Volcom Inc

On May 4, 2011, a putative class action lawsuit captioned Greenwood v. Volcom, Inc., et al., was filed in the Orange County Superior Court. The complaint names as defendants the members of the Company’s board of directors, as well as the Company, PPR and Purchaser. The plaintiff alleges that the Company’s directors breached their fiduciary duties to the Company’s stockholders in connection with the Offer and Merger, and further claims that the Company, PPR and Purchaser aided and abetted those alleged breaches of fiduciary duty. The complaint alleges that the Offer and Merger involves an unfair price, an inadequate sales process, and that defendants agreed to the transactions to benefit themselves personally. The complaint seeks injunctive relief, including to enjoin the Offer and Merger, imposition of a constructive trust, and an award of attorneys’ and other fees and costs, in addition to other relief. The Company believes the plaintiff’s allegations lack merit, and will contest them vigorously.

The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. 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. The section entitled “Risk Factors” set forth in Part II, Item 1A in this Quarterly Report on Form 10-Q, and similar discussions in our other Securities and Exchange Commission, or SEC, filings, discuss some of the important risk factors that may affect our business, results of operations and financial condition. You should carefully consider those risks, in addition to the information in this report and in our other filings with the SEC, before deciding to purchase, hold or sell our securities. We do not have any intention or obligation to update forward-looking statements included in this Quarterly Report on Form 10-Q after the date of this Quarterly Report on Form 10-Q, except as required by law. In addition, the following discussion should be read in conjunction with the information presented in our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for our fiscal year ended December 31, 2010.

The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate these estimates and assumptions on an ongoing basis. We base our estimates on our historical experience and on various other factors which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the amounts of certain expenses that are not readily apparent from other sources. The accounting policies that involve the most significant judgments, assumptions and estimates used in the preparation of our financial statements are those related to revenue recognition, accounts receivable, inventories, goodwill and intangible assets, long-lived assets, income taxes, foreign currency and derivatives, and stock-based compensation. The judgments, assumptions and estimates used in these areas, by their nature, involve risks and uncertainties, and in the event

Consolidated revenues were $87.1 million for the three months ended March 31, 2011, an increase of $9.7 million, or 12.6%, compared to $77.4 million for the three months ended March 31, 2010. This increase was primarily driven by $5.2 million of revenues from our recently acquired Australian operations. The remaining $4.5 million was attributable to strong sell-through of Volcom and Electric products at retail, improved focus on product marketing and increased in-store merchandising efforts. Revenues from our United States segment were $50.3 million for the three months ended March 31, 2011, an increase of $2.1 million, or 4.4% compared to $48.2 million for the three months ended March 31, 2010. Revenues from our Europe segment were $24.8 million for the three months ended March 31, 2011, an increase of $1.2 million, or 4.8% compared to $23.6 million for the three months ended March 31, 2010. On a Euro to Euro basis, revenues in our European segment increased approximately 6.2% for the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Revenues from our Electric segment were $6.9 million for the three months ended March 31, 2011, an increase of $1.3 million, or 23.2% compared to $5.6 million for the three months ended March 31, 2010. Revenues from our Australian segment, which was acquired on August 1, 2010, were $5.2 million for the three months ended March 31, 2011.

Consolidated gross profit increased $1.6 million, or 3.8%, to $43.6 million for the three months ended March 31, 2011 compared to $42.0 million for the three months ended March 31, 2010. Gross profit as a percentage of revenues, or gross margin, decreased 420 basis points to 50.0% for the three months ended March 31, 2011 compared to 54.2% for the three months ended March 31, 2010. Consolidated gross margin related specifically to product revenues decreased 410 basis points to 49.8% for the three months ended March 31, 2011 compared to 53.9% for the three months ended March 31, 2010. Gross margin on product from the United States segment decreased 280 basis points to 46.9% for the three months ended March 31, 2011 compared to 49.7% for the three months ended March 31, 2010. This decrease is primarily due to more in-season discounted product sales and lower margins achieved on off-price sales during the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Gross margin from the European segment decreased 550 basis points to 54.9% for the three months ended March 31, 2011 compared to 60.4% for the three months ended March 31, 2010, primarily due to more liquidation sales and shipment of more low margin samples during the three months ended March 31, 2011 compared to the same period last year. Gross margin from the Electric segment decreased 410 basis points to 58.1% for the three months ended March 31, 2011 compared to 62.2% for the three months ended March 31, 2010 primarily due to lower margins achieved on off-price sales. Gross margin from the Australian segment was 42.9% for the three months ended March 31, 2011.