Headphone maker Skullcandy filed a registration statement with the Securities & Exchange Commission on Friday to raise up to $125 million in an initial public offering. Proceeds will be used to pay down debt and for working capital purposes.


Net sales rose 35.7% in the nine months ended Sept. 30, 2010 to $95.9 million, according to its prospectus. Net income swung to a $7.6 million profit from a $4.4 million loss in the same period the prior year. Sales jumped from $9.1 million in 2006 to $118.3 million in 2009, or a compound annual growth rate of approximately 135%.


The company was founded in 2003 by Rick Alden, its current CEO and a veteran of the action sports industry. He had co-founded Device Manufacturing, a snowboard boot and binding company, in 1995 that was acquired by Atomic Ski Company in 1999. In 1986, Alden co-founded National Snowboard, a snowboard events and marketing company, which was acquired by the American Ski Association in 1991.
“Skullcandy is a leading audio brand that reflects the collision of the music, fashion and action sports lifestyles,” Skullcandy said in its S-1 filing. “Our brand symbolizes youth and rebellion and embodies our motto, 'Every revolution needs a soundtrack,' We believe we have revolutionized the headphone market by stylizing a previously-commoditized product and capitalizing on the increasing pervasiveness, portability and personalization of music.”


A particular focus has been establishing the brand at specialty retailers focused on action sports and the youth lifestyle such as Zumiez, Tilly’s, Jack’s Surfboards, Blades, Ron Jon Surf Shop and Karmaloop.


That strategy helped the brand reach influencers “who helped establish the credibility and authenticity of our brand.” Distribution has since expanded to select consumer electronics, mass, sporting goods and mobile phone retailers. Its biggest customers are Target and Best Buy, which each accounted for more than 10% of its sales in 2009. The company showed at the Outdoor Retailer Winter Market this year.


Skullcandy also believes it's the first headphone brand to sponsor stars within the action sports and the indie and hip-hop music genres. Among its endorsers are snowboarder Danny Kass, surfer Mick Fanning, and music artists such as Snoop Dogg and Mix Master Mike of the Beastie Boys. It has also  partnered with the NBA and events such as the Warped Tour, Maloof Money Cup and U.S. Open of Surfing.


Another focus has been innovation, such as its Skullcrusher, an amplified subwoofer-enhanced headphone. Its headphones are also differentiated by “bold color schemes, loud patterns, unique materials and creative packaging.”


Growth is expected to be driven by adding more innovative displays playing up its sponsors at existing stores, accelerated international growth, expanding its premium offerings, and moving into complementary categories such as protective cases and gaming/mobile phone headphones.


Skullcandy’s biggest single investor, according to the filing, is Jeff Kearl, the company’s chairman and the founder of startup investment firm Monarch Partners.


Underwriters on the offering are being led by Bank of America Merrill Lynch and Morgan Stanley.