Skullcandy Updates SEC Filing; Purchases Astro Gaming Technology

Skullcandy has purchased the assets of gaming headphones maker, Astro Gaming Inc., a San Francisco-based company, for $10.8 million, according to a Wall Street Journal article:

“Skullcandy Inc. has acquired the assets of a maker of gaming headphones for $10.8 million, according to a securities filing that also revealed Skullcandy plunging into the red last year as the headphone seller’s costs soared.

The Park City, Utah-based company, which registered for an initial public offering in January and last month replaced its chief executive, said in a filing late Thursday that it purchased San Francisco-based Astro Gaming Inc. on April 22.

Astro Gaming was backed by investors including Triangle Peak Partners LP and Fayez Sarofim & Co.”

Skullcandy, which filed an IPO back in January, updated its initial S-1 Form at the end of April with the Security and Exchange Commission, reflecting what the WSJ eluded to above: the company saw a loss of $9.7 million for the year and $17.3 million for the final quarter of 2010.   Jeff Harbaugh’s Market Watch provides some numbers and analysis on the subject:

The original S-1 had an income statement for the nine months ended September 30, 2010 that showed (in millions of dollars):
Net Sales                                           $95,940
Cost of Goods Sold                          $46,629
Gross Profit                                        $49,311
Selling, General and
Admin. Expenses                            $30,206
Operating Income                            $19,105
Other (Income) Expense                $14
Interest Expense                             $6,559
Net Income                                      $7,645
The amended S-1 shows the income statement for the whole year ended December 31, 2010 and the picture is a bit different.
Net Sales                                            $160,583
Cost of Goods Sold                          $75,078
Gross Profit                                        $85,505
Selling, General and
Admin. Expenses                             $67,602
Operating Income                             $17,903
Other (Income) Expense                 $14,556
Interest Expense                               $8,387
Net Income (Loss)                           $(9,723)

“Skullcandy is counting on the success of its IPO to reduce its leverage and give it the working capital it needs to execute on its plan. Shareholders and executives have taken a bunch of cash out of the company in the fourth quarter, resulting in a big loss. They were entitled to do that under existing agreements, but how does it look to a potential stock purchaser? Those potential investors also see a company whose 2008 net income of $13 million fell to $3.5 million in 2009 even as sales grew 47% to $118 million. Now, on sales of $160 million, there's a loss of almost $10 million.”
Read more at JeffHarbaugh.com.