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Skullcandy Announces Record Fourth Quarter And 2012 Net Sales

-Financial Tables Follow-

 

         
SKULLCANDY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except share and per share information)
(unaudited)
     
  Three Months Ended December 31, Twelve Months Ended December 31,  
  2012 2011 2012 2011
Net sales $ 100,970 $ 83,413 $ 297,686 $ 232,469
Cost of goods sold  55,815  41,786  156,766  116,930
Gross profit  45,155  41,627  140,920  115,539
Selling, general and administrative expenses  27,492  21,183  99,436  73,378
Income from operations  17,663  20,444  41,484  42,161
Other (income) expense  (139)  45  453  1,761
Interest expense  186  84  641  1,089
Interest expense—related party  —  —  —  6,384
Income before income taxes and noncontrolling interests  17,616  20,315  40,390  32,927
Income tax expense  6,183  7,983  14,574  14,306
Net income  11,433  12,332  25,816  18,621
Net loss (income) attributable to noncontrolling interests 30 (11) 63 (4)
Preferred dividends  —  —  —  (17 )
Net income attributable to Skullcandy, Inc. $ 11,463 $ 12,321 $ 25,879 $ 18,600
         
Net income per common share attributable to Skullcandy, Inc.         
Basic $ 0.42 $ 0.45 $ 0.94 $ 0.93
Diluted  0.41  0.44  0.92  0.79
Weighted average common shares outstanding        
Basic 27,593,290 27,241,718 27,405,017 20,078,579
Diluted  27,848,927 27,968,585 27,980,983 23,573,962

 

     
SKULLCANDY, INC.
CONSOLIDATED BALANCE SHEETS
 (in thousands of dollars)
(unaudited)
 
  As of December 31,
  2012 2011
Assets    
Current assets:    
Cash and cash equivalents $ 19,345 $ 23,302
Accounts receivable, net  76,307  50,616
Inventories  41,567  43,975
Prepaid expenses and other current assets  5,604  8,499
Deferred taxes  2,943  3,978
Total current assets  145,766  130,370
Property and equipment, net  16,000  10,294
Intangibles  12,481  13,678
Goodwill  13,867  13,867
Deferred financing fees  161  402
Total assets $ 188,275 $ 168,611
     
Liabilities and stockholders' equity    
Current liabilities:    
Accounts payable $ 22,887 $ 23,206
Accrued liabilities  21,047  25,100
Bank line of credit  —   9,884
Total current liabilities  43,934  58,190
Deferred taxes  2,219  3,609
Stockholders' equity:    
Common stock  3  3
Treasury stock  (43,294)  (43,294 )
Additional paid-in capital  128,676  119,042
Accumulated other comprehensive income (loss)  (22)  118
Retained earnings  56,218  30,339
Total Skullcandy stockholders' equity  141,581  106,208
Noncontrolling interests  541  604
Total stockholders' equity  142,122  106,812
Total liabilities and stockholders' equity $  188,275 $  168,611
     

 

     
SKULLCANDY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (in thousands of dollars)
(unaudited)
  Twelve Months Ended December 31,
  2012 2011  
Operating activities    
Net income $ 25,816  $ 18,621 
Adjustments to reconcile net income to net cash provided by operating activities:    
 Depreciation and amortization  6,220  2,031
 Loss on disposal of fixed assets  7  123
 Provision for doubtful accounts  3,617  333
 Deferred income taxes  (355)      805  
 Noncash interest expense  241  6,643
 Stock-based compensation expense  6,563  5,243
Changes in operating assets and liabilities, net of effects of acquisitions:    
 Accounts receivable (29,287)   (4,219) 
 Inventories  2,433 (13,966) 
 Prepaid expenses and other  2,679  (4,633 )
 Accounts payable  (343)  7,616
 Accrued liabilities  (4,049)  10,206
Net cash provided by operating activities  13,542  28,803
Investing activities    
Purchase of property and equipment    (10,475)  (7,559)
Purchase of intangible assets   (244)   (31)
Business acquisitions  — (29,462 )
Net cash used in investing activities (10,719 ) (37,052 )
Financing activities    
Net repayments on bank line of credit   (9,884)   (919)
Repayment of long-term debt  — (46,780 )
Proceeds from issuance of common stock, net of issuance costs   —  69,902
Capital contribution by joint venture partner  —  600
Proceeds from exercise of stock options and warrants  2,366  1,140
Income tax benefit related to exercise of stock options  705  1,171
Net cash provided by (used in) financing activities  (6,813)  25,114
Effect of exchange rate changes on cash and cash equivalents  33  (25 ) 
Net increase (decrease) in cash and cash equivalents (3,957)  16,840
Cash and cash equivalents, beginning of period  23,302  6,462
Cash and cash equivalents, end of period $ 19,345 $ 23,302 
     

SKULLCANDY, INC. SEGMENT INFORMATION (unaudited)

Prior to the Company's acquisition of Kungsbacka 57 AB in August of 2011, the Company operated in one business segment. The North America segment primarily consists of Skullcandy and Astro Gaming product sales to customers in the United States and Mexico (through the Company's joint venture). The international segment primarily includes Skullcandy product sales to customers in Europe and Asia that are served by the Company's European and Asian operations. Included in the North America segment for the three months ended December 31, 2012 and 2011 and twelve months ended December 31, 2012 and 2011 are net sales of $8.9 million and $5.2 million and $26.1 million and $33.8 million, respectively, that represent products that were sold from North America to retailers and distributors in other countries. The international segment for the twelve months ended December 31, 2011 only includes activity from August 26, 2011 through December 31, 2011. 

         
  Three Months Ended December 31, Twelve Months Ended December 31,
  2012 2011   2012   2011
Net sales        
 North America $ 82,650 $ 73,783 $ 250,262 $ 218,437
 International  18,320  9,630  47,424  14,032
Consolidated  100,970  83,413  297,686  232,469
         
Gross profit        
 North America  36,357  37,289  117,199  109,639
 International  8,798  4,338  23,721  5,900
Consolidated  45,155   41,627  140,920  115,539
         
Income from operations        
 North America  14,171   18,189  31,869   38,913
 International   3,492   2,255   9,615   3,248
Consolidated $ 17,663 $ 20,444 $ 41,484 $ 42,161
 
 
SKULLCANDY, INC.
RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED NET INCOME
(in thousands of dollars)
(unaudited)
         
         
  Three months ended December 31, Twelve months ended December 31,
  2012 2011 2012 2011
         
         
Net income  $11,433 $12,332 $25,816 $18,621
Net loss (income) attributable to noncontrolling interests  30 (11) 63  (4) 
Second contingent payment pursuant to the securities purchase and redemption agreement (1)   —   —   —  2,199
Third contingent payment pursuant to the securities purchase and redemption agreement (2)   —   —   —  1,392
Legal and settlement expenses associated with litigation, net of tax benefit (3)   —  831 418 1,266
Legal and settlement expenses associated with patent litigation, net of tax benefit (4)  427  —  435  — 
Bad debt expense associated with bankruptcy filing of a major retail customer, net of tax benefit (5)  1,263  —  1,263  — 
Non-GAAP adjusted net income  $13,153 $13,152 $27,995 $23,474
         
         
(1)  This item is recorded in interest expense in the Consolidated Statements of Operations. This expense was not deductible for tax purposes. 
(2)  This item is recorded in other expense in the Consolidated Statements of Operations. This expense was not deductible for tax purposes. 
(3)  This item is recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. It is reflected in the schedule above net of tax benefit of $502 thousand for the three months ended December 31, 2011 and $249 thousand and $765 thousand for the twelve months ended December 31, 2012 and 2011, respectively. 
(4)  This item is recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. It is reflected in the schedule above net of tax benefit of $249 thousand and $254 thousand for the three and twelve months ended December 31, 2012, respectively. 
(5)  This item is recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. It is reflected in the schedule above net of tax benefit of $194 thousand. 
 
SKULLCANDY, INC.
RECONCILIATION OF DILUTED EARNINGS PER SHARE - GAAP TO DILUTED EARNINGS PER SHARE – NON-GAAP
 (unaudited)
         
  Three months ended December 31, Twelve months ended December 31,
  2012 2011 2012 2011
         
Diluted earnings per share - GAAP  $0.41 $0.44 $0.92 $0.79
Second contingent payment pursuant to the securities purchase and redemption agreement   —   —  — 0.09
Third contingent payment pursuant to the securities purchase and redemption agreement   —    —  —   0.06
Legal and settlement expenses associated with litigation, net of tax benefit (1)   — 0.03 0.01 0.06
Legal and settlement expenses associated with patent litigation, net of tax benefit (1)  0.01  — 0.02  —
Bad debt expense associated with bankruptcy filing of a major retail customer, net of tax benefit (1)   0.05   —  0.05   — 
Diluted earnings per share – non-GAAP  $0.47 $0.47 $1.00 $1.00
         
(1)  These items are reflected net of the tax benefit
CONTACT: ICR
         Brendon Frey / Joe Teklits
         203-682-8200
         Brendon.Frey@icrinc.com 
         Joseph.Teklits@icrinc.com

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