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, 1996
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 $.33 1/3 Per Share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Number of shares of Common Stock of Registrant outstanding at
August 2, 1996: 6,230,398
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
For the Three For the Six
Months Ended Months Ended
(Unaudited) (Unaudited)
-------------------- --------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales............$ 21,395 $ 21,350 $ 40,667 $ 42,087
Cost of sales........ 17,260 17,066 33,399 34,004
-------- -------- -------- -------
Gross profit....... 4,135 4,284 7,268 8,083
Selling, general and
administrative
expense............ 3,622 4,152 7,039 7,914
-------- -------- -------- -------
Operating income.... 513 132 229 169
Other income(expense):
Interest expense... (453) (398) (923) (713)
Other, net......... 224 60 395 45
-------- -------- -------- -------
Income(loss) before
taxes.............. 284 (206) (299) (499)
Provision (benefit)
for taxes.......... --- --- --- ---
-------- --------- --------- --------
Net income(loss).....$ 284 $ (206) $ (299) $ (499)
======== ========= ========= ========
Net income(loss)
per share..........$ 0.05 $ (0.03) $ (0.05) $ (0.08)
======== ========= ========= =========
Weighted average
number of common
shares and common
share equivalents
outstanding........ 6,253 6,227 6,230 6,227
========= ======== ========= =========
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)
As of As of
June 30, December 31,
1996 1995
(Unaudited) (Unaudited)
------------- ------------
ASSETS:
Current assets:
Cash.......................$ 1,259 $ 1,299
Receivables, less allowance
for doubtful accounts of
$1,127 at June 30, 1996,
and $1,451 at December 31,
1995...................... 15,585 15,228
Inventories, primarily
finished goods.............. 16,301 18,238
Other current assets........ 1,147 896
------------ ------------
Total current assets........ 34,292 35,661
------------ ------------
Property, plant and equipment,
at cost:
Land........................ 593 593
Building and improvements... 6,923 6,892
Tooling and equipment....... 8,823 15,462
------------ ------------
16,339 22,947
Accumulated depreciation
and amortization.......... (9,724) (15,877)
------------- -------------
Net property, plant and
equipment................. 6,615 7,070
------------ ------------
Other assets.................. 6,936 7,350
------------ ------------
Total assets..................$ 47,843 $ 50,081
============ ============
The accompanying notes are an integral part of these financial
statements.
Cobra Electronics Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands)
As of As of
June 30, December 31,
1996 1995
(Unaudited) (Unaudited)
----------- -----------
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Current liabilities:
Accounts payable............$ 5,800 $ 6,070
Accrued liabilities......... 6,297 6,469
Short-term debt............. 17,863 19,368
----------- -----------
Total current liabilities... 29,960 31,907
----------- -----------
Shareholders' equity:
Preferred stock, $1 par
value, shares authorized-
1,000,000; none issued.... --- ---
Common stock, $.33 1/3 par
value, 12,000,000 shares
authorized; 7,039,100
issued and 6,230,398
outstanding at June 30,
1996 and 6,226,648
outstanding at December 31,
1995...................... 2,345 2,345
Paid-in capital............. 22,100 22,118
Retained earnings........... 680 979
----------- -----------
25,125 25,442
Treasury stock, at cost..... (5,519) (5,545)
Note receivable from officer's
exercise of stock options (1,723) (1,723)
------------ ------------
Total shareholders' equity.. 17,883 18,174
------------ ------------
Total liabilities and share-
holders' equity.............$ 47,843 $ 50,081
============ ============
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,
1996 1995
-------------- -------------
Cash flows from operating
activities:
Net loss from operations......... $ (299) $ (499)
Adjustments to reconcile net loss
from operations to net cash
provided by (used for)
operating activities:
Depreciation and amortization 1,489 1,025
Changes in assets and
liabilities:
Receivables.................. (357) (3,157)
Inventories.................. 1,937 (2,776)
Other current assets......... (270) (464)
Other assets................. (217) 456
Accounts payable............. (270) 1,351
Accrued liabilities.......... (172) 683
------------- -------------
Net cash provided by (used for)
operating activities......... 1,841 (3,381)
-------------- -------------
Cash flows from investing activities:
Capital expenditures........... (384) (1,217)
Net cash used for discontinued
operation.................... -- (246)
-------------- -------------
Net cash used for investing
activities................... (384) (1,463)
-------------- -------------
Cash flows from financing activities:
Net borrowing (repayments) under
line-of-credit agreement..... (1,505) 4,758
Transactions related to exercise
of options, net.............. 8 --
-------------- -------------
Net cash provided by (used for)
financing activities......... (1,497) 4,758
------------- -------------
Net decrease in cash............. (40) (86)
Cash at beginning of period...... 1,299 197
------------- -------------
Cash at end of period............$ 1,259 $ 111
============= =============
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. The Condensed Consolidated
Balance Sheet as of December 31, 1995 has been derived from the
audited consolidated balance sheet as of that date. 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) PURCHASE ORDERS AND COMMITMENTS:
At June 30, 1996, the Company had outstanding purchase orders
with suppliers totaling approximately $25.2 million compared to
$25.7 million as of June 30, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
ANALYSIS OF RESULTS OF OPERATIONS
Second Quarter 1996 vs. Second Quarter 1995:
- --------------------------------------------
Sales for the second quarter of 1996 were $21.4 million, which
approximated prior year's second quarter sales. During the
quarter, sales of telecommunication products increased because of
strong demand for the company's new 25-channel integrated
cordless phone answering system. Sales of mobile electronics
products decreased due to lower sales of integrated radar/laser
detectors, mainly because of weak consumer demand for detectors.
Some of the decrease in mobile electronics product sales was
partially offset by an increase in domestic CB sales.
Gross margin was 19.3% in the second quarter of 1996 compared to
20.1% in the second quarter of 1995. Contributing to the
decrease were lower gross margins on sales of integrated
radar/laser detectors and cordless phone answering systems. The
lower detector margins reflected downward pricing pressures
because of the weakness in consumer demand. The lower answering
system margin was due to increased freight expenses incurred to
expedite receipt of product to fill back orders, which resulted
from the strong demand for the new 25-channel integrated cordless
phone answering system. Offsetting some of the gross margin drop
was an increase in cordless phone gross margins, reflecting
strong demand for 25-channel phones that were not available in
the second quarter of 1995.
Selling, general and administrative expenses decreased $530,000
in the second quarter of 1996 from the same period a year ago,
and as a percentage of net sales decreased to 16.9% from 19.4%
for the second quarter of 1995. Major contributors to the
decrease were lower selling and marketing expenses and reduced
payroll costs resulting from the implementation of programs to
streamline the organization and make it more cost efficient. In
addition, a large decline in bad debts expense, reflecting an
improvement in the quality of the receivable portfolio and
favorable collections experience, was offset by amortization
expense of $300,000 related to advertising credits.
Interest expense for the current quarter increased $55,000
compared to the prior year's quarter as a result of higher
borrowings required to finance increased working capital levels.
Other income of $224,000 reflects $125,000 of royalty income from
Safety Alert licensing agreements and a gain of $149,000 from the
successful conclusion of a suit against a former distributor for
violation of a licensing agreement.
Six Months 1996 vs. Six Months 1995
- -----------------------------------
Sales for the six months ended June 30, 1996 were $40.7 million
compared to $42.1 million for the six months ended June 30, 1995.
Sales of mobile electronics products, primarily CBs, decreased
due mainly to weakness in the retail environment during the first
quarter. This slowdown during the first quarter of 1996 was due
in part to a continuation of the soft consumer demand that
negatively impacted 1995's year-end holiday selling season as
well as the result of the severe winter storms that plagued the
East Coast early in the first quarter and kept consumers inside
their homes and out of the stores. The decrease in sales of
mobile electronics products was partially offset by higher sales
of telecommunications products because of strong demand for the
new 25-channel products.
Gross margin for the first six months of 1996 was 17.9% compared
to 19.2% for the prior year period primarily due to a change in
sales mix from high margin CB products to the other product
lines, which were at lower margins. In addition, margins for
integrated radar/laser detectors and answering systems decreased
as discussed above.
Selling, general and administrative expenses decreased $900,000
for the first half of 1996 from the same period a year ago, and
as a percentage of net sales decreased to 17.3% from 18.8% for
the first half of 1995. As discussed above, lower selling and
marketing expenses were a key contributor as was lower payroll
costs. In addition, bad debts expense declined significantly
from the prior year, reflecting an improvement in the quality of
the receivable portfolio and favorable collections experience,
and was offset by $600,000 of amortization expense related to
advertising credits.
Interest expense for the period increased $210,000 compared to
the prior year as a result of higher borrowings required to
finance increased working capital levels.
Other income of $395,000 reflects a gain of $373,000 from the
successful conclusion of a suit against a former distributor for
violation of a licensing agreement.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities generated cash of $1.8 million during the
first six months of 1996, primarily because of a $1.9 million
reduction in inventory. Inventory declined from the end of last
year due to higher than anticipated sales of telecommunication
products. The allowance for doubtful accounts decreased as a
result of an improvement in the quality of the receivable
portfolio and favorable collections experience.
The company was able to reduced borrowings under its
line-of-credit agreement by $1.5 million and at June 30, 1996,
had approximately $2.7 million of unused credit line.
Also, tooling which was fully amortized and related to products
no longer produced by the company was written off in the first
quarter of 1996.
PART II
OTHER INFORMATION
Items 1, 2, 3, 4 and 5 Not Applicable.
- ----------------------------------------
Item 4. Submission of Matters to a vote of Security Holders
- -------------------------------------------------------------
a) The 1995 Annual Meeting of Shareholders was held on
May 14, 1996.
b) The following persons were elected as Class I
directors of the Company to serve until the 1999
Annual Meeting of Shareholders:
Name Votes For Votes Withheld
------------------ --------- --------------
Jerry Kalov 5,466,815 180,608
Harold D. Schwartz 5,464,758 182,665
The Class II directors continuing in office until the
1997 Annual Meeting of Shareholders are Samuel B.
Horberg and Gerald M. Laures. The Class III
directors continuing in office until the 1998 Annual
Meeting of Shareholders are William P. Carmichael and
Carl Korn.
Because brokers had discretionary authority to vote
with respect to each matter submitted to
shareholders, no broker non votes were tabulated.
c) Not applicable.
d) Not applicable.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits:
Exhibit No. Description
----------- ---------------------------------------------
27 Financial data schedule required under
Article 5 of Regulation S-X
b) During the quarter, the Company filed no Current Reports on
Form 8-K.
SIGNATURE
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
------------------------
Gerald M. Laures
Vice President - Finance,
and Corporate Secretary
Dated: August 12, 1996