Skullcandy, Inc. reported net sales in the second quarter of 2014 increased 6.0 percent to $53.9 million from $50.8 million in the same quarter of the prior year.


 

Domestic (U.S.) net sales increased 6.0 percent 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 percent 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.

 

 

“We continue to excite our consumer through great new products combined with our authentic brand born from innovation, creativity, music, and sports. ” commented Hoby Darling, President and Chief Executive Officer. “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.

 

 

“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,” Darling continued. ”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.”

 

 

Gross profit in the second quarter of 2014 increased 6.3 percent to $24.2 million from $22.8 million in the same quarter of the prior year. Gross margin was 45.0 percent in the second quarter of 2014 compared to 44.9 percent in the same quarter.

 

 

Selling, general and administrative (SG&A) expenses in the second quarter of 2014 decreased 4.3 percent 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 percent compared to 47.2 percent 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 percent 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 percent 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 percent to 9 percent over 2013 levels and net income on a GAAP fully-diluted per share basis of $0.02 to $0.05.

















































































































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)