Skullcandy, Inc. reported net sales in the fourth quarter of 2014 increased 34 percent to $96.8 million from $72.2 million in the same quarter of the prior year.

Domestic (U.S.) net sales increased 37 percent to $70.6 million from $51.6 million in the same quarter of the prior year. International net sales increased 27 percent to $26.3 million from $20.6 million in the same quarter of the prior year.
 

“We delivered strong fourth quarter results highlighted by 34 percent revenue growth, doubling earnings per share from a year ago and capturing the #1 position in for total headphone units sold at domestic retail for full year 2014,” said Hoby Darling, President and Chief Executive Officer. “Our recent performance demonstrates that our strategy of exciting our consumer through innovation and leveraging our brand and capabilities into adjacent audio categories is working. “2014 marked an important inflection point in the evolution of our company. The business is becoming more diversified, our teams are aligned and hungry for success, and we have a clearly defined roadmap for the future that is working. The foundations have been set for 2015 and we are on full attack.”

Gross profit in the fourth quarter of 2014 increased 33 percent to $41.9 million from $31.4 million in the same quarter of the prior year. Gross margin was 43.3 percent in the fourth quarter of 2014 compared to 43.5 percent in the same quarter of the prior year. The 20 basis point decrease in gross margin was due to a shift in product mix towards high growth products with lower margins, including gaming and wireless speakers, together with higher air freight related charges in connection with west coast port slowdowns.

Selling, general and administrative (SG&A) expenses as a percentage of net sales in the fourth quarter of 2014 decreased 380 basis points to 32.1 percent from 35.9 percent in the same quarter of the prior year. The decrease in SG&A expenses as a percentage of net sales was primarily due to the operating leverage created by sales growth, combined with decreases in certain operating expenses.

Operating income in the fourth quarter of 2014 increased by $5.3 million, or 97 percent, to $10.8 million from $5.5 million in the same quarter of the prior year.

Other expense in the fourth quarter of 2014 increased by $0.7 million to $0.8 million as a result of currency effects in Europe, Canada, Japan and Mexico.

Net income in the fourth quarter of 2014 was $7.4 million, or $0.26 per diluted share, based on 28.8 million diluted weighted average common shares outstanding. Net income in the same quarter of the prior year was $3.6 million, or $0.13 per diluted share, based on 28.1 million diluted weighted average common shares outstanding.

Balance Sheet Highlights

As of Dec. 31, 2014, cash, cash equivalents, and short-term investments totaled $36.6 million compared to $38.8 million as of Dec. 31, 2013. This decrease is due to the later timing of sales in the fourth quarter versus one year ago with a corresponding increase in accounts receivable and ending inventory. The company continued to have no outstanding debt. Accounts receivable increased 29.2 percent to $74.4 million as of Dec. 31, 2014 from $57.5 million as of Dec. 31, 2013, which is consistent with the growth and timing of sales in the fourth quarter. Inventory increased 36 percent to $55.0 million as of Dec. 31, 2014 from $40.3 million as of Dec. 31, 2013, which is consistent with current revenue growth rates and logistics contingency planning for potential shipping disruptions.