Universal Electronics Reports Third Quarter 2012 Financial Results

About Universal Electronics Inc.

Founded in 1986, Universal Electronics Inc. (UEI) is the global leader in wireless control technology for the connected home. UEI designs, develops, and delivers innovative solutions that enable consumers to control entertainment devices, digital media, and home systems. The company’s broad portfolio of patented technologies and database of infrared control software have been adopted by many Fortune 500 companies in the consumer electronics, subscription broadcast, and computing industries. UEI sells and licenses wireless control products through distributors and retailers under the One For All® brand name. For additional information, please visit our website at www.uei.com.

Safe Harbor Statement

This press release contains forward-looking statements that are made pursuant to the Safe-Harbor provisions of the Private Securities Litigation Reform Act of 1995. Words and expressions reflecting something other than historical fact are intended to identify forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including the benefits anticipated by the Company due to the Company’s ability to retain and gain market share; the Company’s ability to attract new customers and retain and expand our relationships with its existing customers; acceptance by consumers of the Company’s innovative tablet and smartphone embedded applications; the continued global general economic conditions; the benefits the Company expects via the growth of new markets in certain geographic areas including Latin America, Asia-Pacific region, and Eastern Europe; and other factors described in the Company's filings with the U.S. Securities and Exchange Commission. The actual results that the Company achieves may differ materially from any forward looking statement due to such risks and uncertainties. The Company undertakes no obligations to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.

UNIVERSAL ELECTRONICS INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share-related data) (Unaudited)
		September 30, 2012				December 31, 2011
ASSETS
Current assets:
Cash and cash equivalents		$	41,216			$	29,372
Accounts receivable, net			92,392				82,184
Inventories, net			72,115				90,904
Prepaid expenses and other current assets			3,286				3,045
Deferred income taxes			6,561				6,558
Total current assets			215,570				212,063
Property, plant, and equipment, net			76,890				80,449
Goodwill			30,833				30,820
Intangible assets, net			30,534				32,814
Other assets			5,373				5,350
Deferred income taxes			8,073				7,992
Total assets		$	367,273			$	369,488
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	48,688			$	55,430
Line of credit			2,000				2,000
Notes payable			4,800				14,400
Accrued sales discounts, rebates and royalties			6,443				6,544
Accrued income taxes			4,267				5,707
Accrued compensation			31,343				29,204
Deferred income taxes			52				50
Other accrued expenses			8,214				13,967
Total current liabilities			105,807				127,302
Long-term liabilities:
Deferred income taxes			11,336				11,056
Income tax payable			1,136				1,136
Other long-term liabilities			1,652				5
Total liabilities			119,931				139,499
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding			—				—
Common stock, $0.01 par value, 50,000,000 shares authorized; 21,368,580 and 21,142,915 shares issued on September 30, 2012 and December 31, 2011, respectively			214				211
Paid-in capital			178,602				173,701
Accumulated other comprehensive (loss) income			(57	)			938
Retained earnings			167,651				154,016
			346,410				328,866
Less cost of common stock in treasury, 6,360,302 and 6,353,035 shares on September 30, 2012 and December 31, 2011, respectively			(99,068	)			(98,877	)
Total stockholders’ equity			247,342				229,989
Total liabilities and stockholders’ equity		$	367,273			$	369,488

UNIVERSAL ELECTRONICS INC. CONSOLIDATED INCOME STATEMENTS (In thousands, except per share amounts) (Unaudited)
		Three Months Ended     September 30,								Nine months Ended     September 30,
			2012				2011				2012				2011
Net sales		$	124,871			$	123,527			$	345,307			$	350,985
Cost of sales			88,433				89,349				247,572				254,284
Gross profit			36,438				34,178				97,735				96,701
Research and development expenses			3,521				2,861				10,408				9,275
Selling, general and administrative expenses			23,383				21,852				69,015				67,116
Operating income			9,534				9,465				18,312				20,310
Interest income (expense), net			(24	)			(56	)			(112	)			(210	)
Other income (expense), net			(65	)			(353	)			(515	)			(771	)
Income before provision for income taxes			9,445				9,056				17,685				19,329
Provision for income taxes			(2,595	)			(1,972	)			(4,050	)			(4,297	)
Net income		$	6,850			$	7,084			$	13,635			$	15,032
Earnings per share:
Basic		$	0.46			$	0.48			$	0.91			$	1.00
Diluted		$	0.45			$	0.47			$	0.90			$	0.98
Shares used in computing earnings per share:
Basic			14,984				14,887				14,931				14,963
Diluted			15,099				15,147				15,087				15,312

UNIVERSAL ELECTRONICS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
		Nine months Ended     September 30,
			2012				2011
Cash provided by operating activities:
Net income		$	13,635			$	15,032
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			12,948				12,907
Provision for doubtful accounts			72				241
Provision for inventory write-downs			2,148				3,610
Deferred income taxes			146				26
Tax benefit from exercise of stock options and vested restricted stock			(160	)			399
Excess tax benefit from stock-based compensation			(49	)			(422	)
Shares issued for employee benefit plan			620				592
Stock-based compensation			3,447				3,280
Changes in operating assets and liabilities:
Accounts receivable			(10,876	)			(2,772	)
Inventories			15,758				(22,172	)
Prepaid expenses and other assets			(282	)			674
Accounts payable and accrued expenses			(8,335	)			2,456
Accrued income taxes			(1,428	)			(2,049	)
Net cash provided by operating activities			27,644				11,802
Cash used for investing activities:
Acquisition of property, plant, and equipment			(6,525	)			(10,140	)
Acquisition of intangible assets			(802	)			(814	)
Net cash used for investing activities			(7,327	)			(10,954	)
Cash used for financing activities:
Issuance of debt			12,000				—
Payment of debt			(21,600	)			(16,600	)
Proceeds from stock options exercised			1,425				1,381
Treasury stock purchased			(619	)			(9,512	)
Excess tax benefit from stock-based compensation			49				422
Net cash used for financing activities			(8,745	)			(24,309	)
Effect of exchange rate changes on cash			272				1,212
Net increase (decrease) in cash and cash equivalents			11,844				(22,249	)
Cash and cash equivalents at beginning of period			29,372				54,249
Cash and cash equivalents at end of period		$	41,216			$	32,000

Supplemental Cash Flow Information — There were income tax payments of $6.5 million and $6.9 million during the nine months ended September 30, 2012 and 2011, respectively. There were interest payments of $0.2 million and $0.3 million during the nine months ended September 30, 2012 and 2011, respectively.

UNIVERSAL ELECTRONICS INC. RECONCILIATION OF ADJUSTED PRO FORMA FINANCIAL RESULTS (In thousands, except share-related data) (Unaudited)
		Three Months Ended September 30, 2012												Three Months Ended September 30, 2011
										Adjusted												Adjusted
		GAAP				Adjustments				Pro Forma				GAAP				Adjustments				Pro Forma
Net sales		$	124,871			$	—			$	124,871			$	123,527			$	—			$	123,527
Cost of sales (1)			88,433				(277	)			88,156				89,349				(277	)			89,072
Gross profit			36,438				277				36,715				34,178				277				34,455
Research and development expenses			3,521			__					3,521				2,861				—				2,861
Selling, general and administrative expenses (2)			23,383				(1,376	)			22,007				21,852				(743	)			21,109
Operating income			9,534				1,653				11,187				9,465				1,020				10,485
Interest income (expense), net			(24	)		__					(24	)			(56	)			—				(56	)
Other income (expense) , net			(65	)			—				(65	)			(353	)			—				(353	)
Income before provision for income taxes			9,445				1,653				11,098				9,056				1,020				10,076
Provision for income taxes (4)			(2,595	)			(392	)			(2,987	)			(1,972	)			(144	)			(2,116	)
Net income		$	6,850			$	1,261			$	8,111			$	7,084			$	876			$	7,960
Earnings per share diluted		$	0.45			$	0.08			$	0.54			$	0.47			$	0.06			$	0.53
		Nine Months Ended September 30, 2012												Nine Months Ended September 30, 2011
										Adjusted												Adjusted
		GAAP				Adjustments				Pro Forma				GAAP				Adjustments				Pro Forma
Net sales		$	345,307			$	—			$	345,307			$	350,985			$	—			$	350,985
Cost of sales (1)			247,572				(831	)			246,741				254,284				(831	)			253,453
Gross profit			97,735				831				98,566				96,701				831				97,532
Research and development expenses			10,408				—				10,408				9,275				—				9,275
Selling, general and administrative expenses (3)			69,015				(3,573	)			65,442				67,116				(2,402	)			64,714
Operating income			18,312				4,404				22,716				20,310				3,233				23,543
Interest income (expense), net			(112	)			—				(112	)			(210	)			—				(210	)
Other income (expense), net			(515	)			—				(515	)			(771	)			—				(771	)
Income before provision for income taxes			17,685				4,404				22,089				19,329				3,233				22,562
Provision for income taxes (4)			(4,050	)			(934	)			(4,984	)			(4,297	)			(585	)			(4,882	)
Net income		$	13,635			$	3,470			$	17,105			$	15,032			$	2,648			$	17,680
Earnings per share diluted		$	0.90			$	0.23			$	1.13			$	0.98			$	0.17			$	1.15

(1) To reflect depreciation expense for the corresponding periods relating to the mark-up in fixed assets from cost to fair value as part of the Enson Assets Limited acquisition.

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