Increased Sales and Reduced Operating Expenses Drive Operating
Profit Substantial Tax Benefit Provided by One-Time NOL Carryback
CHICAGO, Feb. 23 /PRNewswire-FirstCall/ -- Cobra Electronics
Corporation (NASDAQ:COBR), a leading global designer and marketer
of mobile communications and navigation products, today reported
net income of $1.8 million, or $0.27 per fully diluted share, for
the fourth quarter of 2009, as compared to a net loss of $20.8
million (including a goodwill impairment charge of $20.1 million),
or $3.21 per share, in the fourth quarter of 2008. Profitability
was restored as net sales increased by 15.7 percent, to $32.8
million from $28.3 million in the prior year, and selling, general
and administrative expenses declined by 4.1 percent, with the fixed
component of these operating expenses declining by more than
$500,000 as management made concerted efforts to contain such
expenses. Both reporting segments reported sales increases, with
the Cobra segment reporting an increase in net sales of 5.9 percent
and the Performance Products Limited ("PPL") segment reporting an
increase of more than 160 percent. Included in fourth quarter
results is a $1.2 million tax benefit due to a one-time net
operating loss carryback provision included in a stimulus package
passed by Congress and signed into law in November 2009. On a
year-to-date basis, which includes a net $8.4 million tax valuation
allowance charge, Cobra reported a net loss of $10.3 million, or
$1.59 per share, as compared to a net loss of $18.8 million, or
$2.91 per share, in the prior year, as net sales declined to $105.2
million from $124.7 million in 2008. "We are pleased to report to
our shareholders a return to profitability in the fourth quarter,"
said Jim Bazet, Cobra's Chairman and Chief Executive Officer. "Our
results reflect, in part, a strengthening of the economy and
increased sales of certain legacy products to our long-time
customers. However, most of the increase in sales is attributable
to our efforts to drive our business forward through the
introduction of new products and the expansion of our distribution
and marketing channels. Navigation products for trucks and
recreational vehicles introduced in late 2008 and 2009 by Cobra and
PPL contributed nearly $4.0 million of increased sales in the most
recent quarter. Additionally, marine GPS tracking devices and
GPS-enabled outdoor leisure products for hikers, skiers and other
outdoor enthusiasts contributed nearly $600,000 of revenues from
new PPL customers in the fourth quarter. Our strategic objective
was to emerge from the downturn as a company that was stronger and
more agile than we were as we entered the downturn and these
results are clear evidence that we have made significant progress
towards reaching this goal." The year-over-year increase in fourth
quarter net sales of $4.4 million was attributable to an increase
of $1.57 million for the Cobra segment and $2.87 million for the
PPL segment. New products, including mobile navigation for trucks,
jump starters and floating VHF marine radios drove much of the
increase for the Cobra segment. Also contributing to the sales
increase for the Cobra segment were two-way radio sales, as the
company continued to benefit from exclusive positioning at a major
retailer. Sales declines in Cobra's other principal categories were
significantly less than those of the prior three quarters. As
compared to the fourth quarter of 2008, radar detection sales
declined by 1.1 percent and Citizens Band radio sales declined by
7.2 percent. This compares favorably with the cumulative declines
against prior year sales through the third quarter of 26.2 percent
for radar detection and 32.9 percent for Citizens Band radios.
International sales, including sales to Canada and throughout
Europe, also continued to decline as compared to the fourth quarter
of the prior year but, again, at a lesser rate than the decline in
the first three quarters of this year. PPL segment sales increased
by nearly $2.9 million, or more than 160 percent, as compared to
the fourth quarter of last year. The most significant factor
contributing to this increase was sales in both the U.K and
throughout Europe of satellite navigation products designed for
professional drivers and recreational vehicle owners. These
products, with large visible screens and routing and points of
interest software tailored to the needs of these users, have been
received well by the market and sales have actually been
constrained by the lack of available units as demand has exceeded
supply. PPL also benefited from sales of new GPS-enabled handheld
navigation units designed for the outdoor enthusiast. These
products, which are available under the Snooper brand as well as
various third-party brands, provide skiers, runners, hikers and
others with maps of trails and a record of their activities. Some
of the improvement in sales for the fourth quarter was offset by a
decline in gross margins as compared to the fourth quarter of 2008,
primarily due to product mix for both the Cobra and PPL segments.
On a consolidated basis, Cobra's gross margin decreased to 25.8
percent from 28.6 percent in the prior year. This reflected a
decline in gross margins for the Cobra reporting segment to 25.8
percent from 27.9 percent, principally due to the decline in
Citizens Band radio sales as a proportion of overall sales, as well
as the mix of sales within the Citizens Band radio and radar
detection product lines, as consumers purchased lower price point
products. The PPL segment gross margin declined to 26.0 percent
from 39.9 percent in the prior year. The most significant cause of
the decline was product mix, as download fees declined as a
percentage of overall sales. Additionally, PPL incurred significant
airfreight as demand for truck and recreational vehicle navigation
products continued to outpace supply; these supply issues are
expected to be fully resolved by the end of the first quarter of
2010. Selling, general and administrative expenses declined to $7.8
million in the fourth quarter from $8.2 million in the prior year.
A decline in fixed operating expenses of more than $500,000 was
offset, in part, by an increase in variable selling expenses tied
to increased sales. Reductions in headcount, as well as declines in
various professional fees, accounted for much of the decline in
fixed expenses. Due primarily to a gain in the cash surrender value
of life insurance that the Company owns for the purpose of funding
deferred compensation programs for several current and former
officers of the company, Cobra recorded other income of $265,000 in
the fourth quarter of 2009 as compared to other expense of $702,000
in the prior year's period. The gain on the cash surrender value in
the most recent period was $148,000 as compared to a loss of
$778,000 in the prior year. The current quarter included a tax
benefit of $1.2 million compared to a tax benefit of $297,000 in
the prior year's quarter. This benefit was primarily due to a
provision in The Worker, Homeownership, and Business Assistance Act
of 2009, enacted November 2009, which allows eligible businesses a
one-time election to carry back net operating losses from 2008 or
2009 for three, four or five years rather than the standard two
years. This was recorded as a tax benefit on the income statement
due to the tax valuation allowance that was booked in the second
quarter of 2009. On a year-to-date basis, consolidated net sales
declined to $105.2 million from $124.7 million, or 15.6 percent,
reflecting the overall weakness in the global economy. The decline
for the Cobra segment was $17.5 million, or 15.8 percent, while the
decline for the PPL segment was $2.0 million, or 14.2 percent. The
decline in Cobra segment sales was attributable primarily to
declines in radar detection and Citizens Band radios domestically,
as well as significant weakness in foreign sales. The decline in
net sales for the PPL segment primarily reflects exchange rate
movements as the dollar has strengthened relative to the pound
sterling; sales in pounds sterling actually increased by
approximately 2.4 percent as compared to one year earlier. Cobra's
consolidated gross margin, on a year-to-date basis, declined to
25.1 percent from 30.6 percent in the prior year. The decline is
attributable primarily to product mix within each segment. The
Cobra segment reported a gross margin of 24.3 percent as compared
to 28.0 percent in the prior year primarily due to an increase in
sales of lower-margin two-way radios and a decline in sales of
higher margin product lines. Additionally, consumer purchases
tended towards lower price point products within each product line,
resulting in product line gross margin declines. The gross margin
for the PPL segment declined to 30.9 percent from 51.6 percent in
2008 due to significantly greater sales in the prior year of the
Aura database, both for downloads and for smartphone use.
Additionally, within each segment, fixed components of the cost of
sales, including the amortization of certain costs associated with
the acquisition of PPL, were expensed across a lower level of
sales. Substantial efforts have been made to contain selling,
general and administrative expenses in 2009, which is evident from
the year-to-date results. SG&A expenses declined to $30.1
million in 2009 from $34.2 million in the prior year. Variable
selling expense reductions associated with lower sales accounted
for less than 40 percent of this decline; the balance was the
result of decreases in fixed operating expenses, including
personnel reductions and lower professional fees. As a result of
the decline in sales and margins, offset in part by lower operating
expenses, Cobra incurred a net loss in 2009 of $10.3 million, or
$1.59 per share, as compared to a net loss of $18.8 million, or
$2.91 per share, in the prior year. As noted previously, the loss
for the current year included a tax valuation allowance of $8.4
million, which included a $9.6 million charge booked in the second
quarter and a tax benefit of $1.2 million booked in the fourth
quarter. Results for 2008 included an impairment charge of $20.1
million. Continued tight working capital management by certain
customers resulted in the delay into the early part of 2010 of
certain sales that were anticipated to take place in the fourth
quarter. As a result, Cobra failed to satisfy the minimum EBITDA
covenant contained in the Company's loan agreement for the fourth
quarter, although the Company was in compliance with the minimum
Fixed Charge Coverage and Tangible Net Worth covenants set forth in
its amended loan agreement. The Company is in the process of
working with its lenders to secure a waiver of the violation and
amend the loan agreement and anticipates executing an amendment to
the loan agreement in the next several weeks. Cobra continues to
have sufficient availability under its credit line to operate its
business. Cobra had interest-bearing debt of $17.9 million as of
December 31, 2009 and cash of $1.4 million, for "net debt" of $16.5
million, as compared to "net debt" of $15.7 million the prior year.
Inventory at the end of the fourth quarter declined to $26.2
million from $27.5 million the prior year and accounts receivable
at the end of the quarter were $22.1 million, an increase from
$18.0 million one year earlier. In discussing the outlook for the
first quarter of 2010, as well as the entire year, Mr. Bazet said,
"Cobra anticipates returning to profitability in 2010, as we drive
our business forward through new products and new distribution and
marketing channels. The strength of our fourth quarter, as noted
earlier, was built on this strategic thrust and it is continuing
into 2010. Moreover, we recognize the tenuous nature of the
economic recovery and we have maintained our focus on containing
expenses and managing working capital. The Company is likely to
achieve better results in the first quarter of 2010 than in the
prior year; however, a seasonal operating loss is likely." Cobra
will be conducting a conference call on February 23, 2010 at 11:00
a.m. EST to discuss fourth 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 http://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 For the Twelve
Months Ended Months Ended December December December December 31,
2009 31, 2008 31, 2009 31, 2008 Net sales $32,768 $28,327 $105,229
$124,745 Cost of sales 24,314 20,218 78,853 86,576 Gross profit
8,454 8,109 26,376 38,169 Selling, general and administrative
expense 7,834 8,173 30,066 34,175 Impairment of goodwill 0 20,084 0
20,084 Earnings (loss) from operations 620 (20,148) (3,690)
(16,090) Other income (expense): Interest expense (313) (222) (928)
(997) Other, net 265 (702) 1,110 (1,143) Earnings (loss) before
taxes 572 (21,072) (3,508) (18,230) Tax (benefit) provision (1,183)
(297) 6,762 598 Net earnings (loss) 1,755 (20,775) (10,270)
(18,828) Less: net earnings attributable to non-controlling
interest 0 (3) 2 11 Net earnings (loss) attributable to Cobra
$1,755 $(20,772) $(10,272) $(18,839) Net earnings (loss) per common
share attributable to Cobra shareholders: Basic $0.27 $(3.21)
$(1.59) $(2.91) Diluted $0.27 $(3.21) $(1.59) $(2.91) Weighted
average shares outstanding: Basic 6,471 6,471 6,471 6,471 Diluted
6,471 6,471 6,471 6,471 Dividends declared per common share $- $-
$- $0.16 Condensed Consolidated Balance Sheets (in thousands,
unaudited) ASSETS: December 31, December 31, 2009 2008 ---- ----
Current assets: Cash $1,405 $1,985 Accounts receivable, net 22,095
18,017 Inventories, net 26,198 27,464 Other current assets 2,349
9,332 Total current assets 52,047 56,798 Property, plant and
equipment, net 5,365 5,776 Total other assets 16,574 16,424 Total
assets $73,986 $78,998 ======= ======= LIABILITIES AND
SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $7,427
$2,923 Accrued liabilities 5,759 6,274 Short-term debt 16,549 1,370
Total current liabilities 29,735 10,567 Non-current liabilities:
Long-term debt 1,320 16,301 Deferred taxes 1,935 1,983 Deferred
compensation 6,772 6,516 Other long-term liabilities 961 1,077
Total non-current liabilities 10,988 25,877 Equity: Shareholders'
equity -Cobra 33,235 42,530 Non-controlling interest 28 24 Total
equity 33,263 42,554 Total liabilities and shareholders' equity
$73,986 $78,998 Investor Contact: Michael Smith Senior Vice
President and CFO Cobra Electronics Corporation 773-804-6281 Media
Contact: Chris Doyle Annual Reports, Inc. 317-736-8838 DATASOURCE:
Cobra Electronics Corporation CONTACT: Michael Smith, Senior Vice
President and CFO, Cobra Electronics Corporation, +1-773-804-6281,
, or Chris Doyle, Annual Reports, Inc., +1-317-736-8838, Web Site:
http://www.cobra.com/
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