SOURCE: Rockford Corporation

April 28, 2011 12:17 ET

Rockford Corporation Reports Increased Revenues and Profits for First Quarter 2011

TEMPE, AZ--(Marketwire - Apr 28, 2011) - Rockford Corporation (PINKSHEETS: ROFO) today announced financial results for the three months ended March 31, 2011.

Net income for the three months ended March 31, 2011 was $1.3 million, compared to net income of $0.6 million for the same period in 2010.

Net sales for the three months ended March 31, 2011, increased 24.1% to $16.6 million compared to net sales of $13.4 million for the same period in 2010. The increase in net sales for the three month period was primarily due to increases in Rockford's core aftermarket, international and OEM sales channels. OEM royalty revenue for the three months ended March 31, 2011, was $0.8 million compared to $0.7 million for the same period in 2010.

As a percent of net sales, gross margin for the three months ended March 31, 2011 increased to 39.7% compared to 37.3% for the same period in 2010. The increase in gross margin percentage was primarily due to lower returns and discounts as a percentage of sales and higher overall sales and OEM royalty revenue.

Operating expenses for the three months ended March 31, 2011, were higher at $5.3 million compared to $4.3 million for the same period in 2010. The increase in operating expenses for the three month period compared to the prior year was primarily due to higher variable expenses, such as outbound freight and commissions, due to higher sales volume and increased sales and promotional expenditures.

William R. Jackson, Rockford's Chief Executive Officer and President, commented, "We are pleased with our start to 2011. Our overall net sales were up over 20% when compared to the same period in 2010. Each of our business segments contributed to the gain. Our gross margins improved over 2% compared to the same period in 2010 and operating expenses are tracking to plan. The car audio market is showing some signs of recovery. Many dealers are reporting better traffic patterns and sell through of products. Considering the weather's impact on many parts of the US in the first quarter, we are pleased with the performance from our specialist channel. All of our brands showed nice growth when compared to the first quarter of 2010. Our OEM business continues to improve as the retail automobile market rebounds."

Mr. Jackson continued: "The disaster in Japan has had some indirect impact on our business. Our Japanese aftermarket distributor lost a portion of his dealer base due to the tragedy. In addition, we are seeing some slowing in raw material and component parts delivery to our supply base. The disruptions in auto manufacturing resulting from the tragedy may also impact our OEM sales in the short term. We are monitoring the situation closely."

Mr. Jackson observed: "During the first week of January 2011, we launched approximately 100 new products at the Palms Hotel in Las Vegas. Most of these products began shipping in the first quarter and the response has been excellent. Our new Punch BRT micro amplifiers and Punch Subwoofers are getting rave reviews from the field. Almost all of our remaining new products for 2011 will be shipping during the second quarter."

Mr. Jackson noted: "We are working closely with our retailers to drive excitement and customers to their stores. In March 2011, we launched our 'Street Team.' The Street Team is responsible for traveling the marketplace and helping retailers promote and use our SoundLab demonstration vehicles. Initial dealer feedback has been great. The SoundLab allows retailers to promote selling and educational events and showcase the Rockford Fosgate experience. In addition, we launched a sponsorship program with the Monster Energy AMA Supercross tour. The Supercross events target our core demographic and give us a great opportunity to showcase our brand and products."

Mr. Jackson concluded: "The first quarter represented significant improvement over 2010. We are being cautious given the potential impact of rising fuel prices and continued supply chain and currency challenges. However, we are cautiously optimistic about the future."

Liquidity and Capital Resources

Rockford's cash used by operations was $1.4 million for the three month period ended March 31, 2011 as compared to $0.4 million during the comparable period in 2010. Net income of $1.3 million was the primary source of cash from operations and an increase in accounts receivables of $4.9 million was 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, 2010. Under the agreement, pricing options based on LIBOR and prime rates are available to Rockford. The LIBOR and prime interest rate options were approximately 2.26% and 3.25%, respectively, at March 31, 2011. As of March 31, 2011, Rockford was in compliance with all applicable covenants. Availability under the credit facility at March 31, 2011 was approximately $7.0 million in excess of the outstanding balance of $3.0 million. Other than ordinary course financing of trade payables, the Wells Fargo credit facility is Rockford's only significant bank financing arrangement.

Rockford anticipates, based on its operating plans and cash flow forecast, that cash flow from operations for 2011 and 2012, and available borrowings under its credit facility, will be adequate to meet Rockford's requirements for current capital expenditures, working capital, interest payments and stock repurchases, if any, for the next twelve months.

Stock Buyback Program

Rockford previously announced that its Board of Directors approved a program to purchase up to 870,000 shares, or approximately 10%, of Rockford's Common Stock in the open market or through privately negotiated transactions. To date Rockford has repurchased approximately 347,000 shares under this stock buyback program. Rockford has approximately 8.4 million shares outstanding currently. The program will expire on December 31, 2012, but may be suspended or discontinued at any time.

About Rockford Corporation

Setting the standard for excellence in the mobile audio industry, Rockford Corporation 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 six brands: Rockford Fosgate®, Rockford Acoustic Design®, Lightning Audio®, Brax™, Helix™ and Renegade®. For more information, please visit: www.rockfordfosgate.com, www.rockfordacousticdesign.com, www.lightningaudio.com, www.braxhifi.com, www.helixhifi.com and www.renegadecaraudio.com,

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/ir/financialinfo.asp in a document 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.

Rockford Corporation
Condensed Consolidated Statements of Operations (unaudited)
For the Three Months Ended March 31, 2011 and  2010
($000s omitted except per share amounts)

                                                         Three months ended
                                                               March 31,
                                                          -----------------
                                                            2011     2010
                                                          -------- --------

Net sales                                                 $ 16,570 $ 13,357

Cost of goods sold                                           9,995    8,375
                                                          -------- --------

  Gross profit                                               6,575    4,982

Operating expenses:

  Sales and marketing                                        2,810    2,006

  General and administrative                                 1,954    1,829

  Research and development                                     503      464
                                                          -------- --------

Total operating expenses                                     5,267    4,299
                                                          -------- --------

  Operating income                                           1,308      683

Interest and other expense, net                                  8       61
                                                          -------- --------

  Income before income taxes                                 1,300      622

Income tax benefit                                               -        -
                                                          -------- --------

Net income                                                $  1,300 $    622
                                                          ======== ========

Net income per common share:
   Basic                                                  $   0.15 $   0.07
                                                          ======== ========
   Diluted                                                $   0.14 $   0.07
                                                          ======== ========
Weighted average shares:
   Basic                                                     8,727    8,607
                                                          ======== ========
   Diluted                                                   9,483    8,607
                                                          ======== ========




Rockford Corporation
Condensed Consolidated Balance Sheets (unaudited)
At March 31, 2011 and December 31, 2010
(In thousands)


                                                   March 31,   December 31,
                                                      2011         2010
                                                  -----------  -----------
ASSETS

Current assets:
  Cash                                            $        --  $        --
  Accounts receivable, net                             13,504        8,684
  Inventories                                           5,502        5,818
  Prepaid expenses and other current assets               486          547
                                                  -----------  -----------

    Total current assets                               19,492       15,049

Property and equipment, net                             1,477        1,525
Other assets                                              249          262
                                                  -----------  -----------

    Total assets                                  $    21,218  $    16,836
                                                  ===========  ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
  Accounts payable                                $     5,053  $     4,262
  Accrued salaries and incentives                       1,021          785
  Accrued warranty and returns                            642          546
  Accrued customer programs                               698          651
  Other accrued liabilities                             1,750        1,403
  Asset based credit facility                           3,029        1,509
                                                  -----------  -----------

    Total current liabilities                          12,193        9,156

Other long-term liabilities                                82          109
                                                  -----------  -----------
  Total liabilities                                    12,275        9,265

Shareholders' equity:
  Common stock                                             96           96
  Additional paid-in-capital                           38,939       38,867
  Retained deficit                                    (28,781)     (30,081)
  Treasury stock                                       (1,311)      (1,311)
                                                  -----------  -----------
    Total shareholders' equity                          8,943        7,571
                                                  -----------  -----------

    Total liabilities and shareholders' equity    $    21,218  $    16,836
                                                  ===========  ===========

Contact Information

  • Executive Contact:
    Richard Vasek
    Chief Financial Officer
    Rockford Corporation
    (480) 517-3169