August 9, 2016

CORRECTION -- Skullcandy, Inc. Reports Second Quarter 2016 Results

PARK CITY, Utah, Aug. 09, 2016 (GLOBE NEWSWIRE) -- Skullcandy, Inc. (NASDAQ:SKUL) today announced financial results for the second quarter ended June 30, 2016.

"We are pleased with our second quarter results. The success we saw with our brands in a challenging retail environment is a testament to the consumer focus and passion of our team. For the Skullcandy brand, we saw significant strength in our largest domestic accounts led by our expanded wireless portfolio which helped fuel sell-through at a rate that exceeded the overall headphone market according to NPD. Wireless is the future of audio and the Skullcandy brand is winning. For the Astro Gaming brand, we continue to experience strong growth and expect the fall launch of the new A50 headset to set the standard for the best console gaming headset in the market. While our overall Company results were hampered by some temporary headwinds including the ongoing clean-up of our China region and several retailer bankruptcies around the world, we are excited as a team to be on full attack," said Skullcandy, Inc. President and CEO, Hoby Darling.

Net sales in the second quarter of 2016 and 2015 were $57.3 million and $57.4 million, respectively. Domestic (U.S.) net sales increased 4% to $42.3 million from $40.7 million in the same quarter a year ago. International (Non U.S.) net sales decreased 10% to $15.0 million from $16.7 million in the same quarter a year ago, primarily due to significantly decreased sales in China.

Gross profit in the second quarter of 2016 decreased 4% to $23.6 million from $24.5 million in the same quarter a year ago. Gross margin decreased to 41.1% in the second quarter of 2016 from 42.7% in the same quarter a year ago primarily due to continued clean up in China.

Selling, general and administrative (SG&A) expenses in the second quarter of 2016 increased 9% to $25.5 million from $23.5 million in the same quarter a year ago. The increase in SG&A expenses is primarily due to certain transaction costs related to the Company's sale process, customer bankruptcies, litigation, personnel related expenses, demand creation, and research and innovation expenses. These increases are partially offset by decreases in administrative costs. As a percentage of net sales, SG&A expenses increased 400 basis points to 45% as compared to 41% in the same quarter a year ago. Excluding certain non-routine costs related to our sale process, litigation, and customer bankruptcies, SG&A expenses were up 3% year over year.

Operating (loss) income in the second quarter of 2016 was $(2.0) million, a decrease of $3.0 million compared to $1.0 million in the same quarter a year ago, driven by a lower gross profit and increased SG&A expenses. Excluding certain non-routine costs related to our sale process, litigation, and customer bankruptcies, the change in operating (loss) income year over year was $1.6 million.

Net (loss) income in the second quarter of 2016 was $(1.6) million, or $(0.05) per share, based on 28.7 million weighted average diluted common shares outstanding, and net (loss) income in the same quarter a year ago was $1.2 million, or $0.04 per share, based on 29.0 million weighted average diluted common shares outstanding.

Second quarter 2016 results include pre-tax expenses of approximately $1.3m, or $0.03 of net income per share, in certain non-routine costs related to our sale process, litigation, and customer bankruptcies.

Balance Sheet Highlights

As of June 30, 2016, cash, cash equivalents, and short-term investments increased 75% to $41.2 million compared to $23.6 million as of December 31, 2015. The increase was primarily due to the Company's collection efforts on receivables from fourth quarter sales and a decrease in the Company's early payments with certain vendors. Accounts receivable, net decreased 37% to $53.1 million as of June 30, 2016 from $84.9 million as of December 31, 2015. Inventories, net increased 7% to $44.5 million as of June 30, 2016 from $41.7 million as of December 31, 2015. The Company continued to have no outstanding debt as of June 30, 2016.

About Skullcandy, Inc.

Skullcandy, Inc. creates world-class audio experiences through its Skullcandy® and Astro Gaming® brands. Founded at the intersection of music, sports, technology and creative culture, Skullcandy brand creates world-class audio and gaming products for the risk takers, innovators, and pioneers who inspire us all to live life at full volume. From new innovations in the science of sound and human potential, to collaborations with up-and-coming musicians and athletes, Skullcandy lives by its mission to inspire life at full volume through forward-thinking technologies and ideas, and leading edge design and materialization. Astro Gaming creates premium video gaming equipment for professional gamers, leagues, and gaming enthusiasts. Astro Gaming was founded in the pits of competitive gaming and has become synonymous with pinnacle gaming experiences. Skullcandy and Astro Gaming products are sold and distributed through a variety of channels around the world from the Company's global locations in Park City, San Francisco, Tokyo, Zurich, and Mexico City as well as through partners in some of the most important culture, sports, and gaming hubs in the world. The Skullcandy brand website can be found at http://www.skullcandy.com. The Astro Gaming website can be found at http://www.astrogaming.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 2015 10-K filed with the Securities and Exchange Commission on March 4, 2016. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date thereof. 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, per share information)
(unaudited)
 
 Three months ended June 30, Six months ended June 30,
 2016 2015 2016 2015
Net sales$57,282  $57,393  $103,569  $103,035 
Cost of goods sold33,727  32,866  62,647  59,849 
Gross profit 23,555  24,527  40,922  43,186 
Selling, general and administrative expenses25,527  23,502  49,668  45,807 
(Loss) income from operations(1,972)  1,025  (8,746) (2,621)
Other expense (income)311  (111) 491  884 
Interest (income) expense(34) 5  (46) (11)
(Loss) income before income taxes and noncontrolling interest(2,249) 1,131  (9,191) (3,494)
Income tax benefit(675) (19) (2,712) (813)
Net (loss) income(1,574) 1,150  (6,479) (2,681)
Net loss attributable to noncontrolling interest  (65)   (168)
Net (loss) income attributable to Skullcandy, Inc.$(1,574) $1,215  $(6,479) $(2,513)
Net (loss) income per common share attributable to Skullcandy, Inc.       
Basic$(0.05) $0.04  $(0.23) $(0.09)
Diluted(0.05)  0.04  (0.23) (0.09)
Weighted average common shares outstanding       
Basic28,665  28,380  28,614  28,326 
Diluted28,665  28,952  28,614  28,326 



SKULLCANDY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
(unaudited)
  
 June 30, 
 2016
 
 December 31, 
 2015
Assets    
Current assets:    
Cash and cash equivalents $24,617  $23,030 
Short-term investments 16,602  543 
Total cash, cash equivalents, and short-term investments 41,219  23,573 
Accounts receivable, net 53,128  84,909 
Inventories 44,498  41,686 
Prepaid expenses and other current assets 11,963  6,189 
Current deferred tax assets 4,492  3,999 
Total current assets 155,300  160,356 
Property and equipment, net 14,566  14,830 
Intangibles 6,743  7,433 
Goodwill 13,867  13,867 
Deferred financing fees 26  31 
Non-current deferred tax assets  558  923 
Other non-current assets 654  250 
Total assets $191,714  $197,690 
Liabilities and Stockholders' Equity    
Current liabilities:    
Accounts payable $17,211  $13,216 
Accrued liabilities 16,341  21,931 
Current deferred tax liability 8   190 
Total current liabilities 33,560  35,337 
Non-current deferred tax liability 996   1,148 
Non-current liabilities 1,280  1,117 
Total liabilities 35,836  37,602 
Stockholders' equity:    
Preferred stock    
Common stock 3  3 
Treasury stock (43,294) (43,294)
Additional paid-in capital 139,638  137,535 
Accumulated other comprehensive income (loss) (652) (818)
Retained earnings 60,183  66,662 
Total stockholders' equity 155,878  160,088 
Total liabilities and stockholders' equity $191,714  $197,690 



SKULLCANDY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
 
 Six Months Ended June 30,
 2016 2015
Cash flows from operating activities:   
Net loss$(6,479)  $(2,681)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:   
Depreciation and amortization5,204  5,230 
Loss on disposal of property and equipment and intangible assets  64 
Provision for doubtful accounts833  11 
Deferred income taxes(2,062) 2,720 
Non-cash interest expense5  5 
Amortization of stock-based compensation expense2,342  2,055 
Foreign currency remeasurement (gain) loss(458) 550 
Changes in operating assets and liabilities:   
Accounts receivable31,039  19,394 
Inventories(2,650) (6,531)
Prepaid expenses and other current assets(5,697) (5,191)
Accounts payable3,702  (9,484)
Accrued liabilities(3,559)  (17,969)
Net cash provided by (used in) operating activities22,220  (11,827)
Cash flows from investing activities:   
Purchase of property and equipment(3,937) (5,807)
Purchases of short-term investments(16,043)  
Proceeds from sales of short-term investments   7,514 
Loan to third party(500)  
Net cash (used in) provided by investing activities(20,480 ) 1,707 
Cash flows from financing activities:   
Proceeds from exercise of stock options9  358 
Taxes paid related to net share settlement(163) (245)
Income tax (detriment) benefit from share based compensation(84) 95 
Net cash (used in) provided by financing activities(238) 208 
Effect of exchange rate changes on cash and cash equivalents85  (10)
Net increase (decrease) in cash and cash equivalents1,587  (9,922)
Cash and cash equivalents, beginning of period23,030  21,623 
Cash and cash equivalents, end of period$24,617  $11,701 
Supplemental cash flow information:   
Cash paid for interest$  $ 
Cash paid for income tax$4,580  $3,725 
Supplemental non-cash activities:   
Purchase of property and equipment financed through accounts payable$298  $329 


SKULLCANDY, INC.
SEGMENT INFORMATION
(unaudited)

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, and all other geographic areas outside the United States that are served by the Company's International operations.

The table below summarizes information about reportable segments for the three and six months ended June 30, 2016 and 2015 (in thousands):

 Three months ended June 30,    
 2016 2015 $ Change % Change
Net sales:       
Domestic$42,324  $40,728  $1,596  4%
International14,958  16,665   (1,707) (10)%
Total net sales$57,282  $57,393  $(111) %


 Three months ended June 30,    
 2016 2015 $ Change % Change
Gross profit:       
Domestic$17,904  $17,849  $55  %
International5,651   6,678  (1,027) (15)%
Total gross profit$23,555  $24,527  $(972) (4)%
        
 Three months ended June 30,    
 2016 2015 Basis Point Change  
Gross margin %:       
Domestic42.3% 43.8%  (150)  
International37.8% 40.1% (230)  
Total gross margin41.1% 42.7% (160)  


 Six months ended June 30,    
 2016 2015 $ Change % Change
Net sales:       
Domestic$74,093  $71,352  $2,741  4%
International29,476  31,683  (2,207) (7)%
Total net sales$103,569  $103,035  $534  1%


 Six months ended June 30,    
 2016 2015 $ Change % Change
Gross profit:       
Domestic$29,992  $30,175  $(183) (1)%
International10,930  13,011  (2,081) (16)%
Total gross profit$40,922  $43,186  $(2,264) (5)%
        
 Six months ended June 30,    
 2016 2015 Basis Point Change  
Gross margin %:       
Domestic40.5% 42.3% (180)  
International37.1% 41.1% (400)  
Total gross margin39.5% 41.9% (240)  

 

Contacts



ICR

Brendon Frey

203-682-8200

Brendon.Frey@icrinc.com

Primary Logo

Source: Skullcandy, Inc.

News Provided by Acquire Media


Close window | Back to top

Copyright 2017 Skullcandy, Inc.