Skullcandy Announces Fourth quarter 2013 Financial Results
PARK CITY, UTAH – March 6, 2014 – Skullcandy, Inc. (NASDAQ: SKUL) today announced financial results for the fourth quarter ended December 31, 2013.
Fourth quarter Results
Net sales were $72.2 million
Net income was $0.13 per diluted share
Non-GAAP adjusted net income was $0.13 per diluted share
"2013 was a year of tremendous positive change geared toward executing our turnaround strategy. We now have a clear long-term vision for transforming Skullcandy and Astro Gaming into the most innovative brands in audio through obsessing about our consumers, disruptive technologies, and creative branding,” said Hoby Darling, President and Chief Executive Officer of Skullcandy. “The year was capped off by a strong fourth quarter performance focused on reinforcing our brand ethos and positioned the business for long-term success. The great work the team has done establishing a new direction for the Company speaks volumes about our people and our culture and the foundation we are building. With our five key growth pillars established and a clear understanding of our consumer, where we will innovate and focus, and a segmented distribution strategy, it is now about executing. We are confident we can achieve our vision of being a global audio leader while delivering profitable growth, increased shareholder value and living by our core values.”
Net sales in the fourth quarter of 2013 decreased 28.4% to $72.2 million from $101.0 million in the same quarter of the prior year. North America net sales decreased 30.3% to $57.6 million from $82.7 million in the same quarter of the prior year. Consistent with the strategy stated in previous quarters, these results were driven by the Company's actions to significantly cut sales to the off-price channel, aggressively enforced its MAP pricing online, and control inventory levels with its customers. International net sales decreased 19.9% to $14.7 million from $18.3 million in the same quarter of the prior year. Included in the North America segment in fourth quarter 2013 and fourth quarter 2012 are net sales of $0.7 million and $7.4 million, respectively, of products that were sold from the United States to customers with a “ship to” location outside of North America. Including these sales in the international segment, international net sales decreased 40.2%, and North America net sales decreased 24.4%, compared to the same quarter in the prior year.
Gross profit in the fourth quarter of 2013 decreased 30.0% to $31.4 million from $44.9 million in the same quarter of the prior year. Gross margin was 43.5% in the fourth quarter of 2013 compared to 44.5% in the same quarter of the prior year. The decrease in gross margin was primarily attributable to increased sales returns and allowance expense due to increased returns rates and trailing credits.
Selling, general and administrative (SG&A) expenses in the fourth quarter of 2013 decreased 4.8% to $26.0 million from $27.3 million in the same quarter of the prior year. SG&A expenses in the fourth quarter of 2013 included $1.5 million in marketing costs related to the four city tour highlighting key athletes and products. These costs were offset by a decrease in bad debt expense of $1.5 million as compared to the fourth quarter of 2012. As a percentage of net sales, SG&A expenses were 35.9% compared to 27.0% in the same quarter of the prior year.
Certain reclassifications have been made to the Company's 2012 results to conform to the 2013 presentation to better reflect where certain costs should be presented in the statement of operations. For this reason, tooling depreciation and warranty related expenses are being included in cost of goods sold for all comparable periods.
Net income attributable to the fourth quarter of 2013 was $3.6 million, or $0.13 per diluted share, based on 28.1 million diluted weighted average common shares outstanding. Net income attributable to the same quarter of the prior year was $11.5 million, or $0.41 per diluted share, based on 27.8 million diluted weighted average common shares outstanding. For a reconciliation of non-GAAP adjusted net income (loss) to net income (loss), see the accompanying tables at the end of this release.
Balance Sheet Highlights
The following information was filed by Skullcandy, Inc. (SKUL) on Thursday, March 6, 2014 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.