PARK CITY, Utah, July 31, 2014 (GLOBE NEWSWIRE) -- Skullcandy, Inc. (Nasdaq:SKUL) today announced financial results for the second quarter ended June 30, 2014.
Second quarter results versus same quarter in prior year
- Net sales: $53.9 million vs. $50.8 million
- Gross margin: 45.0% vs. 44.9%
- Selling, general and administrative expense: $22.9 million vs. $24.0 million
- Net income (loss) per diluted share: $0.06 vs. $(0.02)
"We continue to excite our consumer through great new products combined with our authentic brand born from innovation, creativity, music, and sports. The successful actions the team has taken toward achieving our key objectives resulted in solid full priced selling and second quarter profitability that exceeded expectations," commented Hoby Darling, President and Chief Executive Officer. "While we delivered a solid second quarter performance, I am even more excited for the back half of the year when we launch our ultra-secure Sports Performance line with Sticky Gel technology and bring to the market some of the most bombproof and fun wireless products on the market. Most importantly, the investments we are making in our team, culture, demand creation, and innovation, are positioning Skullcandy for long-term growth and sustained leadership."
Net sales in the second quarter of 2014 increased 6.0% to $53.9 million from $50.8 million in the same quarter of the prior year. Domestic (U.S.) net sales increased 6.0% to $39.5 million from $37.2 million in the same quarter of the prior year. International (Non U.S.) net sales increased 6.1% to $14.4 million from $13.6 million in the same quarter of the prior year primarily due to increased sales in Canada, and to a lesser extent Mexico and China.
Gross profit in the second quarter of 2014 increased 6.3% to $24.2 million from $22.8 million in the same quarter of the prior year. Gross margin was 45.0% in the second quarter of 2014 compared to 44.9% in the same quarter.
Selling, general and administrative (SG&A) expenses in the second quarter of 2014 decreased 4.3% to $22.9 million from $24.0 million in the same quarter of the prior year. The decrease in SG&A expenses is primarily due personnel expenses, licensing royalties and co-op expenses. As a percentage of net sales, SG&A expenses were 42.6% compared to 47.2% in the same quarter of the prior year.
Net income attributable to the Company in the second quarter of 2014 was $1.6 million, or $0.06 per diluted share, based on 28.5 million diluted weighted average common shares outstanding. Net loss attributable to the Company in the same quarter of the prior year was $(0.6) million, or $(0.02) per diluted share, based on 27.7 million diluted weighted average common shares outstanding.
Balance Sheet Highlights
As of June 30, 2014, cash and cash equivalents totaled $44.1 million compared to $38.8 million as of December 31, 2013. The Company continued to have no outstanding debt. Accounts receivable decreased 24% to $43.8 million as of June 30, 2014 from $57.5 million as of December 31, 2013, which is consistent with the seasonality of our business. Inventory increased 26% to $50.8 million as of June 30, 2014 from $40.3 million as of December 31, 2013, in order to prepare for the back-to-school and holiday seasons.
2014 Full Year and Third Quarter Financial Outlook
For the full year 2014, the Company still forecasts net sales to increase in the mid to high single digit percentage range over 2013 levels. However, the Company is providing guidance for GAAP operating income of $8.3 million to $9.7 million and increasing guidance for net income on a GAAP fully-diluted per share basis to a range of $0.22 to $0.26 per share.
For the third quarter of 2014, the Company currently forecasts net sales to increase between 7% to 9% over 2013 levels and net income on a GAAP fully-diluted per share basis of $0.02 to $0.05.
Call Information
A conference call to discuss the second quarter of 2014 results is scheduled for today, July 31, 2014, at 4:30 PM Eastern Time / 2:30 PM Mountain Time. A broadcast of the call will be available on the Company's website, www.skullcandy.com. In addition, a replay of the call will be available shortly after the conclusion of the call and remain available through August 7, 2014. To access the telephone replay, listeners should dial (877) 870-5176 or (858) 384-5517 and entering conference ID number 13586920.
About Skullcandy, Inc.
Skullcandy is the original lifestyle and performance audio brand inspired by the creativity and irreverence of youth culture. Skullcandy designs, markets and distributes audio and gaming headphones and other accessory related products under the Skullcandy, Astro Gaming and 2XL brands. Skullcandy was launched in 2003 and quickly became one of the world's most distinct audio brands by bringing unique technology, color, character and performance to an otherwise monochromatic space; helping to revolutionize the audio arena by introducing headphones, earbuds and other audio and wireless lifestyle products that possess unmistakable style and exceptional performance. The Company's products are sold and distributed through a variety of channels in the U.S. and approximately 80 countries worldwide, including the company's website at www.skullcandy.com.
Forward-Looking Statements
Certain statements in this press release and oral statements made from time to time by representatives of the Company are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements regarding the Company's anticipated future financial and operating results and any other statements about the Company's future expectations, beliefs or prospects expressed by management are forward-looking statements. These forward-looking statements are based on management's current expectations and beliefs, but they involve a number of risks and uncertainties that could cause actual results or events to differ materially from those indicated by such forward-looking statements. Important factors that could cause actual results to differ materially from expectations are disclosed under the "Risk Factors" section of the 2013 10-K filed with the Securities and Exchange Commission ("SEC") on March 14, 2014, first quarter 2014 10-Q filed with the SEC on May 9, 2014 and in any subsequent reports the Company files with the SEC. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise
-Financial Tables Follow-
| SKULLCANDY, INC. | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (in thousands of dollars, except share and per share information) | ||||
| (unaudited) | ||||
| Three months ended June 30, | Six months ended June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net sales | $ 53,861 | $ 50,789 | $ 92,941 | $ 87,839 |
| Cost of goods sold | 29,632 | 28,004 | 50,549 | 48,568 |
| Gross profit | 24,229 | 22,785 | 42,392 | 39,271 |
| Selling, general and administrative expenses | 22,928 | 23,951 | 45,008 | 50,262 |
| Income (loss) from operations | 1,301 | (1,166) | (2,616) | (10,991) |
| Other (income) expense | (375) | (249) | (205) | 290 |
| Interest expense | 181 | 111 | 192 | 214 |
| Income (loss) before income taxes and noncontrolling interests | 1,495 | (1,028) | (2,603) | (11,495) |
| Income tax expense (benefit) | (85) | (339) | (791) | (3,726) |
| Net income (loss) | 1,580 | (689) | (1,812) | (7,769) |
| Net income (loss) attributable to noncontrolling interests | (8) | 54 | (79) | 87 |
| Net income (loss) attributable to Skullcandy, Inc. | $ 1,572 | $ (635) | $ (1,891) | $ (7,682) |
| Net income (loss) per common share attributable to Skullcandy, Inc. | ||||
| Basic | $ 0.06 | $ (0.02) | $ (0.07) | $ (0.28) |
| Diluted | 0.06 | (0.02) | (0.07) | (0.28) |
| Weighted average common shares outstanding | ||||
| Basic | 28,041,146 | 27,719,081 | 27,940,219 | 27,709,974 |
| Diluted | 28,506,538 | 27,719,081 | 27,940,219 | 27,709,974 |
| SKULLCANDY, INC. | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (in thousands of dollars) | ||
| (unaudited) | ||
|
June 30, 2014 |
December 31, 2013 |
|
| Assets | ||
| Current assets: | ||
| Cash and cash equivalents | $ 44,065 | $ 38,835 |
| Accounts receivable, net | 43,796 | 57,549 |
| Inventories | 50,826 | 40,284 |
| Prepaid expenses and other current assets | 7,389 | 4,663 |
| Deferred taxes | 3,507 | 4,097 |
| Total current assets | 149,583 | 145,428 |
| Property and equipment, net | 9,464 | 10,021 |
| Intangibles | 9,528 | 10,979 |
| Goodwill | 13,867 | 13,867 |
| Deferred financing fees | 41 | 224 |
| Deferred taxes | 2,499 | 2,395 |
| Total assets | $ 184,982 | $ 182,914 |
| Liabilities and Stockholders' Equity | ||
| Current liabilities: | ||
| Accounts payable | $ 19,854 | $ 16,565 |
| Accrued liabilities | 20,237 | 22,838 |
| Deferred taxes | 490 | 55 |
| Total current liabilities | 40,581 | 39,458 |
| Deferred taxes | 1,575 | 1,742 |
| Stockholders' equity: | ||
| Common stock | 3 | 3 |
| Treasury stock | (43,294) | (43,294) |
| Additional paid-in capital | 134,265 | 131,428 |
| Accumulated other comprehensive income (loss) | (84) | (171) |
| Retained earnings | 51,291 | 53,182 |
| Total Skullcandy stockholders' equity | 142,181 | 141,148 |
| Noncontrolling interests | 645 | 566 |
| Total stockholders' equity | 142,826 | 141,714 |
| Total liabilities and stockholders' equity | $ 184,982 | $ 182,914 |
| SKULLCANDY, INC. | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (in thousands of dollars) | ||
| (unaudited) | ||
|
Six months ended June 30, |
||
| 2014 | 2013 | |
| Cash flows from operating activities: | ||
| Net loss | $ (1,812) | $ (7,769) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||
| Depreciation and amortization | 4,615 | 4,394 |
| Loss on disposal of property and equipment and intangible assets | 690 | 1,979 |
| Provision for doubtful accounts | 716 | 1,076 |
| Deferred income taxes | 754 | (995) |
| Noncash interest expense | 184 | 120 |
| Amortization of stock-based compensation expense | 1,415 | 2,059 |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 13,014 | 33,257 |
| Inventories | (10,519) | (9,555) |
| Prepaid expenses and other current assets | (1,315) | 2,681 |
| Accounts payable | 3,268 | (6,933) |
| Accrued liabilities | (3,890) | (8,200) |
| Net cash provided by operating activities | 7,120 | 12,114 |
| Cash flows from investing activities: | ||
| Purchase of property and equipment | (3,297) | (1,890) |
| Purchase of intangible assets | — | (17) |
| Net cash used in investing activities | (3,297) | (1,907) |
| Cash flows from financing activities: | ||
| Proceeds from exercise of stock options | 1,728 | 115 |
| Income tax benefit (detriment) from stock option exercises and expirations | (316) | 5 |
| Net cash provided by financing activities | 1,412 | 120 |
| Effect of exchange rate changes on cash and cash equivalents | (5) | 36 |
| Net increase (decrease) in cash and cash equivalents | 5,230 | 10,363 |
| Cash and cash equivalents, beginning of period | 38,835 | 19,345 |
| Cash and cash equivalents, end of period | $ 44,065 | $ 29,708 |
| Supplemental cash flow information: | ||
| Cash paid for interest | $ — | $ 1 |
| Cash paid for income tax | 1,365 | 5,803 |
SKULLCANDY, INC.
SEGMENT INFORMATION
(unaudited)
On June 30, 2014, we began certain organizational changes to align with how our Chief Operating Decision Makers review performance and make decisions in managing the Company. We manage our business in two segments which are comprised of Domestic and International. The Domestic segment primarily consists of Skullcandy and Astro Gaming product sales to customers in the United States. The international segment primarily includes Skullcandy product sales to customers in Europe, Asia, Canada, Mexico (through the Company's joint venture), and all other geographic areas outside the United States that are served by the Company's International operations.
| Three months ended June 30, | Six months ended June 30, | |||
| 2014 | 2013 | 2014 | 2013 | |
| Net sales | ||||
| Domestic | $ 39,458 | $ 37,216 | $ 65,581 | $ 63,443 |
| International | 14,403 | 13,573 | 27,360 | 24,396 |
| Consolidated net sales | 53,861 | 50,789 | 92,941 | 87,839 |
| Gross profit | ||||
| Domestic | 17,519 | 16,845 | 29,934 | 28,496 |
| International | 6,710 | 5,940 | 12,458 | 10,775 |
| Consolidated gross profit | 24,229 | 22,785 | 42,392 | 39,271 |
| Consolidated selling general and administrative expenses | 22,928 | 23,951 | 45,008 | 50,262 |
| Consolidated income (loss) from operations | $ 1,301 | $ (1,166) | $ (2,616) | $ (10,991) |