TEMPE, AZ-- Oct 16, 2012 - Rockford Corporation (PINKSHEETS: ROFO) today announced financial results for the three and nine months ended September 30, 2012 and changes in the membership of its Board of Directors.
Net income for the three months ended September 30, 2012, was $1.4 million compared to $1.2 million for the same period in 2011. Net income for the nine months ended September 30, 2012, was $6.5 million compared to $4.2 million for the same period in 2011.
Net sales for the three months ended September 30, 2012, increased 7.4% to $15.3 million compared to net sales of $14.2 million for the same period in 2011. Net sales for the nine months ended September 30, 2012, increased 14.8% to $54.9 million compared to net sales of $47.8 million for the same period in 2011. The increase in net sales for the three and nine month period was primarily due to increases in Rockford's core aftermarket and international sales channels. OEM royalty revenue for the nine months ended September 30, 2012, was $1.0 million compared to $2.0 million for the same period in 2011.
As a percent of net sales, gross margin for the three months ended September 30, 2012 decreased to 37.0% compared to 37.4% for the same period in 2011. As a percent of net sales, gross margin for the nine months ended September 30, 2012 decreased to 38.2% compared to 38.5% for the same period in 2011. The decreases in gross margin as a percent of sales for the three and nine month periods are primarily due to lower royalty revenue.
Operating expenses for the three months ended September 30, 2012, were $4.6 million compared to $4.1 million for the same period in 2011. Operating expenses for the nine months ended September 30, 2012, were $14.8 million compared to $14.1 million for the same period in 2011.
William R. Jackson, Rockford's Chief Executive Officer and President, commented, "Car audio retail sales across the US have been turbulent over the past three months. Retailers and distributors are reporting softer than normal traffic patterns. Our team has done a good job working with our retail partners, both domestic and international, to maximize sell through of our products. The Rockford brand portfolio continues to perform well in this challenging retail environment. Net sales were up 7.4% in the third quarter of 2012 and up 14.8% year to date."
Mr. Jackson observed: "Our OEM business continues to be solid; however, royalty revenue was down approximately $1 million for the nine month period. This is due to reduced production of Mitsubishi vehicles with Rockford Fosgate branded audio systems."
Mr. Jackson noted: "In the third quarter we completed an agreement to distribute Blaupunkt car audio products in North America and, late in the quarter, began shipping the Blaupunkt product line to selected partners in the US market. We are encouraged about the initial market response and sell through that distributors are reporting."
Mr. Jackson continued: "Our sales and marketing group has been working with our retail partners in preparation for holiday season. We believe our aggressive plan will help retailers to maximize their car audio sales potential for the season. The team is also already preparing for our 2013 New Product Showcase which will be unveiled at the Palms Hotel in Las Vegas on January 8th, 2013."
Mr. Jackson concluded: "In summary, I am pleased with our third quarter and year to date 2012 results. The Rockford team continues to be focused on building our business with our partners and expanding the experience of premium car audio for consumers."
Liquidity and Capital Resources
Rockford's cash provided by operations was $3.6 million for the nine months ended September 30, 2012 as compared to $1.5 million during the comparable period in 2011. Net income of $6.5 million was the primary source of cash from operations and a decrease in accounts payable of $1.7 million and an increase in accounts receivable of $1.5 million were the primary use of cash from operations.
Rockford's asset-based credit facility with Wells Fargo Capital Financial continues to have the terms described in Rockford's annual report for the year ended December 31, 2011. Under the agreement, pricing options based on LIBOR rates are available to Rockford. The interest rate was approximately 4.4% at September 30, 2012. Availability under the credit facility at September 30, 2012 was approximately $3.8 million in excess of the outstanding balance of $6.2 million. The increase in the credit line balance during the third quarter reflects Rockford's use of its credit line to complete the purchase of shares in the Dutch Auction that closed on September 14, 2012.
Rockford anticipates, based on its operating plans and cash flow forecast, that cash flow from operations for 2012 and 2013, and available borrowings under its credit facility, will be adequate to meet Rockford's requirements for current capital expenditures, working capital and interest payments for the next twelve months.
At the completion of the recent Dutch Auction, our three largest shareholders agreed to restructure our Board of Directors. As a result of these changes our Board of Directors has been reduced to 5 directors including continuing directors Mr. Kamin, Mr. Tim Bartol, Mr. Godfrey, and Mr. Jackson and our new director Mr. Mark A. Riser. Mr. Nick Bartol, Mr. Goldress, and Mr. Lloyd have retired from our Board of Directors.
Mr. Kamin has been appointed Chairman of the Board of Directors, replacing Mr. Goldress. The Board of Directors appointed Mr. Riser as one of Rockford's directors as a nominee of Mr. Kamin, who is now Rockford's largest shareholder. Mr. Riser joined Morningside Private Investors in 2010 and has been a private investor since 1999.
Peter Kamin, Chairman of the Board of Directors, commented, "I would like to thank Jerry Goldress, Nick Bartol, and John Lloyd for their service and commitment to Rockford Corporation over many years. I would also like to welcome Mark Riser to the Board and we look forward to his contributions as a director."
About Rockford Corporation
Setting the standard for excellence in the mobile audio industry, Rockford markets and distributes high-performance audio systems for the mobile audio aftermarket and OEM market. Headquartered in Tempe, Arizona, Rockford Corporation distributes its products under the brands: Rockford Fosgate®, Rockford Acoustic Design®, Lightning Audio®, Brax™, Helix™, Renegade® and Blaupunkt™. For more information, please visit: www.rockfordfosgate.com, www.rockfordacousticdesign.com, www.lightningaudio.com, www.braxhifi.com, www.helixhifi.com, www.renegadecaraudio.com and blaupunkt-usa.net.
Forward-looking Statement Disclosure
We make forward-looking statements in this press release including but not limited to statements about our results of operations. These statements may be identified by the use of forward-looking terminology such as "may," "will," "believe," "expect," "anticipate," "estimate," "continue," or other similar words.
Forward-looking statements are subject to many risks and uncertainties. Rockford cautions you not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Actual results may differ materially from those anticipated in our forward-looking statements. Rockford disclaims any obligation or undertaking to update these forward-looking statements to reflect changes in our expectations or changes in events, conditions, or circumstances on which our expectations are based.
When considering our forward-looking statements, you should keep in mind the risk factors discussed in our press releases and earnings reports, as well as the risk factors generally applicable to a small business such as ours. We particularly call your attention to the risk factors and other cautionary statements identified on our investor relations web-site, http://www.rockfordcorp.com/RiskFactors titled "Risk Factors That May Affect Rockford's Operating Results, Business Prospects and Stock Price" (the "Risk Disclosure"). We updated the Risk Disclosure as of March 31, 2011. Our business is subject to the risk factors noted in the Risk Disclosure, other risk factors identified above and other risk factors we have not anticipated or discussed. These risk factors could cause our actual results to differ significantly from those anticipated in our forward-looking statements.
Condensed Consolidated Statements of Operations (unaudited)
For the Three and Nine Months Ended September 30, 2012 and 2011
($000s omitted except per share amounts)
Three months ended
Nine months ended
Cost of goods sold
Sales and marketing
General and administrative
Research and development
Total operating expenses
Interest and other expense, net
Income before income taxes
Income tax benefit
Net income per common share:
Weighted average shares:
Condensed Consolidated Balance Sheets (unaudited)
At September 30, 2012 and December 31, 2011
Accounts receivable, net
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued salaries and incentives
Accrued warranty and returns
Accrued customer programs
Other accrued liabilities
Asset based credit facility
Total current liabilities
Other long-term liabilities
Total shareholders' equity
Total liabilities and shareholders' equity
CHIEF FINANCIAL OFFICER
SOURCE: Rockford Corporation