SOURCE: Rockford Corporation

July 18, 2011 19:11 ET

Rockford Corporation Reports Second Quarter 2011 Results

TEMPE, AZ--(Marketwire - Jul 18, 2011) - Rockford Corporation (PINKSHEETS: ROFO) today announced financial results for the three and six months ended June 30, 2011.

Net income for the three months ended June 30, 2011 was $1.8 million, compared to net income of $1.1 million for the comparable period in 2010. Net income for the six months ended June 30, 2011 was $3.1 million, compared to net income of $1.8 million for the comparable period in 2010.

Net sales for the three months ended June 30, 2011, increased 14.2% to $17.0 million compared to net sales of $14.9 million for the same period in 2010. Net sales for the six months ended June 30, 2011, increased 18.9% to $33.6 million compared to net sales of $28.2 million for the same period in 2010. The increase in net sales for the three and six month periods were primarily due to increased sales in Rockford's core aftermarket, international and OEM sales channels. OEM royalty revenue for the six months ended June 30, 2011, was $1.4 million compared to $1.1 million for the same period in 2010.

As a percent of net sales, gross margin for the three months ended June 30, 2011 increased to 38.3% compared to 36.7% for the same period in 2010. As a percent of net sales, gross margin for the six months ended June 30, 2011 increased to 39.0% compared to 37.0% for the same period in 2010. The increase in gross margin percentage for the three and six month periods were primarily due to lower returns and discounts as a percentage of sales, higher overall sales, and increased OEM royalty revenue.

Operating expenses for the three months ended June 30, 2011, were higher at $4.7 million compared to $4.3 million for the same period in 2010. Operating expenses for the six months ended June 30, 2011, were higher at $10.0 million compared to $8.6 million for the same period in 2010. The increase in operating expenses for the three and six month periods compared to the prior year were primarily due to higher variable expenses, such as outbound freight and commissions, resulting from higher sales volume and increased sales and promotional expenditures.

William R. Jackson, Rockford's Chief Executive Officer and President, commented, "Overall our sales were up over 14% in the second quarter. All of our business and distribution channels contributed to the gain. Our specialist and international channels continue to perform well. Several areas in the US are experiencing improved retail traffic, while others are still feeling the impact of the weak economy. Gas prices appear to have stabilized and our retailers are beginning to take a more optimistic view. Gross margins have improved compared to last year and expenses are tracking to plan."

Mr. Jackson stated, "Currency fluctuations and rising commodity prices continue to put pressure on the business and, in response, we announced a slight price increase at the end of the second quarter. The OEM business is steadily rebounding as the market for new cars improves. Our Japan based partners are returning to normal production schedules after the earthquake and tsunami."

Mr. Jackson observed, "Our new brands, BRAX and Helix, are beginning to have an impact in the market. The new Plug & Play products from Helix offer an outstanding upgrade to a factory sound system with minimal installation time and disruption to the vehicle. Several of our dealers and consumers have applauded the concept and we believe it is beginning to open new opportunities for us in the marketplace. Renegade and Lightning Audio continue to do well and have grown each quarter. These products offer terrific value for the first time buyer and give our retailers an opportunity to increase their sales to customers on more limited budgets."

Mr. Jackson continued: "Most of the new 2011 Rockford Fosgate products have shipped into the marketplace. The response to the Punch BRT micro amplifiers has been particularly gratifying. The small size and big performance of these products have given us a compelling advantage over our competition."

Mr. Jackson noted: "Our marketing team has been working non-stop with our reps and retailers in the field. In the second quarter, our SoundLab 'Street Team' visited 23 states and worked with retailers in the market making several thousand consumer impressions. Ed Dalesandro, our rep in the Ohio/Pennsylvania territory told me that, 'The Sound Lab is the single best tool I have used to activate customers and create excitement about premium car audio. It makes a statement about the Rockford Fosgate sound and the brand.' The SoundLab vehicles have proven to be a great marketing device. We continue to work with our dealers to drive excitement for car audio and to create retail traffic."

Mr. Jackson concluded: "The second quarter finished well for us. We are pleased with the way our products and brands are being received in the market. Although the market continues to be turbulent, we remain cautiously optimistic."

Liquidity and Capital Resources

Rockford's cash provided by operations was $0.3 million for the six month period ended June 30, 2011 as compared to $1.8 million provided by operations during the comparable period in 2010. Net income of $3.1 million was the primary source of cash from operations and an increase in accounts receivables of $4.1 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 based on LIBOR was approximately 4.25% at June 30, 2011. As of June 30, 2011, Rockford was in compliance with all applicable covenants. Availability under the credit facility at June 30, 2011 was approximately $7.4 million in excess of the outstanding balance of $2.6 million. Other than ordinary course financing of trade payables, the Wells Fargo credit facility is Rockford's only significant debt 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 announced on March 31, 2011, 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. From March 31, 2011, to date Rockford has repurchased approximately 501,000 shares under this stock buyback program. After these repurchases Rockford has approximately 8.3 million shares outstanding, a reduction from approximately 8.8 million shares that were outstanding at March 31, 2011. 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 the 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 and Six Months Ended June 30, 2011 and 2010
($000s omitted except per share amounts)
Three months ended
June 30,
Six months ended
June 30,
2011 2010 2011 2010
Net sales $ 17,000 $ 14,886 $ 33,570 $ 28,243

Cost of goods sold
10,482 9,420 20,477 17,795

Gross profit
6,518 5,466 13,093 10,448

Operating expenses:

Sales and marketing
2,530 2,055 5,340 4,061

General and administrative
1,745 1,697 3,699 3,526

Research and development
455 509 958 973

Total operating expenses
4,730 4,261 9,997 8,560

Operating income
1,788 1,205 3,096 1,888

Interest and other expense, net
34 56 42 117

Income before income taxes
1,754 1,149 3,054 1,771

Income tax benefit
- - - -

Net income
$ 1,754 $ 1,149 $ 3,054 $ 1,771

Net income per common share:
Basic $ 0.21 $ 0.13 $ 0.36 $ 0.21
Diluted $ 0.19 $ 0.12 $ 0.32 $ 0.20
Weighted average shares:
Basic 8,405 8,581 8,565 8,581
Diluted 9,300 9,252 9,408 9,014

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Rockford Corporation
Condensed Consolidated Balance Sheets (unaudited)
At June 30, 2011 and December 31, 2010
(In thousands)
June 30, December 31,
2011 2010
ASSETS
Current assets:
Cash $ -- $ --
Accounts receivable, net 12,725 8,684
Inventories 7,590 5,818
Prepaid expenses and other current assets 559 547
Total current assets 20,874 15,049
Property and equipment, net 1,442 1,525
Other assets 236 262
Total assets $ 22,552 $ 16,836
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,916 $ 4,262
Accrued salaries and incentives 1,108 785
Accrued warranty and returns 695 546
Accrued customer programs 817 651
Other accrued liabilities 1,750 1,403
Asset based credit facility 2,630 1,509
Total current liabilities 12,916 9,156
Other long-term liabilities 62 109
Total liabilities 12,978 9,265
Shareholders' equity:
Common stock 96 96
Additional paid-in-capital 38,981 38,867
Retained deficit (27,027 ) (30,081 )
Treasury stock (2,476 ) (1,311 )
Total shareholders' equity 9,574 7,571
Total liabilities and shareholders' equity $ 22,552 $ 16,836

Contact Information

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