Cobra Q4 Sales Slip, Income Climbs

Chicago— Although Cobra Electronics registered a fourth quarter sales decrease, the company responded by tightening expenses, with resulting fourth quarter increases in both operating and net incomes.

For the three months, ended Dec. 31, Cobra sales decreased 3 percent to $41.3 million, down from $42.6 million, due mainly to a decrease in two-way radio sales, accompanied by a decline in average selling price per unit, which exceeded a modest growth in unit volume.

However, overall fourth quarter net income jumped 50 percent, hitting $1.5 million, compared with just under $1 million in the year-ago period. Operating income for the three months rose to $2.7 million from $1.7 million year-on-year.

"Our focus on tightly managing selling, general and administrative expenses was very successful," said Jim Bazet, president/CEO, "as we saw these expenses drop significantly from a year ago."

Cobra knocked 21.1 percent off last year's fourth quarter SG&A, reducing this from $10.2 million in 2002, to $8 million in the three months just past.

However, gross margin for the fourth quarter dropped to 25.9 percent, from 27.9 percent in the last quarter a year earlier.

"The decline in gross margin, after registering year-over-year increases for the past three quarters," said Bazet, "was attributable to continued pricing pressures in the two-way radio market, as well as efforts to sell through certain slower moving items during the holiday season, when the most favorable pricing would be available."

Looking at the company's annual results, Bazet, who was encouraged by both income and margin improvements, said, "Our goal for 2003 was to reverse the decline in revenues and earnings that Cobra has experienced over the past two years. We achieved part of our goal as earnings exceeded those of 2002, but the continued decline in the two-way radio market made the sales goal unachievable. We remain committed to those goals in 2004."

For the 12 months, sales dropped to $114.8 million, from $135.8 million, while net income increased 7 percent, to $1.8 million, from $1.7 million. Gross margin for the year rose to 26.7 percent, compared with 25.2 percent in 2002. Expenses declined to $27.5 million, from $31.1 million.

In 2004, Cobra expects a resumption of revenue growth as new product categories contribute to sales and earnings. The company is counting heavily on prospects for handheld GPS and mobile navigation systems, which are scheduled for late second quarter availability.

Cobra projects higher revenue and earnings for the upcoming 12 months, compared with 2003. o