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Cobra Electronics Reports Second Quarter Results



               Cobra Electronics Reports Second Quarter Results

Lower Sales to Travel Centers and Higher Patent Litigation Expenses Result in
Operating Loss

PR Newswire

CHICAGO, July 26, 2013

CHICAGO, July 26, 2013 /PRNewswire/ -- Cobra Electronics Corporation (NASDAQ:
COBR), a leading global designer and marketer of mobile communications and
navigation products, today reported a net loss of $1.9 million, or $0.29 per
share for the second quarter of 2013 as compared to net income of $902,000, or
$0.14 per share for the second quarter of 2012. In addition, there was an
operating loss of $1.9 million for the current quarter compared to operating
income of $1.4 million in the same quarter last year. These changes reflected
drops in net sales of $3.5 million and gross margin of more than four points
as well as a significant increase in fixed selling, general and administrative
expenses, primarily litigation expenses relating to patent claims.

Consolidated net sales were $25.6 million compared to $29.1 million in the
second quarter of 2012, with the Cobra segment reporting a $3.0 million
decrease in sales and the Performance Products Limited ("PPL") segment
reporting a decrease of $415,000. The sales drop for the Cobra segment
resulted from lower domestic sales of Truck Navigation products and Citizens
Band radios, however, this was partially offset by a significant increase in
Detection products and PMR two-way radios sales into Eastern Europe. Truck
Navigation domestic sales to travel centers were significantly below the
second quarter of 2012 due to strong initial load-in sales of two new models
in the same quarter last year, which were not repeated in 2013, as well as
increased competition. In addition, the decline in Citizens Band radio
domestic sales reflected higher customer inventories due to lower sell-through
at major travel centers. The PPL sales decrease was attributable to a
continued difficult economic environment in Europe and increased competition
in Truckmate™ navigation products.

"We are disappointed to report a decline in operating results compared to the
second quarter of 2012, however, we believe that our results are somewhat
reflective of the global economic deterioration in discretionary consumer
purchases that continues to impact the consumer electronics industry. Also, a
significant amount of the current quarter's operating loss was due to expenses
for the Fleming patent litigation. In addition, our Company typically builds
important momentum from seasonality in the third and fourth quarters and
management is taking aggressive actions to improve our financial performance
for that period. Therefore, we are still optimistic about the Company's
ability to achieve both profitable and improved results in the second half of
this year" said Jim Bazet, Cobra's Chairman and Chief Executive Officer.

Consolidated gross margin was 26.1 percent compared to 30.5 percent in the
second quarter of 2012 primarily as a result of a less favorable sales mix and
competitive pricing pressures mainly in the Cobra segment. The gross margin
for the Cobra segment was 24.9 percent compared to 29.5 percent in the second
quarter of last year due to the decrease in sales of higher margin Truck
Navigation products, which also declined due to competitive pricing pressures.
Also contributing to the lower gross margin in the Cobra segment were
competitive pricing pressures on sales of Detection products into Eastern
Europe. PPL's gross margin decreased to 33.1 percent from 36.3 percent last
year reflecting mainly an unfavorable product mix and a foreign exchange loss
compared to a gain in the same quarter last year.

Selling, general and administrative expenses (SG&A) were $8.5 million in the
second quarter of 2013 compared to $7.4 million in the prior year's quarter.
Variable selling expenses declined consistent with net sales. However, fixed
expenses increased primarily as a result of significant expenses from the
Fleming patent litigation. The Company has entered into an agreement to settle
all outstanding claims relating to the Fleming patent litigation. The
settlement agreement provides the Company with a license to certain patents
held by Mr. Fleming in exchange for certain payments to be made by the
Company. Although this settlement occurred subsequent to the completion of the
second quarter, the expense for an upfront payment has been recorded in the
current quarter financial results in accordance with U.S. GAAP. "We are
pleased to have resolved this matter privately. We believe that this
settlement is in the long-term best interests of Cobra and its shareholders as
it will allow us to avoid the lengthy and costly legal process that would
otherwise be necessary to bring the case to a conclusion," commented Mr.
Bazet. In addition, the Company is currently working with the lenders under
its credit agreement to exclude the expenses for the Fleming patent litigation
from certain formula calculations related to the credit agreement.

Interest expense for the second quarter of 2013 was $150,000 compared to
$235,000 for the second quarter of 2012 due to a lower interest rate. Other
income was $86,000 compared to  other expense of $144,000 in the prior year's
quarter primarily due to a gain on the cash surrender value of life insurance
that the Company owns for the purpose of funding deferred compensation
programs for certain current and former officers of the Company as compared to
a loss in the same quarter last year. A tax provision of $14,000 was recorded
in the current quarter as compared to a $164,000 tax expense in the second
quarter of 2012 mainly due to lower income for both Cobra Electronics Europe
Limited and PPL. 

Interest-bearing debt increased to $16.2 million as of June 30, 2013 compared
to $14.2 million at June 30, 2012. Cash on hand at June 30, 2013 was $2.0
million as compared to $2.9 million at June 30, 2012 mainly due to the timing
of cash receipts. Inventory at the end of the second quarter increased to
$34.6 million from $32.6 million at June 30, 2012 as a result of the lower
than expected sales. Accounts receivable at the end of the quarter were $12.3
million, a decrease from $16.4 million one year earlier.

On a year-to-date basis, consolidated net sales were $47.2 million compared to
$55.5 million for the same period of 2012. In addition to the sales decrease,
a lower gross margin of more than two points and significantly increased SG&A
expenses for the Fleming patent litigation resulted in an operating loss of
$3.6 million for the first six months as compared to a $1.6 million operating
income for the prior year's period.  The net loss for the year-to-date was
$3.5 million, or $0.53 per share, as compared to a net income of $1.2 million
or $0.19 per share in the prior year.

In discussing the outlook for the third quarter of 2013, as well as the entire
year, Mr. Bazet said, "We are implementing several actions in the second half
of 2013 that are aimed at significantly improving our financial performance.
Some of these actions include substantially reducing operating expenses,
adding meaningful sales of several exciting new products not previously
planned for this year and taking certain steps to improve distributor sales.
We believe that these steps along with the recently settled Fleming patent
litigation will enable the Company to return to profitability and as such,
will achieve a higher operating income in the third quarter of 2013 than in
the third quarter of 2012. However, the Company anticipates a lower level of
operating income in 2013 as compared to 2012 as a result of the losses
experienced by the Company in the first half of 2013."

Cobra will be conducting a conference call on July 26, 2013 at 11:00 a.m. EDT
to discuss second quarter results as well as its current strategies and
outlook.  The call can also be accessed live or through replay via the
Internet at http://www.cobra.com.

About Cobra Electronics
Cobra Electronics is a leading global designer and marketer of communication
and navigation products, with a track record of delivering innovative and
award-winning products.  Building upon its leadership position in the GMRS/FRS
two-way radio, radar detector and Citizens Band radio industries, Cobra
identified new growth opportunities and has aggressively expanded into the
marine market and has expanded its European operations. The Consumer
Electronics Association, Forbes and Deloitte & Touche have all recognized
Cobra for the company's innovation and industry leadership.  To learn more
about Cobra Electronics, please visit the Cobra site at www.cobra.com.

Safe Harbor
This release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.  These statements are based
on management's current expectations and are subject to risks and
uncertainties.  Actual results may differ materially from these expectations
due to factors such as the acceptance of Cobra's new and existing products by
customers, the continued success of Cobra's cost containment efforts and the
continuation of key distribution channel relationships.  Please refer to
Cobra's filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K, for a more detailed discussion of factors that may
affect Cobra's performance.

Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)
                           For the Three Months      For the Six Months Ended
                           Ended
                           June 30,      June 30,    June 30,      June 30,
                           2013          2012        2013          2012
Net sales                  $  25,630     $  29,084   $  47,207     $  55,502
Cost of sales                 18,951        20,226      34,293        39,056
     Gross profit             6,679         8,858       12,914        16,446
Selling, general and          8,544         7,413       16,505        14,840
administrative expense
     (Loss) earnings from     (1,865)       1,445       (3,591)       1,606
     operations
Other (expense)
income:
     Interest expense         (150)         (235)       (310)         (488)
     Other, net               86            (144)       439           349
(Loss) earnings before        (1,929)       1,066       (3,462)       1,467
taxes
Tax provision                 14            164         13            226
Net (loss) earnings        $  (1,943)    $  902      $  (3,475)    $  1,241
Net (loss) earnings per
common share:
     Basic                 $  (0.29)     $  0.14     $  (0.53)     $  0.19
     Diluted               $  (0.29)     $  0.14     $  (0.53)     $  0.19
Weighted average shares
outstanding: 
     Basic                    6,611         6,611       6,611         6,586
     Diluted                  6,611         6,622       6,611         6,600

 

                          Condensed Consolidated Balance Sheets
                          (in thousands, unaudited)
ASSETS:                                     June 30,     December     June 30,
                                                       31,
                                          2013         2012         2012
Current assets:
      Cash                              $ 1,984      $ 1,785      $ 2,871
      Accounts receivable, net            12,303       20,943       16,355
      Inventories, net                    34,586       38,068       32,627
      Other current assets                3,465        3,071        2,494
      Total current assets                52,338       63,867       54,347
Property, plant and equipment, net        5,411        5,323        5,392
Total other assets                        14,598       14,300       13,976
Total assets                            $ 72,347     $ 83,490     $ 73,715
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
      Accounts payable                  $ 3,689      $ 5,598      $ 5,721
      Accrued liabilities                 6,571        7,931        6,345
      Short-term debt                     16,215       20,284       14,220
      Total current liabilities           26,475       33,813       26,286
Non-current liabilities:
      Deferred taxes                      803          886          1,090
      Deferred compensation               7,944        7,780        7,675
      Other long-term liabilities         726          751          763
      Total non-current liabilities       9,473        9,417        9,528
Shareholders' equity                      36,399       40,260       37,901
Total liabilities and shareholders'     $ $72,347    $ $83,490    $ $73,715
equity

SOURCE Cobra Electronics Corporation

Website: http://www.cobra.com
Contact: Investor Contact: Jim Bazet, Chairman and CEO, Cobra Electronics
Corporation, 773-804-6265, jbazet@cobra.coml Media Contact: Chris Doyle,
Annual Reports, Inc., 317-736-8838, chrisdoyle@annualreportsinc.com
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