Press Release:
Skullcandy Announces Strong Third Quarter 2012 Financial Results
Income from operations increased 29.1% to $10.6 million
Net sales increased 17.1%
Net income was $0.23 per diluted share
Company updates 2012 net sales and adjusted EPS outlook to $290-300 million and $1.00-$1.04, respectively
PARK CITY, Utah, Nov. 1, 2012 (GLOBE NEWSWIRE) — Skullcandy, Inc. (Nasdaq:SKUL) today announced financial results for the third quarter ended September 30, 2012.
Third Quarter Highlights (Q3 2012 vs. Q3 2011)
Income from operations increased 29.1% to $10.6 million
Net sales increased 17.1% to $71.0 million
Net income was $6.5 million, or $0.23 per diluted share
Jeremy Andrus, Skullcandy’s President and CEO stated, “We are pleased with our third quarter results, in which operating income increased over 29% and was driven by solid sales growth, margin expansion and expense leverage. With the successful launch of a new line of Astro Gaming and Skullcandy gaming headsets, we continue to broaden our customer base and diversify our business. Early feedback on our new gaming headsets has been overwhelmingly positive and we believe this is a meaningful new growth opportunity for Skullcandy. Other exciting upcoming new product launches include two premium on-ear and over-ear styles, Navigator and Crusher, which combine cutting-edge performance and design with Skullcandy’s proprietary Supreme Sound.”
Third Quarter Results
Net sales in the third quarter of 2012 increased 17.1% to $71.0 million from $60.6 million in the same quarter of the prior year. The increase was primarily driven by increased Astro Gaming sales of $4.7 million and an increase in international sales.
Gross profit in the third quarter of 2012 increased 18.5% to $34.1 million from $28.8 million in the same quarter of the prior year. Gross profit as a percentage of net sales, or gross margin, was 48.0% in the third quarter of 2012 compared to 47.5% in the third quarter of 2011.
Selling, general and administrative (SG&A) expenses in the third quarter 2012 increased 14.2% to $23.5 million from $20.6 million in the same quarter of the prior year. As a percentage of net sales, selling, general and administrative expenses decreased to 33.1% from 33.9% in the same quarter of the prior year.
Income from operations increased 29.1% to $10.6 million from $8.2 million in the same quarter of the prior year. Income from operations as a percentage of net sales increased to 15.0% from 13.6% in the same quarter of the prior year.
Net income attributable to Skullcandy, Inc. in the third quarter of 2012 was $6.5 million, or $0.23 per diluted share, based on 28.1 million diluted weighted average common shares outstanding. Net income attributable to Skullcandy, Inc. in the same quarter of the prior year was $1.0 million, or $0.04 per diluted share, based on 26.3 million diluted weighted average common shares outstanding. Excluding the one-time expenses related to a capital transaction in 2008, adjusted net income in the third quarter of 2011 was $4.5 million, or $0.17 per diluted share based on 26.3 million diluted weighted average common shares outstanding. For a reconciliation of adjusted net income to net income, see the accompanying tables at the end of this release.
Balance Sheet Highlights
As of September 30, 2012, cash and cash equivalents totaled $1.9 million compared to $14.9 million at September 30, 2011 and the Company had no long-term debt. As of September 30, 2012, the Company had $22.9 million of availability under its credit facility. Accounts receivable and inventory were $60.0 million and $55.4 million, respectively, at September 30, 2012. While accounts receivable is up significantly on a year-over-year basis, last year’s third quarter accounts receivable included only approximately one month of Europe direct sales, and is, therefore, non-comparable. For the nine month period ended September 30, 2012, working capital increased $16.3 million to $88.4 million, or 22.5%, which is less than net sales growth of 32.0% for the same period.
Outlook
The Company is tightening its net sales outlook for the full year 2012 to $290-$300 million from a previous outlook of $280-$300 million. A mix shift toward higher-priced, lower margin products and cautiousness regarding the retail environment in Europe and the escalating U.S. promotional environment heading into the important holiday season creates less visibility around gross margin and operating expenses. As a result, the Company is revising its adjusted fully diluted earnings per share outlook for 2012 to $1.00-$1.04 from a previous outlook of $1.10-$1.20. This adjusted earnings per share outlook excludes $0.4 million of after-tax expenses related to the Monster litigation in the first quarter and assumes an effective tax rate of approximately 36.5% and diluted weighted average common shares outstanding of approximately 28.3 million.
About Skullcandy, Inc.
Skullcandy is a global designer, marketer and distributor of performance audio and gaming headphones and other accessory related products under the Skullcandy, Astro Gaming and 2XL by Skullcandy brands. Skullcandy became one of the world’s most distinct audio brands by bringing 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. Visit skullcandy.com, or join us at facebook.com/skullcandy or on Twitter @skullcandy.
