation of Volcom, Inc.3
.2*

Amended and Restated Bylaws of Volcom, Inc.3
.3*

Certificate of Amendment of Restated Certificate of
    Incorporation of Volcom, Inc.4
.1*

Specimen Common Stock certificate.10
.1*

Form of Indemnification Agreement between Volcom and each of its
    directors and officers.10
.2

Credit Agreement by and between Bank of the West and Volcom,
    Inc., dated as of July 20, 2006 (incorporated by reference in
    the Companys Current Report on Form 8-K filed on July 24,
    2006).10
.3*

Lease dated as of May 19, 1999 by and between Griswold
    Industries and Stone Boardwear, Inc. (the predecessor entity to
    Volcom, Inc.) for the real property known as 1740 Monrovia
    Avenue, Costa Mesa.10
.4*

Form of 2005 Incentive Award Plan.10
.5*

Form of Restricted Stock Award Grant Notice and Agreement.10
.6*

Form of Stock Option Grant Notice and Agreement.10
.7*

Software License Agreement by and between Innovative Systems,
    LLC and Volcom Stone Board Wear, Inc., made and effective
    September 1, 2002.10
.8

Real Estate Development Agreement dated May 5, 2006 between
    Volcom SAS and Société dEquipement des Pays de
    lAdour (English Translation) (incorporated by reference in
    the Companys Current Report on Form 8-K filed on May 9,
    2006).10
.9

Amended and Restated 2005 Incentive Award Plan (incorporated by
    reference in the Companys Annual Report on Form 10-K filed
    on March 14, 2007).21
.1

Subsidiaries of Volcom, Inc.23
.1

Consent of Independent Registered Public Accounting Firm
    (Deloitte & Touche LLP).31
.1

Certification of the Principal Executive Officer, as required
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31
.2

Certification of the Principal Financial Officer, as required
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32


Certifications of the Principal Executive Officer and Principal
    Financial Officer, as required pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.     *
    
    Incorporated by reference to Volcom, Inc.s Registration
    Statement on Form S-1 (File Number: 333-124498)
    
    All current directors and executive officers of Volcom, Inc.
    have entered into the Indemnity Agreement with Volcom, Inc.