A Report on Skullcandy

(As part of curriculum of MPPS – TEIT 2014 – SPIT)

By

Aditya Shirode

C51 TEIT SPIT

Table of Contents

Company Profile

Key Demographics

Company Prowess

Company Timeline

Description of Product

Organizational Structure

Company Strategy: Past-Present-Future

Management Strategies and Policies

Projects: Undertaken and Upcoming

Current Market Evaluation

Awards and Recognitions

Images: Work Environment and Products

References

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1

1. Company Profile

Skullcandy, Inc., a Delaware corporation develops and distributes headphones and other audio

accessories to retailers throughout the United States and to retailers and distributors in various

countries worldwide.

Skullcandy is the leading global lifestyle and performance audio brand driven by the creativity

and irreverence of youth culture. Skullcandy designs, markets and distributes audio and gaming

headphones and other related products under the Skullcandy, Astro Gaming and 2XL by

Skullcandy brands. Skullcandy was launched in 2003 and quickly became one of the world's

most distinct audio brands by bringing unique technology, color, character and performance to

an otherwise monochromatic space; helping to revolutionize the audio arena by introducing

headphones, earbuds and other audio and wireless lifestyle products that possess unmistakable

style and exceptional performance. The Company's products are sold and distributed through a

variety of channels in the U.S. and approximately 80 countries worldwide.

They pioneered the distribution of headphones in specialty retailers focused on action sports

and the youth lifestyle, such as Zumiez, Tilly's and hundreds of independent snow, skate and

surf retailers. Through this channel we reach consumer influencers, individuals who help

establish and maintain the credibility and authenticity of our brand. Building on this foundation,

they have successfully expanded our distribution to select consumer electronics, mass, sporting

goods and mobile phone retailers.i

The company was founded in 2003 by Rick Alden, the creator of several successful action sports

companies and a lifelong industry enthusiast. The principal offices are located in Park City,

Utah and San Clemente, California.

Founder Rick Alden

Founded in 2003

Employees 335 (As of Sept 2013)

Address 1441 West Ute Boulevard, Suite 250, Park City, UT 84098, United States

Phone 435-940-1545

Fax 435-214-2566

Website http://www.skullcandy.com/

FB Page facebook.com/Skullcandy

Twitter @skullcandy

NASDAQ SKUL (IPO in 2011)

Revenue $297.32M

Net Income $25.88M

2012 Growth 27.9%

2

The Company competes mainly with Sony, JVC, Bose, Beats by Dr. Dre, Nixon, Adidas, Incase,

Urbanears, Monster Cable Products, Sol Republic, iFrogz, Nike and Sennheiser.

Company Logo

(Source: http://atomictango.com/wp-content/uploads/2008/01/skullcandy_logo_SS2012.png)

Origin Story: A head (set) for savvy branding and expansion

For some people, opportunity knocks. In Rick Alden’s case, it was sent to voicemail.

Alden missed an important cell-phone call while sitting on a ski lift in Utah because he couldn’t

hear the ring through his MP3 headphone. Then he noticed the same thing happen to people

traveling by train and subway in Tokyo and London.

Thus, in 2003, Skullcandy was born. This year, the company will sell an estimated $120 million

worth of stylish headphones that allow users to listen to music, then switch over to their phone

to take a call. Even with the recession, the company’s sales are still growing at a dizzying 50% a

year.ii

Skullcandy is a case of careful branding and savvy expansion. The company’s headphones found

an untapped niche among snowboarders, skateboarders, and action-sports enthusiasts.

Originally, the focus of the company was its technology, which combined state-of-the-art

headphones with hands-free cellular technology. Quickly, Skullcandy realized its real strength

was as a hip, edgy brand that made a fashion statement.

The company’s Park City, Utah, office is modeled after an indoor skate park. Employees race

down the corridors on their boards. “We keep focused on the lifestyle and pump that energy

into our product brand,” Alden says.

3

Today, 90% of Skullcandy’s customers don’t even ride, but want to feel like they do—the

headphones have become such a hip status symbol that every teenager wants the company's

Skullcrusher, Full Metal Jacket, or Double Agent models. Skullcandy has also expanded into

mass retailers such as Target and Best Buy. But Andrus notes that the company also turned

down many retailers, even when it could have used the cash, because it didn’t want to diminish

the edge of the brand by making it available in too many places.

According to Skullcandy’s Investor Presentationiii, they describe themselves as:

The Epicenter Of Youth Culture

A Leading performance audio brand rooted in action sports and lifestyle cultures

Revolutionized the headphone market by reinventing a uninspired category

Pioneered the distribution of headphones in specialty retailers focused on action sports

and the youth lifestyle

Set-up international direct sales office in Europe; products are now sold in more than 80

countries

Built a world-class product development and advanced concept engineering platform

Implementing a multi-brand strategy to expand into new audio segments and adjacent

categories

Acquired Astro Gaming, the premier headset brand in the gaming category

4

2. Key Demographics

Valuation Measures

Market Cap (intraday)5: 172.41M

Enterprise Value (22-Oct-2013)3: 142.43M

Trailing P/E (ttm, intraday): 17.12

Forward P/E (fye 31-Dec-2014)1: 29.67

PEG Ratio (5 yr expected)1: -22.50

Price/Sales (ttm): 0.66

Price/Book (mrq): 1.26

Enterprise Value/Revenue (ttm)3: 0.55

Enterprise Value/EBITDA (ttm)6: 5.33

Financial Highlights

Fiscal Year

Fiscal Year Ends: 31 Dec

Most Recent Quarter (mrq): 30-Jun-2013

Profitability

Profit Margin (ttm): 3.95%

Operating Margin (ttm): 7.20%

Management Effectiveness

Return on Assets (ttm): 7.10%

Return on Equity (ttm): 7.89%

Income Statement

Revenue (ttm): 259.81M

Revenue Per Share (ttm): 9.41

Qtrly Revenue Growth (yoy): -29.90%

Gross Profit (ttm): 140.92M

EBITDA (ttm)6: 26.72M

Net Income Avl to Common (ttm): 10.27M

Diluted EPS (ttm): 0.36

Qtrly Earnings Growth (yoy): N/A

5

Balance Sheet

Total Cash (mrq): 29.71M

Total Cash Per Share (mrq): 1.07

Total Debt (mrq): 0.00

Total Debt/Equity (mrq): N/A

Current Ratio (mrq): 4.49

Book Value Per Share (mrq): 4.91

Cash Flow Statement

Operating Cash Flow (ttm): 33.54M

Levered Free Cash Flow (ttm): 24.68M

SKUL vs. Industry Leaders

Statistic Industry Leader SKUL SKUL Rank

Market Capitalization BC94.L 179.30B 173.24M 133 / 188

P/E Ratio (ttm) RSW.L 1,738.99 16.98 38 / 188

PEG Ratio (ttm, 5 yr expected) IND.MI 64.14 -22.50 N/A

Revenue Growth (Qtrly YoY) 8016.HK 431.30% -29.90% 148 / 188

EPS Growth (Qtrly YoY) JTT.DE 494.10% N/A N/A

Long-Term Growth Rate (5 yr) 0081.HK N/A -3.40% N/A

Return on Equity (ttm) SMDM 602.56% 7.89% 57 / 188

Long-Term Debt/Equity (mrq)

N/A

Dividend Yield (annual) KOSS 4.70% N/A N/A

Table 1: Valuation Measures Table 2: Financial Highlights

Table 3: SKUL vs. Industry Leaders

(Source: http://in.finance.yahoo.com/q/ks?s=SKUL)

6

iv

7

Income Statement Evolution

(Source: http://www.4-

traders.com/reuters_charts/3,2,605,375,Skullcandy+Inc/CF43B/2/Income+Statement+Evolution.png)

Finances – Leverage

(Source: http://www.4-traders.com/reuters_charts/4,2,605,375,Skullcandy+Inc/CF43B/2/Finances+-

+Leverage.png)

8

EPS consensus revisions: last 18 months

(Source: http://www.4-

traders.com/reuters_charts/6,2,605,475,Skullcandy+Inc/CF43B/2/Target+Price+consensus+revisions+%3

A+last+18+months.png)

9

Price/ Earnings Ratio

(Source: http://screening.nasdaq.com//charts/SKUL_per.jpeg)

Sales/ Revenue over last 5 Years

10

Gross income over last 5 years

11

3. Company Prowess

Skullcandy has a wide range of headphones. They come in a wide range of colors, graphics, and

designs from over-ear headphones to on-ear headphones such as the Mix master (over-ear),

the Aviator (over-ear), and the Titans (in-ear). The company also has several docks for iPhones,

iPads, and iPods (Pipe and Vandal). In 2012 Skullcandy unveiled their first gaming headset in

several years, entitled SLYR. The initial launch was met with mixed reviews, and several months

later they successfully launched a higher priced headset titled PLYR 2. The company's most

recent releases are the $179.99 Dolby Surround Sound PLYR 1 headset, and the sub-woofer

utilizing $99 Crushers. The former of which was highly publicized through promotions with

many athletes and artists, who appeared in roughly 30 reaction videos when submitted to the

headphone's subwoofers.

Skullcandy offers a Wide Range of Innovative Performance Audio Products, which is their niche.

From the beginning, they have built products that are a reflection of Human lifestyle. They have

created Customer-oriented and uniquely targeted Products, which have reaped tremendous

rewards.

Skullcandy offers special ‘Action Sports’ Headphones, targeted at sportsmen and enthusiasts of

Snow, Surf, Moto, BMX and Ski sports. Not only most athletes prefer Skullcandy over others,

but general public too buys them to get a feel and live the Sport through them.

12

4. Company Timeline

v

13

5. Description of Products

14

15

16

17

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6. Organization Structure

Management Board of Directors

20

7. Strategy: Past-Present-Future

Consensus Opinion on SKUL (It is Dying): Analysts have a consensus mean of $249 million in

sales for 2013 and $266 million for 2014. Analysts are projecting mean earnings per share of

$.13 for 2013 and $.29 for 2014. Mean analyst price target is $4.79. Bear case (consensus)

thesis is that the company has been a seller of cheap headphones and will not be able to

transition to a seller of higher quality headphones at premium prices. If turnaround is not

successful stock has already been knocked down to the point where downside is only 10%-15%.

Upside is 80%-100% if company succeeds with a few initiatives and trading multiples expand.

This investment follows the 2-to-1 risk/reward ratio. This means investor expects to make at

least two times as much, if they are right versus if they are wrong and is what I look for as a

value investor.

Company second quarter earnings came in more or less as expected; again this is a turnaround

story and requires at least a year horizon in my opinion. As an investment company has zero

long term debt and 23% of current market capitalization is cash, so as previously enumerated

downside is limited. Implementing a few of the outlined initiatives results in significant upside

for shareholders. Stock appreciation will be driven by higher than anticipated revenue and

lower SG&A once company has few successful products and new branding is undertaken. SG&A

(% of Sales) has historically been in the 20-30% range going back to financials from 2006-2012,

as competition has increased in the space SG&A has increased, hitting the absurd 71% number

in the first quarter of 2013. I believe after 12-18 months of aggressive marketing the company

can go back to a range of high 30% to low 40%, but will never be able to go back to its old

numbers as a result of the changed competitive landscape. In terms of revenue, according to a

financial times quote Beats (private) 2012 revenues rose from $298m to $519m, almost

doubling in a year which is very promising if Skullcandy gets its act together. To have Skullcandy

making $300 million in revenue by 2015, by virtue of moving into a similar space is completely

rational and with Seth Darling (CEO) having extensive experience in the space it seems

reasonable. I do not believe sell side analysts are accurately taking into account how much of

the headphone market can be taken by Skullcandy and thus are predicting lower revenue.

Numerous changes have occupied management and distracted them from adding shareholder

value, including a switch from an OEM model to an ODM model, now they are feeling the pain

and are looking to execute.

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After tanking from its IPO price of $20 per share all the way down to $5 after its most recent

earnings report, Skullcandy (SKUL) needs a doctor. Dr. Dre could be that doctor. Dr. Dre might

have given Skullcandy just the boost it needs with the large success of Beats by Dre, giving new

life to a high-end headphone market. The overall headphones market increased from $1.8

billion to $2.4 billion from 2011 to 2012. Beats by Dre had 40% of the total U.S. headphones

market in 2012 and almost 70% of the premium headphones market during the holiday season

according to NPD. One thing is certain in the premium headphones market, which is anything

over $100, consumers will pay for sound quality and for the brand.

22

Top headphone purchase influencers

(Source: http://static.cdn-seekingalpha.com/uploads/2013/3/9/1484511-13628115250183284-Christopher-

Cowan.png)

Skullcandy headphones were very popular because they offered the consumer a cheap but

stylish brand for the mass amounts of iPhones and iPods that were being sold. They were

second in market share only to Sony in 2010, 23% and 14% respectively. Skullcandy also

obtained the top spot in earbuds sales in 2010. They priced their IPO at $20 per share which

would have given them a $500 million market cap at the time. Skullcandy built their brand on

being the headphones for athletes and musicians which worked very well at the time. There

was one problem - they primarily sold inexpensive headphones and when the premium market

emerged they were nowhere to be found.

Although being in a crunch condition, Skullcandy has announced following products at this

year’s CES –

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The Skullcandy Mix Master Mike

Skullcandy Roc Nation Aviators (in black/chrome and brown/gold)

(Source for both images: http://www.flickr.com/photos/the-jude/)

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8. Management Strategies and Policies

After the company reported a miss on Q4 2012 earnings and a slight beat on Q1 2013 earnings,

shares of Skullcandy fell more than 20% in the afterhours trading session. The steep decline

came on the heels of the company's guidance for Q1 2013 which assumes a loss of $.25 a share

for the quarter. Now, if you are one of those die hard SKUL investors who think that maybe the

company is low-balling expectations; I'd take on a second perspective that views the quarter as

nearly over when the company offered this guidance to investors on March 7, 2013. I'm pretty

sure they have a good idea of what the numbers look like at this point, so you may not want to

fool yourself into thinking management is under promising and might over deliver. Frankly

speaking, that hasn't been the Skullcandy way either.

Let's take a quick look at Q4 2012 before moving on:

Revenues: Up 21% to $101 million

Earnings: $.47 vs. estimates of $.48

North American sales increased 12% to $82.7 million and international net sales

increased 90.2% to $18.3 million.

Gross margin was 44.7% as compared to 49.7% in the same quarter a year ago.

Operating income in the fourth quarter was $17.7 million, down from $20.4 million in

the fourth quarter of 2011.

Clearly the company was and has not been firing on all cylinders based on the results noted

above. Additionally, guidance for Q1 2013 left much too be desired. Now let's look a little more

closely at what resulted in such a dramatic gross margin contraction YOY. The company notes

that three factors resulted in the gross margin contraction during Q4 2012: 1. The shift in sales

towards higher-priced, low-margin products accounted for 200 basis points of the decline. 2.

Two, higher levels of promotional sales and retailer discounting accounted for 180 basis points

of the decline. 3. Product liquidations through the off-price channel, which contributed 140

basis points to the decline.vi

On February 7, 2013, Skullcandy's CEO Jeremy Andrus decided to step down from his positions

as President and Chief Executive Officer and a Company director to join a private investment

firm. He will serve as a consultant to the Company over the next 12 months. The Board is

initiating a search for a permanent Chief Executive Officer. During the interim, the Board of

Directors has named Rick Alden, the company's founder, former Chief Executive Officer and a

current director, as Interim Chief Executive Officer.

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Although company advertised these as major changes for future, the changes were bound to

occur due to recent failures in upholstering the company in past years.

Over the last 50 or so days, Skullcandy CEO Seth “Hoby” Darling said he has learned a number

of major lessons about the brand and the category, breaking them down into five key areas the

company needs to focus on to achieve success:

The need to more clearly define the brand, what it stands for, and who its customers

are. Skullcandy will focus on clear messages to excite the consumer.

Increase differentiation and install a more disciplined product development strategy. In

the past he said Skullcandy has focused on some good ideas instead of all great ones.

The goal now is to become a product company, not just a brand-driven one. He

admitted they have a ways to go, but believes they are headed in the right direction.

Better align product, marketing, and sales teams and ultimately improve customers’

experience at the point of sale. Historically, he said Skullcandy’s divisions have been

siloed and that is beginning to change.

Transforming distribution. Darling says Skullcandy has too many of the same styles in

multiple channels that don’t support Skullcandy as a performance lifestyle audio brand.

The goal is to increase full-price sales and they’re already seeing results. Sales in the off-

price channel were down 66% in Q1. ”We need to segment retailers by consumers and

align our products with them,” he added.

Leverage New Categories. Darling believes Skullcandy has done a poor job of entering

into adjacent categories such as speakers and home audio, an area where he sees huge

opportunity. “We were distracted through the IPO process and missed the launches of

categories where we have a right to play,” said Darling. “We need to focus on doing

fewer things better but don’t expect us to rush to places where we don’t have brand

permission.”

Darling says that things are already beginning to turn around with decreasing off-price sales,

significant demand for its new Skullcrushers technology and went on to outline four major

priorities inline with the turnaround strategy that Founder Rick Alden outlined in March:

Reinforce the brand’s position in domestic channels. This begins with evolving the marketing

and the brand, which starts with providing clarity for employees, then the outside world, about

who Skullcandy is and isn’t. Darling says this involves “Examining all aspects of consumer touch

points to see where we can be most effective in creating deep connections from grassroots to

nationally-televised events.” The company is also moving ahead with plans to evolve packaging

and expects that impact will hit in early ’14.

26

Drive innovation around key styles and innovative consumer-focused technologies.

Darling says they have too many styles and SKUs without clear differentiation or stories.

He says that Skullcrushers is the model for the future and they will move forward to

maintain a diversified product offering but narrow the focus. “This will allow us to

increase average selling price and gross margin,” adds Darling.

Transform domestic distribution to capitalize on our accounts. The goal is to engage

with the brand’s best partners to drive consumers in their doors. Skullcandy will invest

in creating innovative in-store experiences and dominating at point of sale will be a

strong focus.

Invest in international and gaming. Europe, China and Japan will be a large focus and

international sales are accelerating as are gaming, led by their Astro brand, which

Darling says “Has been on a tear. We see gaming as a significant opportunity and plan

on being a strong player.”

Company Culture:

Skullcandy is the number-two-selling headphone company in the U.S., with revenues topping

$150 million. It creates audio products and technology to catalyze the collision of music,

fashion, and sports. Rooted in youth culture and the rebel spirit of rock ’n’ roll, Skullcandy

celebrates independence, ambition, individuality, and creativity. Skullcandy embodies exclusive

designs by some of today’s most notorious artists, fused with team-inspired state-of-the-art

technology in both function and form, remixed to a thumping beat.

Skullcandy employees are the top customers of the brand, and the spirit of the brand can be

found in each employee. We work hard and play hard, and all agree that no great idea is born

behind a desk. Skullcandy employees love the casual work environment with a dress code so

laid back it hardly exists. The office is designed as a skate park—skateboards and scooters are

used throughout the office during business hours. We have flexible scheduling, medical

benefits, 401K matching, a powder-day policy, cheap-as-dirt ski passes subsidized by the

company, gym memberships, tons of room for growth and advancement, and, most important,

the feeling of family.

EMPLOYEE RECOGNITION AND AWARDSvii

Annual company surf trip: Skullcandy had a one week job-well-done-award surf trip to Costa

Rica this year. In addition, employee of the month is the longest-running and most sought-after

recognition award. The winner is announced monthly at a company-wide meeting. The

announcement is always a surprise after a room-wide drum roll. Skullcandy also offers on-the-

spot gift cards for a job well done and lunches and dinners for departments completing large

27

projects or performing above and beyond. Additional recognition awards include jazz tickets

(great seats), additional ski passes, concert tickets (think Lauren Hill and Snoop Dog), and

product giveaways. The company also provides Fitness Benefits to its employees.

FLEXTIME

Flextime is available to all employees. Employees are encouraged to get out and enjoy the

activities they love—boarding, skiing, hiking, biking, running, etc. It is not rare to find bikes,

skateboards, and snowboards leaned up on every wall in the building.

SPONSORED ATHLETES

Known for its relationships with various action sports industries, Skullcandy currently sponsors

professional athletes in snowboarding, skiing, skateboarding, wakeboarding, motocross, and

the biking communities. Working with athletes such as Terje Hakonsen, Louie Vito, Clay Marzo,

Balaram Stack Mark Frank Montoya, Kevin Durant, and Derrick Rose has spawned some of

Skullcandy's signature action sports pieces including the Terje Nine and MFM Pro.

COMMUNITY SERVICE

Skullcandy is really socially active – both online and offline.

Skullcandy works with the United Way each Christmas. This year we adopted a family of nine

and supported them financially as well as providing them with Christmas gifts and other

essentials. In addition, Skullcandy works with the Salvation Army serving dinner once a month

at a local shelter. Multiple organizations throughout the community are given Skullcandy

product donations for raffles, runs, and fundraisers.

Skullcandy is currently involved in supporting "Boarding for Breast Cancer" initiatives. Boarding

For Breast Cancer (B4BC) is a nonprofit, youth-focused education, awareness and fundraising

foundation designed to increase awareness about breast cancer, the importance of early

detection and the value of an active lifestyle.

After Sandy, the hurricane, Skullcandy donated sales of one whole day to help those affected.

GREEN INITIATIVES

Skullcandy purchases postconsumer-waste-recycled paper products for the break room and

lunches. Employees are also encouraged to use their own coffee cup, water bottle, or dishes. In

our conference room, reusable water bottles are placed out for visitors. Skullcandy recycles all

paper, cardboard, plastic, and aluminum. We also provide a fountain soda machine to limit the

collection of cans and plastic bottles.

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9. Projects – Undertaken and Upcoming

Undertaken:

One of the ambitious project that might save Skullcandy the bushes is “Glowing Skullcandy

Headsets”.

Express your personal blinken-style by adding 14 color-changing NeoPixels to a white pair of

Skullcandy headphones. This intermediate-level soldering project embeds a FLORA main board

in one earphone and uses a piece of ribbon wire to connect to the other earphone. Each pixel is

addressable, so the colors an animation possibilities are endless! Mod your headphones with

glowing LEDs and FLORA, Adafruit's wearable electronics platform.viii

Glowing Skullcandy Headphones

29

(Source: http://www.adafruit.com/adablog/wp-content/uploads/2013/08/risa-rose-skullcandy-

glowing-headphones-adafruit-flora.png)

Upcoming:

The Berrics, the famous indoor skate park and shop owned by Steve Berra and Eric Koston, have

teamed up with sick headphone makers Skullcandy for a number of future projects.

The partnership began earlier this year with the sponsorship of a daily segment on

www.theberrics.com featuring Theotis Beasley, and will continue with Skullcandy branding,

banners and videos being featured on the website as well as the creation of a gaming zone in

the skate park.ixx

In 2008, Skullcandy went Online. It started e-Commerce, revolutionized its whole process and

completely integrated itself with Online Management System.

Skullcandy’s website (https://www.skullcandy.com/) was voted as one of the best designed CSS

websites in 2009.

Skullcandy also implemented ERP in its integration. It joined hands with SAP and developed a

completely unique software for itself. It implemented SAP’s Business By Design Solution.

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10. Current Market Evaluation

Skullcandy Enterprise Value = Market Cap + Debt – Cash = 138.26 M

(As of Sept 2013)

Pundits have announced Skullcandy as Risky asset. It has been on the sell list right when it

shown losses for the first time after in IPO in Q1 of 2012. The price took a deep dip at end of

2012, but it has picked itself a little since.

Skullcandy Inc is at this time traded for 6.23. This company has historical hype elasticity of -0.05

and average elasticity to hype of competition of 0.09. Skullcandy Inc is projected to decline in

value after the next headline with price expected to drop to 6.18. The average volatility of

media hype impact on the company stock price is about 544.62%. The price decrease on the

next news is expected to be -0.8% where as daily expected return is at this time at 0.09%. The

volatility of related hype on Skullcandy is about 309.64% with expected price after next

announcement by competition of 6.32. About 35.0% of the company outstanding shares are

owned by corporate insiders. The company has price-to-book ratio of 1.17. Typically companies

with comparable Price to Book (P/B) are able to outperform the market in the long run.

Skullcandy Inc had not issued any dividends in recent years. Given investment horizon of 30

days, the next projected press release will be on 30th October.

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11. Awards and Recognition

Skullcandy announced that it has recently been selected as "Vendor of the Year" by multiple

national retail partners, including Target, Toys"R"Us and Fred Meyer. These honors recognize

Skullcandy for outstanding achievement as a business partner that continuously drives growth

and meets the needs of its customers and respective retailers. Target's award is the second

Skullcandy has received from the retailer in four years. (2008, 2012)

Skullcandy, a developer of core audio products, is celebrating its place at the top of Inc.

Magazine’s recently released annual Inc. 5000 list – an honor roll of the 5000 fastest-growing,

privately held companies throughout the U.S. Creator of the widely acclaimed Inc. 500 hotlist,

Inc. Magazine selected Skullcandy as the nation’s 31st top entrepreneurial success due to the

company’s impressive revenue growth of over 4,077%. Skullcandy also topped the charts as the

number one company on Inc.’s list of the Top 100 Consumer Product Companies. (2008)

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As CEO of Skullcandy, Alden, has been named one of vSpring Capital's "Top 100 Venture

Entrepreneurs" in 2006, 2007, 2008, and 2009 and holds a patent for technology that integrates

mobile phones and music players. In addition, Alden was named Enrst & Young's Entrepreneur

of the Year for the state of Utah during the spring of 2008.

Skullcandy was also named as “The world’s coolest ear bud” by CNN News in 2008.xi

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12. Snapshots and Images

Work Environment

San Clemente Office

(Source: http://cdn.business.transworld.net/wp-content/blogs.dir/1/files/2013/06/skullcandy_Office-

1.jpg)

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Shanghai Office

(Source:

http://www.skullcandy.com/cms/images/uploads/news/3432/skullcandy_shanghai_1__large.jpg)

(Source:

http://www.skullcandy.com/cms/images/uploads/news/3432/skullcandy_shanghai_5__large.jpg)

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Products

xii

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Skullcandy Navigator on-ear headphones

(Source:

http://asset2.cbsistatic.com/cnwk.1d/i/tim/2012/12/17/Skullcandy_Navigator_headphones_35558239_

07_620x443.jpg)

Skullcandy Roc Nation Aviator Headphones

(Source: http://www.metrovelvet.com/wp-content/themes/metrovelvet/assets/1211/skulls.jpg)

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References

i http://investors.skullcandy.com/ ii http://www.joecopywriter.com/sap_profile-skullcandy.pdf

iii http://files.shareholder.com/downloads/ABEA-5FMQI8/1920947018x0x548289/DE072634-D64B-4F6A-8E83-

A5684A82FCFF/Skullcandy_Investor_Presentation.pdf iv http://www.marketwatch.com/investing/stock/skul/profile

v

http://www.acg.org/UserFiles/file/global/InterGrowth%202011/Thought%20Leadership/SAP_ThoughtLeadership_2011.pdf vi http://www.benzinga.com/news/13/01/3233841/five-companies-that-could-purchase-skullcandy

vii http://www.outsideonline.com/outdoor-adventure/best-jobs/8-Skullcandy.html

viii http://www.adafruit.com/blog/2013/08/14/glowing-skullcandy-headphones-mod-wearablewednesday/

ix http://www.skateboarding.com.au/news/the-berrics-team-skullcandy-future-projects/

x http://theberrics.com/canteen/item/skullcandy-headphones-skullcandy-aviators-harold-hunter-foundation-

collaboration-project.html xi http://money.cnn.com/2008/12/30/technology/copeland_skullcandy.fortune/

xii http://www.ecoustics.com/editorial/reviews/skull-candy-headphone