UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-511
COBRA ELECTRONICS CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE 36-2479991
(State of incorporation) (I.R.S. Employer Identification No.)
6500 WEST CORTLAND STREET
CHICAGO, ILLINOIS 60635
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 889-8870
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.33 1/3 Per Share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
--- ---
Number of shares of Common Stock of Registrant outstanding at August 12,
1994: 6,226,648
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
For the Three For the Six
Months Ended Months Ended
(Unaudited) (Unaudited)
------------------- -------------------
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
--------- --------- --------- ---------
Net sales $ 21,132 $ 23,816 $ 39,613 $ 42,657
Cost of sales 17,480 21,371 32,370 37,649
--------- --------- --------- ---------
Gross profit 3,652 2,445 7,243 5,008
Selling, general and
administrative expense 3,448 4,365 6,615 8,693
Restructuring costs --- 1,076 --- 1,076
--------- --------- --------- ---------
Operating income (loss) 204 (2,996) 628 (4,761)
Other income (expense):
Interest expense (241) (339) (460) (606)
Other, net 91 36 (12) (74)
--------- --------- --------- ---------
Income (loss)
before taxes 54 (3,299) 156 (5,441)
Provision (benefit)
for taxes --- --- --- ---
--------- --------- --------- ---------
Net income (loss) $ 54 $ (3,299) $ 156 $ (5,441)
========= ========= ========= =========
Net income (loss)
per share $ 0.01 $ (0.53) $ 0.03 $ (0.87)
========= ========= ========= =========
Weighted average number
of common shares and
common share equiva-
lents outstanding
during the period 6,236 6,227 6,233 6,232
========= ========= ========= =========
Cash dividends None None None None
========= ========= ========= =========
The accompanying notes are an integral part of these financial
statements.
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
As of As of
June 30, December 31,
1994 1993
-------------- --------------
ASSETS:
Current assets:
Cash and cash equivalents $ 603 $ 176
Receivables, less allowance for
doubtful accounts of $673 at
June 30, 1994 and $795 at
December 31, 1993. 11,861 15,657
Inventories, primarily
finished goods 15,460 16,128
Prepaid taxes and expenses 5,699 5,449
-------------- --------------
Total current assets 33,623 37,410
-------------- --------------
Property, plant and equipment,
at cost:
Land 593 593
Building and improvements 6,833 6,815
Equipment 13,160 12,717
-------------- --------------
20,586 20,125
Accumulated depreciation
and amortization (13,558) (12,738)
-------------- --------------
Net property, plant and equipment 7,028 7,387
-------------- --------------
Other assets 5,172 4,929
-------------- --------------
Total assets $ 45,823 $ 49,726
============== ==============
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)
(Unaudited)
As of As of
June 30, December 31,
1994 1993
-------------- --------------
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 3,387 $ 3,442
Accrued expenses 7,645 8,289
Short-term debt 10,329 13,689
-------------- --------------
Total current liabilities 21,361 25,420
Deferred taxes 3,346 3,346
-------------- --------------
Total liabilities 24,707 28,766
Shareholders' equity:
Preferred stock, $1 par value,
shares authorized-1,000,000;
none issued --- ---
Common stock, $.33 1/3 par
value, 12,000,000 shares
authorized; 7,039,100 issued
and 6,226,648 outstanding at
both June 30, 1994 and
December 31, 1993. 2,345 2,345
Paid-in capital 22,118 22,118
Retained earnings 3,795 3,639
-------------- --------------
28,258 28,102
Treasury stock, at cost (5,545) (5,545)
Note receivable from officer's
exercise of stock options (1,597) (1,597)
-------------- --------------
Total shareholders' equity 21,116 20,960
-------------- --------------
Total liabilities and
shareholders' equity $ 45,823 $ 49,726
============== ==============
The accompanying notes are an integral part of these financial
statements.
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
For the Six Months Ended
(Unaudited)
---------------------------
June 30, June 30,
1994 1993
------------ -----------
Cash flows from operating activities:
Net income (loss) from operations $ 156 $ (5,441)
Adjustments to reconcile net income
(loss)from operations to net cash
provided by (used for) operating
activities:
Depreciation and amortization 1,040 719
Deferred taxes on income --- ---
Changes in assets and liabilities:
Receivables 3,796 6,586
Inventories 668 (2,972)
Prepaid taxes and expenses (466) 155
Other assets (65) 214
Accounts payable (55) (1,274)
Accrued liabilities (644) 906
------------ -----------
Net cash provided by (used
for) operating activities 4,430 (1,107)
------------ -----------
Cash flows from investing activities:
Capital expenditures (465) (922)
Net cash used for discontinued
operation (178) (90)
------------ -----------
Net cash used for investing activities (643) (1,012)
------------ -----------
Cash flows from financing activities:
Net (repayments) borrowings under
line-of-credit agreement (3,360) 1,569
------------ -----------
Net cash used for financing activities (3,360) 1,569
------------ -----------
Net increase (decrease) in cash
and cash equivalents 427 (550)
Cash and cash equivalents at
beginning of period 176 558
------------ -----------
Cash and cash equivalents at
end of period $ 603 $ 8
============ ===========
The accompanying notes are an integral part of these financial
statements.
Cobra Electronics Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is
suggested that these financial statements be read in conjunction with
the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K. In the opinion of management, the
information contained herein reflects all adjustments necessary to make
the results of operations for the interim periods a fair statement of
such operations. All such adjustments are of a normal recurring nature.
The results of operations of any interim period are not necessarily
indicative of the results that may be expected for a fiscal year.
(1) EARNINGS PER COMMON SHARE:
The number of common shares used in the computation of earnings per
common share for the three month periods ended June 30, 1994 and
1993 include average common share equivalents of 9,217 and 0,
respectively. The number of common shares used in the computation of
earnings per common share for the six month periods ended June 30,
1994 and 1993 include average common share equivalents of 6,376 and
5,340, respectively.
(2) PURCHASE ORDERS AND COMMITMENTS:
At June 30, 1994, the Company had outstanding purchase orders with
foreign suppliers totaling approximately $25.3 million compared to $30.5
million as of June 30, 1993.
(3) FINANCING ARRANGEMENTS:
The company has in place a secured credit agreement which extends until
January 11, 1995. Management expects to have in place a new credit
agreement prior to the expiration date of the current agreement.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
ANALYSIS OF RESULTS OF OPERATIONS
Second Quarter 1994 vs. Second Quarter 1993:
- --------------------------------------------
Consolidated net sales for the second quarter of 1994 declined $2.7
million compared to the prior year second quarter. The decline
reflected lower sales in both the laser/radar detector and phone
answering system product lines as well as the fact that the prior year
quarter included sales from the Company's former Professional Products
Group, which was sold in late 1993. Partially offsetting these sales
declines was a 9% increase in CB radio sales, primarily fueled by
initial shipments of the Company's new line of weather-alert CB radios.
Gross margin was 17.3% in the second quarter of 1994 compared to 10.3%
in the prior year quarter. The improvement in margin was due primarily
to a shift in sales mix to higher-margin ten-channel cordless phones and
integrated laser/radar detectors. Cordless phone sales for 1994 were
primarily ten-channel models, including the new, popularly-priced
cordless phone with electronic voice scrambling, while sales a year ago
were mainly lower-margin single channel models. The Company's higher-
margin integrated laser/radar detectors, which were introduced in the
third quarter of 1993, represented most of the current quarter's
detector sales. Slightly offsetting these margin improvements were
costs associated with expansion of the Company's consumer hotline and
higher air freight charges, which were incurred to reduce large order
backlogs for several popular products including the Company's new line
of weather-alert CB radios.
During the second quarter of 1993, the Company recorded a one-time
charge of $1.1 million to cover the estimated costs of a restructuring
program. Approximately 40% of the charge was for severance and
termination costs related to a significant downsizing of the Company's
workforce, which was implemented during the third quarter of 1993.
Annual savings from this workforce reduction in payroll-related expenses
were estimated to be approximately $2.1 million. The remaining portion
of the restructuring charge was to cover additional one-time costs to be
incurred as a result of the lower staffing levels. As of December 31,
1993, all restructuring costs had been incurred. Because of this
restructuring, the Company realized payroll-related cost savings during
the current quarter of approximately $600,000 compared to the prior
year. In addition to the payroll-related cost savings realized during
the current quarter, the majority of the remaining decline in selling,
general and administrative expenses resulted from lower bad debt
expense, because of favorable credit experience, and the elimination of
expenses for the Professional Products Group, which was sold in late
1993.
Interest expense declined almost $100,000 during the first quarter of
1994 because of lower borrowings under the Company's line-of-credit
agreement.
Six Months 1994 vs. Six Months 1993:
- --------------------------------------------
Consolidated net sales for the six months ended June 30, 1994 declined
$3.0 million compared to the prior year period. The decline is
primarily due to the fact that the prior year included sales from the
Company's former Professional Products Group, which was sold in late
1993. In addition, a 9% increase in sales of CB radios, including
initial shipments of the Company's new line of weather-alert CBs, and a
33% increase in cordless phone sales were offset by reduced sales of
both laser/radar detectors and phone answering systems.
Gross margins for the first six months of 1994 were 18.3% compared to
11.7% a year ago. As was the case in the second quarter, the
improvement in margin was primarily due to increased sales of higher-
margin cordless phones and integrated laser/radar detectors.
Selling, general and administrative expenses for the first six months of
1994 declined $2.1 million compared to the prior year. Approximately
$1.2 million of the decline relates to the reduction in payroll-related
expenses resulting from the workforce reduction implemented during the
third quarter of 1993. The Company expects a similar level of payroll-
related cost savings to be realized during the last six months of 1994.
Also, contributing to the decline were lower bad debt expense, because
of favorable credit experience, and the elimination of expenses for the
Professional Products Group, which was sold in late 1993.
Interest expense declined $146,000 during the first six months of 1994
compared to the prior year due to lower borrowings under the Company's
line-of-credit agreement.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities generated cash of $4.4 million during the first
six months of 1994, primarily because of a $3.8 million reduction in
accounts receivable. This reduction in accounts receivable reflected
the normal seasonal pattern of lower first and second quarter sales and
increased collections commensurate with higher fourth quarter sales.
As a result of the cash flow generated from operating activities during
the first six months of 1994, the Company was able to reduce borrowings
under its line-of-credit agreement by $3.4 million from December 31,
1993.
The majority of any taxes payable in 1994 will be offset by utilizing
tax net operating loss carryforwards which, at December 31, 1993,
totalled $49.9 million. As such, no income tax provision was recorded
in the first six months of 1994.
The Company has in place a secured credit agreement which extends until
January 11, 1995. Management expects to have in place a new credit
agreement prior to the expiration date of the current agreement.
PART II
OTHER INFORMATION
Items 1, 2, and 3 Not Applicable.
- ----------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
a) The 1994 Annual Meeting of Shareholders was held on May 10, 1994.
b) Not Applicable.
c) The following persons were elected as Class II directors of the
Company to serve until the 1997 Annual Meeting of Shareholders:
Name Votes For Votes Withheld
- ------------------- --------------- ---------------
Samuel B. Horberg 5,266,900 146,323
Gerald M. Laures 5,271,918 141,305
d) Not Applicable.
Items 5 and 6 Not Applicable.
- -----------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COBRA ELECTRONICS CORPORATION
By /s/ Gerald M. Laures
Gerald M. Laures
Vice President - Finance,
and Corporate Secretary
Dated: August 15, 1994